As a token of appreciation, maybe sometime you might find yourself in a happy mood and want to gift somebody else a car. Maybe your child just graduated from college, or your best friend is cash strapped and buying them a vehicle would mean the world to them. Although no money usually trades hands when gifting a car, many people still get confused and ask questions like “how do I transfer a car title to a family member?” This guide will help you get around the bases and also tell you what to do in order to successfully transfer a car title to another person.
#1 Clear Your Car Loan
You won’t be able to transfer a title or gift someone a vehicle if you don’t own it in person. If you have any outstanding balance on your car loan, think of how you can clear the debt and make sure you notify the lender once you do so to ensure everything is cool and you now own the vehicle in full. If a family member is purchasing the vehicle, there are always ways of adjusting the loan. Although if the car is meant to be a gift, the selling price is zero which means no money usually trades hands.
#2 Think About the Other Person’s Financial Situation
If you gift a vehicle to a loved one or family member, they’ll need the cash to pay for gas, insurance, maintenance and repairs. If it’s difficult for them to cover all these vehicle ownership costs and you too don’t want anything to do with these expenses, you should figure a way to gift them a car. It’s important to note that your immediate family member consists of your mother, your dad, your brother, your sister, your child, your partner, your relatives, and even your in-laws. Otherwise, anyone else won’t be considered as an immediate family member. If the new owner bears a different last name, you’ll need to prove the relationship in some way.
#3 Make Sure You Can Afford to Pay Gift Tax
Before you gift someone a vehicle, it’s important to note that you may be liable for paying gift tax on it. Although these requirements may change every year, a gift tax is vital particularly when the fair market value of a vehicle is more than $15,000 for singles or $30,000 for those who might have married. Otherwise, many times a gift tax usually range anywhere from 18%-40%.
#4 What About Sales Tax?
One of the greatest benefits of gifting someone a vehicle is that you don’t have to worry about sales tax if you already own it in person. Although vehicle sales tax varies from state to state, it can make a big difference when gifting a car to another person. For example, let’s say the vehicle sales tax in your country is 10% and you gift a $15,000 car, you can save $1,500 on sales tax. On the other hand, if you purchase a vehicle and then gift it, you would also pay the sales tax on the initial purchase.
#5 Draft a Bill of Sale
A bill of sale is simply a dated, legal document that identifies both the former and new vehicle owner. Without a bill of sale in place, you may still be liable for the vehicle you gifted. Therefore, you should quickly draft a bill of sale to ensure you’re no longer responsible for the vehicle should anything happen. But how do you sign a car title over to someone, or how do you sign over a car title as a gift? These are the kind of questions many people ask when gifting a vehicle. Also how to fill out the car title for a private sale is fairly straightforward than most people think.
In the bill of sale, simply fill in your name as the seller and the family member’s name as the buyer. You should also fill in the odometer reading and the word “gift” in the sale price box. To finalize, make sure that you and the person receiving the gift both sign and date the bill in order to validate the contract you’ve just agreed upon.
A bill of sale should include:
- Vehicle Identification Number (VIN)
- Make and Model of the vehicle
- Odometer disclosure statement
- Purchase price of the vehicle
#6 Transfer Your Car Title
After you sign and date the title, the next thing you need to do is transfer your title in order to change vehicle ownership. Transferring a car title to someone else is easy, all you have to do is visit your local DMV, fill out some paperwork, and pay a small fee. After you’ve met and fulfilled all the specified requirements, the department will take care of everything else and give the new owner a temporary registration as well as mail them the new title. Make sure to check your country’s laws to learn more about title transfer laws and any associated fees.
Insure the New Owner
Technically, the new car owner can’t legally drive around as they wish unless they’re covered by some auto insurance. If they already have a policy in their name, all they have to do is check with their insurance agent and add your gifted car to that particular policy. Otherwise, if this is the person’s first car, they will be asked to provide some more information in order to get a new policy.
Nowadays, you can easily pass a vehicle on to a loved one or a friend without much hassle and without even paying any sales tax or excise tax as some people call it in some countries. In fact, this is also such an excellent way to give a vehicle a second life and to put a happy smile on another person’s face whom you value much in life. Since transferring a car title varies from state to state, it’s important to check that you’ve met and fulfilled all the specified requirements before another person can own the vehicle outright. Hopefully, this guide on how do I transfer a car title to a family member has helped everyone figure out how they can easily transfer a car title to a loved one or family member.