How To Give Away A Car To A Friend

How To Give Away A Car To A Friend

Are you thinking of giving a car as a gift? Maybe you are ready to upgrade and do not believe the resale value is worth the time or effort. Giving a car to a friend can be a generous way to pass on something useful, especially if they need reliable transportation. Handing over the keys to someone you care about can be an exciting and rewarding moment, but there is more to it than simply exchanging keys and saying goodbye.

If you want to give away a car to a friend the right way, there are a few important steps you should take. It is not just about being kind. You also need to make sure the process is legal, clear, and complete. From checking that the title is in your name to filling out the right forms and understanding your state’s rules, every part of the process matters.

This guide will walk you through how to give a car to a friend in a way that protects both of you. Whether you are passing on a used car or helping someone who needs it, we will explain what you need to do, from transferring the title to handling insurance and registration. Giving a car can be a thoughtful and generous gift. With a little planning, it can also be a smooth and worry-free experience for both you and your friend.

READ: Best Way To Donate A Car For Tax Deduction

Why Should I Gift A Friend A Car?

You want to help a friend in need : If your friend is struggling or needs reliable transportation for work, school, or family, giving them a car can be a life-changing gift.
Your car is no longer being used:  Maybe you upgraded or simply have an extra car that is collecting dust. Instead of letting it sit, why not let someone else put it to good use?
Selling the car feels like too much hassle : Listing a car, meeting with buyers, and negotiating can take time and energy. Gifting the car to a friend is often quicker and more rewarding.
You want to share your good fortune:  If you are in a comfortable place financially, giving a car to a friend can be a meaningful way to show gratitude and generosity.
It strengthens your bond:  Acts of kindness like this can bring people closer. It is not just about the car, it is about the support, trust, and care behind the gesture.
It gives the car a second life : Instead of trading it in for a low amount or letting it sit unused, your car can continue to serve someone you care about.

How Much Should A Friend Pay For Receiving A Car Gift?

If you are giving a car as a true gift, your friend does not need to pay you anything for the vehicle itself. But that does not mean the car comes with zero cost. There are still a few things they will likely need to pay for, which include;

Insurance :

Your friend will need to insure the car before driving it legally. Costs vary based on factors like driving history and the car’s model.

Title Transfer Fee :

Most states charge a small fee to transfer the title, even for a gifted vehicle.

Registration Fee :

Your friend will also need to pay a fee to register the car in their name.

Taxes :

Some states waive sales tax on gifts with proper paperwork, while others may still charge a reduced tax based on the car’s value.

Documents Needed To Gift A Car To A Friend

The following documents are needed to complete the gifting of a car to a friend process;

Vehicle Title : Sign the title over to your friend. Write “gift” in the price section if your state allows.
Bill of Sale : Even if no money is involved, this shows who transferred the car and when. Include names, date, mileage, and note that it was a gift.
Gift Transfer Affidavit : Required in many states. Lists both parties, the relationship, and signatures.
Lien Release:  If the car had a loan, show proof it is paid off and the lien is cleared.
ID : Both you and your friend will need valid driver’s licenses.
Odometer Disclosure : Needed in some states for cars under 10 years old.
Inspection Report (if needed): Some states require an emissions or safety check before transfer.
IRS Form 709 (if needed):  If the car’s value is over the federal gift limit ($17,000), this form may be required.

READ: How To Donate My Car To Charity

How To Gift A Car To A Friend: Step-by-Step Guide

Giving away a car to a friend is a generous and meaningful act. Follow the steps below;

Make Sure You Fully Own the Car

Before gifting a car, confirm that you own it free and clear. If there is a loan, the lender holds a lien on the title until it is fully paid. Other liens may come from unpaid tickets or repair loans. Once paid off, request proof that the lien is removed. You can check for any existing liens using the car’s VIN.

Confirm the Car Is in Good Condition

Unless the car is being donated as a junker, make sure it is safe and roadworthy. Check fluid levels, brakes, tire pressure, and lights. A well-maintained car is safer and saves your friend from future repairs.

Create a Bill of Sale

Even if no money is exchanged, write a bill of sale with both parties’ names, the vehicle’s details, mileage, date, and estimated value. This protects you after the car leaves your name.

Follow State Title Transfer Rules

Check your state’s DMV for exact steps. Most require a completed title, a transfer form, ID, and payment of any fees. Some states also ask for proof of insurance or emissions testing.

Assign the Title

Sign the title over to your friend and list “Gift” in the purchase price section. Double-check that all required sections are filled out correctly.

Complete Gift Transfer Form

Many states require an affidavit for motor vehicle gift transfers. Both parties fill out this form, including personal information and the relationship between the giver and the recipient.

Handle Tax Paperwork

Depending on your state and the car’s value, a gift tax may apply. If the car is worth more than $17,000, IRS rules may also come into play. Review local and federal guidelines to stay compliant.

Have the New Owner Register and Insure the Car

The new owner must register the car in their name and pay any registration fees. They will also need to get their auto insurance policy before driving the vehicle.

Tips to Give Away a Car to a Friend

Ensure the Car is Paid Off : Make sure there are no liens on the car.
Check the Car’s Condition:  Get the car inspected and fix any issues.
Prepare Paperwork : Have the title, bill of sale, and any gift transfer forms ready.
Update Insurance and Registration : Your friend needs to update the car’s registration and insurance.
Discuss Expectations : Be clear about any conditions or expectations.
Consider Taxes : Check gift tax rules in your state.
Transfer the Title Correctly : Complete the title transfer and mark it as a gift.

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