In the spirit of Father's Day, you might wish to express your love and appreciation by gifting a car to your dad. This could be a substantial gesture to recognize his relentless support throughout your life. To help you navigate this process, we at Kunes Auto Group have put together a comprehensive guide, as gifting a car entails slightly different steps than buying one for yourself.
Settle Your Auto Loan
Before you can gift the ultimate Father's Day present, make sure you own the vehicle outright. This implies your car loan must be fully paid off. Any outstanding balance would obstruct you from transferring the vehicle's title, so your first step should be settling your auto loan. Once done, confirm with your lender that the vehicle is officially yours.
Evaluate Your Dad's Financial Situation
While receiving a car as a gift is exciting, it also entails ongoing costs like insurance, gas, maintenance, and occasional repairs. Before gifting a car, it's important to consider whether your dad can comfortably afford these additional expenses. If these costs might strain his finances and you're unable to assist, it could be prudent to reconsider the car gift.
Understand the Gift Tax
When gifting a car, you may need to pay the gift tax, depending on the vehicle's fair market value. As of 2019, if the car's market value exceeds $15,000 for an individual or $30,000 for a married couple, a gift tax ranging from 18% to 40% may apply.
Bypass the Sales Tax with a Pre-Owned Car Gift
One advantage of gifting a car you already own is the potential to avoid sales tax. Sales tax can significantly inflate the cost of a car, so this could yield significant savings. However, if you're considering buying a new car to gift it, remember that you would incur sales tax on the original purchase.
Prepare a Bill of Sale
To absolve yourself of any future liabilities associated with the gifted car, it's advisable to create a bill of sale. Both you and your dad should sign this document, which should detail the car's make and model, purchase price (if applicable), Vehicle Identification Number (VIN), and current odometer reading.
Officially Transfer the Car Title
To officially gift the car, you need to transfer the vehicle's title. This process usually necessitates a trip to your local Department of Motor Vehicles (DMV), where you'll be required to pay a fee and fill out the necessary forms. Since laws and fees can differ by state, it's best to check with your local DMV for specifics.
Secure Insurance Coverage for Your Dad
Finally, ensure your dad has appropriate car insurance to legally drive the gifted car. If he already has an insurance policy, he just needs to add the new vehicle. If not, you might consider helping him set up a new policy.
By following these guidelines, you'll be ready to give your dad the unforgettable Father's Day gift of a car.