If you’re feeling generous, you can give your car away for free. This happens more often than you might think, but usually for circumstances such as:
- A family member just received their driver’s license
- You bought a new vehicle and still have your old one to deal with
- You can no longer drive for medical reasons
- You know a family or individual in dire need
To make this process official, there are certain steps that should be made to make sure the car is properly transferred to the new owner. The gifting process may vary slightly depending on the state you live in, however, the general steps are listed below.
Part 1 of 3: Make an agreement with the recipient of the gifted vehicle
Step 1: Negotiate the terms of the gift. Gifting a vehicle for no financial gain doesn’t exclude you from discussing the terms of the vehicle transfer.
The responsibility for potential and ongoing expenses, such as insurance fees, fuel expenses, repair fees, and maintenance costs, should be clarified with the recipient so both parties are on the same page.
Determine who will pay fees and taxes associated with the title transfer process.
Visit your nearest DMV or check the DMV website to see what costs will be associated with your title transfer.
For example, in California, the title transfer fee is $15 plus taxes through the DMV. The fees and policies vary from state to state.
- Note: If the recipient needs to pay sales and use tax on the gift, calculate the tax amount based on the NADA Official Used Car Guide price, an accepted market price guide, for the vehicle.
Step 2: Write a sales agreement or bill of sale for the gift. It may seem unnecessary at the time, but the seller may still maintain liability for the car if there isn’t a contract in place for the gifted vehicle.
A contract or bill of sale will likely be required by the DMV at the time of title transfer anyway.
Have both the current owner and the recipient fill out the necessary sections of the bill of sale or agreement.
Part 2 of 3: Complete the transfer of title portion of your title certificate
Step 1: Verify that there are no liens outstanding on your car. You won’t be able to transfer your title with an outstanding lien on your car.
A lien on your car means that there is a third party that has a legal and financial interest in your vehicle because of a debt owed.
If there is a lienholder listed on your title, contact them to make arrangements to remove the lien.
If the funds are paid in full, it may be as simple as completing a discharge of loan through the DMV. You can visit the DMV lien removal page for more information.
You may need to finance your car loan in another fashion to remove the lien from the title. This can be done by closing your current loan through financial help from an outside lender such as Escrow.
- When the lien has been discharged, you can proceed with the title transfer.
Step 2: Fill out the transfer of title section. You will need to fill out the transfer of title section completely on the original car title.
Make sure to print the current mileage on the title transfer section.
Write “GIFT” in the sale amount field on the title.
Step 3: File the title transfer paperwork. The simplest and most straightforward way to transfer your title to the car’s recipient is for both parties to go to the DMV branch and complete the paperwork.
A clerk at the office will ensure all the paperwork is filled out correctly and completely so there are no delays or problems.
You may need to fill out a Statement of Facts or another document stating the vehicle is being transferred as a gift so the recipient can be exempted from paying taxes on the transfer. You can learn more about your state’s policy on tax exemptions for vehicle gifts at the DMV website.
Part 3 of 3: Pay the title transfer fee and applicable state taxes
Step 1: Find the applicable fee amounts. If you are at the DMV office, they will let you know exactly how much will need to be paid.
- If the recipient is shown as exempt from paying the sales and use tax online, they will likely still need to pay the title transfer fee.
Step 2: Pay fees and taxes. Pay the DMV fees for the title transfer and sales tax if applicable.
- Once the fees are paid, the transfer is complete and the car has been gifted to the new owner.
Whether you are gifting your vehicle to a family or friend, there are certain steps that you need to make this process official. By following the guide above, the gift recipient can enjoy their new vehicle with the title successfully transferred under their name. If you are feeling extra generous, you can have a certified mechanic, such as one from YourMechanic, give your car a full inspection before handing off the keys. This will ensure that your gift is driving smoothly for its new recipient.
This article originally appeared on YourMechanic.com as How to Gift a Car and was authored by Jason Unrau.