Gifting a Car: What You Need to Know
With the holidays right around the corner, you’re likely starting to think about what gifts to get your loved ones (if you haven’t already finished shopping altogether).
If you’re looking to give a bigger gift this year, and have a spare giant red bow, you may be looking into gifting someone else a car. If you’re fortunate enough to be in the position to give a new or used car to a loved one, you should understand the process, transfer requirements, and possible fees that come with gifting a vehicle.
At Berry Insurance, we want to make sure your perfect present goes over without a hitch. Beyond needing auto insurance coverage, there are often many steps drivers are surprised to learn about when trying to gift a car to someone else.
In this article we’ll cover everything you should know about the process of gifting a vehicle so you can stay in the know for any potential issues down the road.
How should I gift a car in Massachusetts?
To save yourself the hassle of having to deal with transfers, additional fees, or other potential issues, we recommend including the one receiving the gift in the buying process. Not only can they then pick out their own car, but can be involved in the financing and titling process.
Even if you’re paying for the vehicle, including the recipient in the process will help you dodge any potential legal or financial issues if your name was attached to the car as an owner. While it may not elicit as big of a reaction as a brand new car in the driveway, it would mean less work for you down the road.
If you’re looking to get a used car, note that you can only gift a used car if there is not a lien attached to the vehicle. To give a car with a lien, you would need to finish paying off any loans and release the lien in order to transfer the title of the vehicle to the recipient.
How do I transfer a car in Massachusetts?
If you received a car as a gift or are simply being given one from another friend or family member, there is a process you will need to follow to transfer the vehicle to you from the previous owner/buyer.
Transferring a vehicle in Massachusetts comes with many fees, paperwork, and potential sales tax. If you are transferring the car to any immediate family members, the recipient of the gift would be exempt from paying any sales tax. This includes any transfers amongst parents, children, siblings, or spouses. The recipient of the gifted car would have to fill out an MVU-26 form to receive the sales tax exemption. This sales tax exemption does not apply to transfers from grandparents, uncles/aunts, or cousins.
Similarly, the recipient of the vehicle may be exempt from paying for sales tax on vehicle transfers outside their household if it is being given as a gift. The recipient would instead have to fill out an MVU-24 form to receive the sales tax exemption.
Next, the recipient/new owner will need to visit their local RMV to continue the transfer process and obtain a registration and title on the vehicle.
What you will need to complete to transfer the vehicle:
- The new owner must complete the registration and title application. Your insurance company must approve it
- Pay the $75 title fee
- Pay the registration fee. The cost may vary by plate type
- A previous owner’s certificate of title assigned to the new owner. If your vehicle is exempt from title due to its age, you must present the previous registration and the bill of sale
- Completed sales tax exemption form (if applicable)
After completing the transaction at the RMV, you will receive either the registration certificate, new plates and year of expiration decal for the rear plate, or a resignation certificate with the new vehicle information. The RMV would process the title and mail it to you in between 6-8 weeks.
What are my auto insurance options for gifted vehicles?
To legally drive in most states, you will need to acquire auto insurance coverage for the vehicle. Depending on how and who you are gifting the car to could affect how they are covered and if you will need to update your own current auto policy.
If you are planning to gift a vehicle to someone in your household who is a brand new driver (such as a newly licensed teenager), you will need to add them onto your auto insurance policy if they aren’t already. Adding teen or even new adult drivers can affect your policy in different ways, but it’s important to make sure every family member is protected when out on the open road. To learn more about adding new drivers and ways you can save, read this article: How Does a New Driver Affect Your Auto Insurance?
If the gifted vehicle will be on your own policy it can be a good idea to update your insurance agent or carrier about the recent addition. They can help make sure that your policy covers any features of the new vehicle and see if you are eligible for any possible discounts on your policy. It would also be wise to update your agent or carrier when gifting one of your current cars to someone outside of your household/policy, as less vehicles on your policy could affect what coverage you need.
The gift that keeps on giving
You’re sure to make the season bright when gifting a loved one a new car. While it can be an expensive investment, the surprise on their face will be priceless!
Adding a new vehicle to the household can be the perfect time to look into renewing your auto policy. Renewing your policy every six months or a year can help to update your policy on any major changes or find out if you should shop around for a new policy. Learn more about the benefits of renewing your policy here: How Often Should I Renew or Switch my Car Insurance?