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- You must fully own the car (no liens) to gift it legally. If there’s an outstanding loan or lien, the title can’t be transferred for a gift.
- Gifting to someone outside your household complicates insurance significantly. Insurers may view you as lacking “insurable interest,” making them reluctant to cover the vehicle long-term.
- You can temporarily insure the car yourself before transfer. Title and insurance can remain in your name until after revealing the gift, then transfer shortly afterward.
- Many states require a formal “gift transfer” process on title paperwork. That often includes a bill of sale marked “gift” or a gift affidavit, not just a standard sale form.
- Ongoing costs beyond the sticker price, such as registration, taxes, insurance and upkeep, fall to the recipient. Before gifting, make sure the recipient can manage those expenses responsibly.
If you’re considering slipping the keys to a brand-new car under the tree, you have a daunting task ahead.
Not only do you have to find the perfect car, but it must also be paid for, titled and insured without tipping off the object of your affection. On top of that, you must get it home late on Christmas Eve with a big red bow mounted on the roof.
Advertising campaigns like Lexus’s “December to Remember” have helped drive holiday sales and car gifting. Lexus started the campaign in 1998 and turned December from its worst sales month into its best.
Here’s what you need to know about car insurance when you buy a car for someone.
The fine print of giving a car: Title, registration and insurance
Giving a car as a gift is easy if it is for your spouse or child and more complicated if you buy it for a friend.
Buying and titling a car that you are part owner of is simple. Since you are an owner, you can sign all the paperwork and your spouse never has to know — until the big reveal. DMV rules vary by state; in some cases, the other person’s presence may be required, so ask about your state’s requirements.
Insurance should be a no-brainer as well. If you are listed as a co-owner of the car and add it to a shared policy, you can sign all necessary documents without involving your spouse, keeping your secret safe.
But it’s more complicated if you are not a co-owner of the vehicle. Titling a car in someone else’s name without that person’s signature on some paperwork is difficult, especially if you are financing the car. Insurance can also be a challenge. Insurers will be concerned that you will have no insurable interest in the car, making them reluctant to write a policy.
But it is still possible to put a car in the driveway and be insured. You can title and insure the car in your name, and sign the title over as a gift a few days after the surprise.
Tips for gifting a car during the holidays
While gifting a car requires extra planning, most dealers are willing to help. Here are a few tips for planning your surprise:
- Start early. You may run into unexpected problems.
- Consider all expenses other than the sticker price — the recipient must fuel the car, park it and insure it, unless you are willing to handle those expenses, too.
- Dealers are happy to keep the car on the lot until the big day but may not be able to deliver late Christmas Eve. You may need to ask a neighbor to help out.
- If the dealership requires signatures from your spouse, consider wrapping the key in a nice box with a picture of the car and then heading to the dealership later to sign the paperwork. Most dealers will happily have the car on the show floor topped with a big red bow.
- Ask to borrow the big bow from the dealership or buy one online.
Frequently Asked Questions: How to get car insurance when gifting a car
Do you need insurance before giving someone a car?
Yes. A gifted car must be insured before it’s driven, even briefly. Many givers keep the title and insurance in their name until after the reveal, then complete the transfer. Continuous coverage prevents gaps, claim issues or registration delays.
Can you insure a car that you plan to give away?
You can insure a car you intend to gift, but only temporarily. Insurers require “insurable interest,” meaning the policyholder must still have financial responsibility. Once the title transfers, the recipient must carry their own policy to avoid liability problems.
Does the recipient need insurance before the car title is transferred?
In most states, yes. Recipients typically secure a policy using the car’s VIN before going to the DMV. Their insurance activates when the title is transferred, allowing the giver to cancel their policy without exposing the car to risk.
Are there taxes or fees when gifting a car?
State rules vary. Many states waive sales tax for gifts between immediate family but still charge transfer and registration fees. Gifts to non-family members may require a gift affidavit or additional documentation, depending on state requirements.
Can you gift a car that still has a loan or lien on it?
Usually not. A lender holds legal interest until the loan is paid off, so the vehicle can’t be transferred as a gift until the lien is released. Paying off the loan first ensures a clean, legal transfer process for the recipient.
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