How To Give Away A Car To A Friend

How To Give Away A Car To A Friend

A Step-by-Step Guide to Gifting a Car to a Friend:

Giving away a car to a friend can be a thoughtful and generous gesture, whether you are upgrading your vehicle, no longer need a second car, or simply want to help someone out. But even though there is no money involved, it is important to handle the process properly to avoid legal issues down the road. In most states, including Texas and others across the U.S., there are specific steps you need to follow to transfer ownership legally and ensure the vehicle is registered in your friend’s name.

If you are wondering how to give away a car to a friend, the good news is that it is not complicated but it does require a little document and planning. You will need to sign over the title, fill out a bill of sale (even if the price is $0), and sometimes notify your local DMV or equivalent agency. In some cases, you might also need to provide a gift affidavit or pay a small fee, depending on your state’s rules.

This guide will walk you through everything you need to know about gifting a car to a friend, including legal requirements, what documents are needed, and how to protect yourself from liability. Whether you are doing this out of kindness or helping someone get back on their feet, giving away a car the right way ensures a smooth, stress-free process for both of you.

How Much Must A Friend Pay When Donation A Car To Him/Her

If you are donating a car to a friend, technically, they do not have to pay you anything because it’s a gift. However, there are still some costs involved for your friend, mainly related to vehicle registration, title transfer, and taxes, depending on the state.
Below is a breakdown of what your friend may have to pay:

Title Transfer Fee:

Most states charge a small fee (around $10–$30) to transfer the vehicle’s title from your name to your friend’s name.

Registration Fees:

Your friend will need to register the car in their name, which can cost anywhere from $30 to $200+, depending on your state.

Gift Tax (Sometimes Waived):

Some states allow a gift tax exemption if the car is truly a gift.
In places like Texas, your friend must submit a gift affidavit to avoid paying sales tax.

Without this affidavit, the state might calculate sales tax based on the car’s fair market value.

Insurance:

Before driving the car, your friend must insure it, which is a separate and ongoing cost.

Which Information And Documents Are Needed To Give Away A Car To A Friend

Gifting a car to a friend is a kind gesture, but it still requires proper documentation to make the transfer legal and hassle-free. Below is a list of the information and documents you’ll need to complete the process easily:

Vehicle Title (Certificate of Title):

You must have the original car title in your name.
You must sign it to your friend and include the odometer reading, date of transfer, and both parties’ signatures.

Bill of Sale (Even if the Car is Free):

Some states require a bill of sale, even for gifts.

Include:

Full names and addresses of both parties
Vehicle details (make, model, year, VIN)
Date of transfer
Sale price (can be listed as $0 or “gift”)

Gift Affidavit (State-Specific):

In some states like Texas, a Motor Vehicle Gift Transfer Affidavit (Form 14-317) is required to prove the vehicle is a gift and avoid paying sales tax.

Valid Photo IDs:

Both you and your friend may need to provide government-issued IDs to verify your identities.

Vehicle Registration and Insurance:

Your friend must register the car and get insurance before legally driving it.

Vehicle Transfer Notification (Optional but Recommended):

Notify your DMV that you no longer own the vehicle to protect yourself from future liability (tickets or accidents).

How To Give Away A Car To A Friend

The following steps will guide you on how to give away a car to a friend:

Make Sure You Fully Own the Car:

It might seem obvious, but before gifting a car, you need to confirm that you own it outright. If you took out a loan to buy the car whether new or used, there is likely a lien on the title until the loan is paid off. Once you have paid it in full, the lender should send you proof that the lien has been cleared so you can get a new title in your name.

Liens can also come from unpaid parking tickets or if you borrowed money using the car as collateral. Either way, make sure the title is in your name and completely lien-free before handing over the keys. You can check for liens by running a search using the vehicle identification number (VIN).

Ensure the Car Is in Good Working Condition:

Unless you are giving the car away as a junker to a charity, it is important to make sure it runs well. Routine maintenance and inspections help catch problems early and keep the vehicle safe and reliable.

Check tire pressure
Test the brakes
Top off all fluids
Inspect the exterior, including lights

Taking care of these basics not only keeps you safe but also extends the life of the car and saves the new owner from unexpected repairs.

Create A Bill Of Sale:

Even if you are giving the car away for free, it is important to have a bill of sale. This document shows who owned the car before and who owns it now, protecting you from any issues that might come up after the transfer.

The bill of sale should include:

Odometer reading at the time of transfer
Date of transfer
The fair market value of the vehicle

You can easily find blank bill of sale forms online, including ones specific to your state.

Understand the state’s title transfer process:

Whether you are selling a vehicle or transferring ownership to a family member or friend, understanding your state’s title transfer process is essential. This will usually be done at the Department of Motor Vehicles (DMV). Each state may have slightly different requirements for vehicle titles, so it is important to do your research. Generally, you will need to do all of the following:

Fill out a certificate of title transfer form
Bring the original title
Pay applicable fees
Provide identification documents, ie driver’s license
Provide proof of insurance or smog check if required by your state

Title transfer fees can vary depending on the state, the value of the vehicle, and other factors. By familiarizing yourself with the process and fees, you can ensure a smooth and efficient transfer of your car title at your local DMV.

Assign the Title to the New Owner:

To officially transfer ownership, you will need to complete the title assignment. This includes filling in the recipient’s details, such as their name and driver’s license number.
When you reach the section that asks for the purchase price, simply write “Gift” to show that no money was exchanged.

Fill Out the Affidavit of Motor Vehicle Gift Transfer:

Before the new owner can register the car, both of you need to complete an Affidavit of Motor Vehicle Gift Transfer. You can usually find this form online by searching the name along with your state.

While the exact form may vary by location, it typically asks for:
The legal owner’s personal and contact information
Your relationship with the person receiving the car

Make Sure All Tax Forms Are in Order:

Depending on your state and the value of the car, you may be responsible for paying a gift tax. Some states charge a small gift tax no matter the car’s value.

According to Kelley Blue Book: As of January 2023, gift tax rules apply if the vehicle’s fair market value is over $17,000.
Anything above this counts against your lifetime gift tax exemption, which is currently $12.92 million.

To avoid future issues, be sure to research your state’s laws and complete any required IRS forms.

Have the Recipient Register the Car and Get Insurance:

Before the new owner can legally drive the car, they must register it in their name and pay any required fees.

If they do not live in the same household as you, they will also need to get their auto insurance policy.
Encourage them to compare options to find the best coverage and rates.

Gifting A Car vs. Selling It for $1

Some people try to avoid gift taxes by selling the car for $1, but this often does not help. You will still need to complete all the same paperwork as if you were gifting it.
Also, the recipient may still have to pay sales tax based on the car’s fair market value, not the $1 price so it does not save money in most cases.

Giving a car to a friend is a generous gesture, but it comes with important steps to follow. From clearing any liens and creating a bill of sale to handling taxes and transferring the title, every detail matters. By making sure the car is in good condition and the paperwork is in order, you protect both yourself and your friend. Take the time to follow the legal process, and your thoughtful gift will be a smooth and stress-free experience for everyone involved. Visit this website for more details.

Other Posts: