How To Give Away A Car To A Friend

How To Give Away A Car To A Friend

There are times when you have a car that you would like to give to someone as a gift, especially if that someone is a close friend who needs reliable transportation. Whether you are upgrading your vehicle or simply no longer need it, giving away a car can be a thoughtful and generous gesture. But before you do, it is important to understand the steps involved in how to give away a car to your friend.

To begin, you must have a clear title to the vehicle. That means any outstanding loan on the car must be paid off in full. If you already have the title in your name and in your possession, you are ready to move forward with the process. Giving a car to your friend involves more than just handing over the keys. You will need to properly transfer ownership by signing the title over, possibly filling out a gift affidavit depending on your state, and completing a bill of sale. Your friend will also need to register the car in their name and get insurance coverage before driving it.

Each state has different rules for gifting a vehicle, so it is important to check with your local DMV to make sure all the required paperwork is completed. In this article, we will walk you through every step of how to give away a car to your friend, from verifying ownership to finalizing the transfer.

Why Give Away a Car to a Friend?

Giving a car to a friend can be a meaningful and practical decision. Below are some reasons why people choose to do it:

Helps someone in need

A car can give your friend reliable transportation for work, school, or family needs.

Avoids the hassle of selling

Selling a car takes time and effort. Gifting is often easier and more rewarding.

Low resale value, high personal value

If the car is still in good shape but not worth much money, giving it to a friend can make better use of it.

Strengthens relationships

Giving a car shows trust and care. It is a generous way to support someone close to you.

Puts the car to good use

Instead of letting the car sit unused or trading it in for a low price, gifting it ensures it stays on the road.

Can be more rewarding than money

Seeing a friend benefit from your gift can feel more valuable than making a small profit from a sale.

Gives peace of mind

You know exactly where the car is going and that it will be appreciated and well-used.

Documents Required To Give Away a Car to a Friend

Gifting a car to a friend is generous, but it still requires proper paperwork. Even if no money changes hands, you must follow your state’s vehicle transfer rules. Listed below are the main documents you will likely need:

Vehicle Title

You need a clear title in your name with no outstanding loan. Sign the title and fill in your friend’s name as the new owner. Follow your state’s instructions carefully.

Proof of Insurance

Your friend must show proof of insurance before registering the vehicle in their name.

Identification

Both of you may need valid IDs, especially when visiting the DMV in person.

Bill of Sale (Optional)

Though not always required, a bill of sale is useful. It shows the transfer happened and that the car was a gift. Include the date, vehicle info, and both names.

Gift Affidavit

Some states require a gift affidavit or gift letter. It proves the car was given without payment and may help avoid sales tax.

Odometer Disclosure

If the car is under 10 years old, you may need to record the mileage. This could be part of the title or a separate form.

How to Give Away a Car to a Friend

Giving a car to a friend is a generous way to help someone who needs reliable transportation. Whether you are upgrading or simply do not need the car anymore, the process involves a few legal steps. If you are wondering how to give away a car to a friend, here is what you need to know:

Make Sure You Fully Own the Car

You cannot give away a car unless the title is in your name and fully paid off. If there is still a loan, you will need to pay it off and get the title from your lender first.

Check State Requirements

Each state has its own rules for gifting a vehicle. Visit your local DMV’s website to find out what forms you need. Some states require a gift affidavit and may waive certain taxes on gifted cars.

Sign the Title Over

The title proves ownership. Fill it out carefully, listing your friend as the new owner. Mistakes can delay the process or require a replacement title.

Write a Bill of Sale (Optional)

Even though it is a gift, a simple bill of sale can help. Include both names, car details, the date, and note that it was given as a gift.

Remove License Plates if Required

Some states let the plates stay with the car, others do not. Check your state’s rules before handing over the keys.

Cancel Your Insurance

After the transfer, cancel your insurance. Your friend will need to get their coverage before registering the car.

Help Your Friend Register the Vehicle

Your friend must register the car in their name. They will need the signed title, proof of insurance, and possibly a gift form, depending on your state.

How Much Can Giving Away a Car to a Friend Save You on Taxes?

Gifting a car to a friend is a generous thing to do, and in some cases, it might even save money on taxes. While it is not guaranteed in every situation, there are a few ways you could avoid extra costs.

You probably will not owe gift tax

The IRS lets you give up to $18,000 (as of 2024) per person each year without needing to pay federal gift tax. If the car’s value is higher, you may need to file a gift tax form, but most people do not owe anything unless they have given away millions over their lifetime.

You will not pay sales tax

Since you are giving the car away rather than selling it, there is no sales tax on your end.

Your friend might avoid sales tax, too

In many states, if the car is marked as a gift and the right forms are filled out, like a gift affidavit, your friend may not have to pay sales tax either. Some states waive it completely, while others reduce it.

No tax break for you

Unless you donate the car to a registered charity, you will not get a tax deduction for the gift.

FAQs: How To Give Away a Car to a Friend

Will my friend have to pay taxes on the car?

That depends on where you live. Some states don’t charge sales tax on gifted cars if you fill out the right forms, while others may charge a reduced amount. Your friend should check with the DMV to find out.

Do I need to tell the DMV when I give away my car? 

Yes, in most states, you have to notify the DMV or file a notice of transfer. This helps protect you from any future tickets or issues involving the car.

Can I just give my car to a friend for free? 

Yes, you can. As long as you own the car outright and have the title, you can transfer it to your friend without any payment. Just make sure to follow your state’s rules for transferring the title.

What paperwork do I need to give my car away?

Usually, you will need the signed vehicle title, a bill of sale (which isn’t always required but is helpful), a gift affidavit if your state asks for it, an odometer reading if the car is newer, and both of your IDs. It’s a good idea to check your local DMV to see exactly what’s needed.

Can I give away a car if I still owe money on it? 