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Essential Steps to Consider Before Buying a Car as a Gift

Buying a car as a gift can be an incredibly generous and exciting gesture. However, it’s important to understand that gifting something as significant as a vehicle involves more than just the purchase price. At O1ne Mortgage, we want to ensure that you are well-informed and prepared for this big decision. Here are some crucial steps to consider before you buy a car for a loved one.

1. Consider Your Giftee’s Financial Situation

While buying a car is a substantial gift, the cost of car ownership extends far beyond the initial purchase. Your giftee will need to cover ongoing expenses such as:

• Fuel
• Insurance
• Maintenance
• Repairs
• Annual registration

These costs can add up to thousands of dollars each year. It’s essential to have a conversation with your giftee to ensure they are aware of and can manage these financial responsibilities.

2. Understand Financing Options

If you plan to finance the vehicle, you may need to put your name on the title as a co-owner. Alternatively, you can buy the car with cash or have the giftee apply for the loan with you as a cosigner. Consider how the cost will impact your financial obligations and goals. For expert advice on financing options, contact O1ne Mortgage at 213-732-3074.

3. Understand Title Requirements

Each state has its own laws regarding vehicle titles. You may need the giftee to sign off on the title, or you might be able to handle the paperwork through a dealer. If you plan to put both names on the title, consider using “or” or “and/or” to simplify future transactions. Consult with a local dealer to understand your options.

4. Figure Out Insurance

Proof of insurance is typically required to complete the sale. If you’re covering the insurance premiums, you can add the vehicle to your existing policy. If the giftee will get their own policy, you may need to temporarily add the vehicle to your policy or obtain a binder from your insurance agent. This provides coverage until a policy is issued.

5. Remember Taxes

In addition to sales tax, you may be subject to the gift tax exclusion. In 2023, you can give up to $17,000 (or $34,000 as a married couple) without reporting it to the IRS. Any value over this amount counts toward your lifetime exclusion, which is $12.92 million (or $25.84 million for married couples) in 2023. Most people will only need to file an additional form on their tax return.

The Bottom Line

Buying a car as a gift is a wonderful gesture, but it requires careful planning and consideration. Understand the specific laws and logistics for your state, and consult with a local dealer for guidance. For any mortgage service needs or expert advice on financing options, call O1ne Mortgage at 213-732-3074. We are here to help you make informed decisions and ensure a smooth process.

Contact O1ne Mortgage today at 213-732-3074 for all your mortgage service needs. We look forward to assisting you!

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