Giving a car as a gift or charitable donation

Despite what the holiday commercials will have you believe, very few people can afford to wrap up a car with a big bow, park it in the driveway and wait for the surprised recipient to "ooh and ahh" over the gift. While this type of auto gifting is rare, people do give cars on a regular basis. Usually it is an older car that they are donating or giving to a friend or family member.

There are certain things you need to know when giving a car away. These things include potential tax-related issues and the proper way to go about signing over the car to another person, which could vary depending on where you live. A trip to the motor vehicle department could shed some light on where you need to begin. The first step often begins with a bill of sale.

A bill of sale is usually required for any transfer of your car that is not to a direct family member. In this instance, a hand-written "sales" note may be adequate. In other cases a more formal bill of sale is generally needed, which will also require some other things:

* A recent appraisal of the vehicle to determine its value.

* The original title of the car.

* The price you would be asking for the car that is being waived.

* An indication of the mileage.

* Any other requirements as spelled out by motor vehicles where you live.

The same process applies for donating a car to a charity, and a copy of the bill of sale can be used to deduct the gift properly when it comes time to file your taxes.

When filling out the bill of sale, expressly indicate that the car is granted as a gift. Keep in mind that the car "buyer," the person to whom you are donating the vehicle, also may still have to pay sales tax on the car. The sales tax varies by state or province, or the DMV may exclude the tax or charge a straight tax based on the Kelly Blue Book value of the car.

While a bill of sale is usually required, it's also likely that, when donating a car to charity, you need to sign the back of the title and give that title to a representative of the charity. Again, this is something that is best verified by the DMV to ensure you are doing it correctly.

Though not a donation or gift, assuming the payments on another person's car also comes with some guidelines. Assuming payments often occurs because the existing owner can no longer afford the vehicle payments or are looking for a new car and simply want to help out another person in the process. There are situations where people take over the payments of a car from another, assuming the lease or loan. While not a gift in the traditional sense, it is a way to help a person out who may not be able to afford a new car in another manner.

Before beginning, the person who will be assuming the payments will need to contact the financing company to find out if they will agree to this scenario. A down payment may be necessary. A credit check and verification of a credit score is usually on the list of things that will be verified. As with a regular loan, the financing company may require an approval period, which could take some time. If the recipient is approved, the existing owner will have to sign paperwork that transfers the car lien into the recipient's name.

Giving the gift of a car to another person or as a charitable donation requires navigating the proper channels of paperwork and procedure. The best resource is to speak to someone who works at the Department of Motor Vehicles directly to guide you through the process.