What You Need to Know About Gifting a Car in Canada
Have you got an old car in mint condition sitting in your garage waiting for a new owner? Or maybe you've been shopping for a brand-new car for someone in your family? Regardless of whether a car is used or brand new, if you're thinking of a gifting the car to someone, you may not know that there's more to it than just handing over the keys in a gift box. To help you out, here are answers to commonly asked questions to give you a better understanding of what’s involved.
How does transferring vehicle ownership work and what are the requirements?
Prior to transferring ownership to the recipient, it's important that the recipient considers any tax implications that may apply during the transfer of the car. Keep in mind that each province has their own set of rules when it comes to their variation of retail sales tax (RST) and when it should be applied. For example, some provinces will allow you to give a car to an immediate family member (e.g., spouse, parent, child, sibling, etc.) RST-free, but only if it's the first vehicle being gifted within a 12-month period. If, however, you're gifting a car to anyone outside of immediate family, they will be required to pay RST based on the book value of the car.
When it comes to transferring vehicle ownership to the new car owner, the process is also province dependent. While some provinces may allow you to submit transfer requests online, other provinces may require you and the recipient of the car to go to your province's DMV to complete the transfer. Typically, you'll be expected to present some paperwork (e.g., form declaring the gift, proof of insurance, etc.) and your driver's license. If the recipient is required to pay a RST, it'll also be paid for during that process at your local DMV. Keep in mind some provinces may also require additional documentation. For example, when gifting a car in Ontario, you'll be required to provide a Safety Standards Certificate, whereas other provinces don't require any inspection certification prior to the vehicle transfer. Check out your provincial regulations for direction and requirements that'll pertain to you.
How do I insure a car that was gifted to me if I already have an existing car insurance policy?
If you're the recipient of a gifted car and you already have an active car insurance policy, you'll need to contact your insurer to add the gifted car to your existing policy. Ideally, you'll want to reach out to your insurance company as soon as possible to ensure you're protected in your newly gifted car. And it'll prevent you from paying for two insured cars (if you only plan on driving the one).
How do I insure a gifted car if this is the first vehicle I've ever owned?
If the gifted car is the first you've ever owned, you'll need to prioritize getting a car insurance policy first, even before the car ownership gets transferred into your name. So where do you start? When you first start shopping for car insurance, you may feel inclined to look into cheap car insurance options. But you'll probably come to realize that although some policies may be less expensive, the coverage they offer may not be the most ideal. Rather than looking for "cheap" insurance, look for affordable options that can fit your budget. That way, you won't have to compromise the right coverage you need for you and your car.
Since this may be the first car insurance policy you'll purchase for yourself, you'll need to ensure that you at least have the mandatory coverage required within your province. In addition to the basic coverage it provides, you'll also want to look into adding enhanced coverage to your basic policy, such as Comprehensive coverage, Collision or Upset, Specified Perils or All Perils coverage. By choosing any of these options, you can think of it as adding an extra layer of defense to your car to protect it from the unexpected.
Although you may have scored a car at little to no cost, there are still other costs to factor in when owning a car — and they'll start adding up. While you may have no say in gas prices or maintenance costs, you can look into ways to save on your car insurance. Whether you're a new driver living at home who's receiving a gifted car from your parents, or you're an existing TD Insurance customer with a policy for home, condo or tenant insurance, you can take advantage of the bundling discounts we offer, such as our multi-product or multi-vehicle discounts, just to name a few.
To gift, or not to gift, that is the question.
This comes down to personal preference. If you want some money back in your pocket as a reward for taking good care of your car, selling it may be a good option. But if you're looking to save your child who's on a tight budget some extra money, gifting a car may be the better option. Whichever option you choose, tax exemptions for the recipient will only be made if they're an immediate family member being gifted a car, not if they're purchasing a car from you.
Whether you're the buyer or receiver of the gifted car, make sure you have the best insurance coverage to suit your needs prior to the vehicle transfer. If you're an existing TD Insurance customer looking to update your policy with a newly gifted vehicle, you can do so through MyInsurance. Or, if you're looking to purchase your first car insurance policy with us, you can get a quote online in minutes.