Gifting a Car vs. Selling for $1 in Arkansas
In Arkansas, gifting a car or selling it for $1 is nearly the same process. The only difference is the $1.
Written by Brian Hicks
Reviewed by Bellina Gaskey
In , giving a car as a gift doesn’t incur any extra costs. Neither does selling it for $1. Gifted vehicles and vehicles purchased for less than $4,000 are not required to pay sales tax.
If you’re looking to give a car to someone, you may have heard that it could be more cost-effective to sell it for $1. In Arkansas, it doesn’t really make a difference. Either way, you won’t be slammed with sales taxes. So, gifting the car will save the recipient $1.
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4.7/5 rating on the App Store | Trusted by 5+ million customers and 7 million cars4.7/5 app rating | Trusted by 5M+ driversIs it better to gift a car or sell it for a dollar in Arkansas?
There are a number of reasons you might want to give someone a vehicle as a gift, but you may be concerned about the potential sales taxes involved. Luckily, there are no additional state taxes to be paid on a car that’s given as a gift.
The
sales tax on cars in Arkansas
is the tenth-highest in the nation at 6.5%. However, with county taxes, that number goes up quickly. These county taxes (all higher than the state tax) range from 7% to 11.5%. However, cars purchased for less than $4,000 are exempt from any sales tax normally imposed on vehicle purchases.Similarly, a gifted car is not taxed in Arkansas (some states do have tax costs for gifted vehicles). So as long as the giver and giftee are in Arkansas, the transaction won’t have any taxes.
You’ll still need to complete a certain process to gift a car and pay some related fees. Keep reading to get a better understanding of what you’ll need when gifting or receiving a car in Arkansas.
How gifting a car works in Arkansas
Cars are a big commodity. You want to make sure that you’re doing everything correctly to avoid unforeseen costs and ensure that the car is officially owned by the correct party. Let’s discuss what’s required for
gifting a car in Arkansas
.1. Pay off any outstanding loans
If you’re gifting a used car, you need to
check if the car has any liens
on it. If not, you’re good to go. However, if there are any liens on the vehicle, you’ll have to make sure to fulfill them before you can
transfer the vehicle title
. Once you fulfill the lien, you’ll get a new title for the vehicle denoting that you are the outright owner.2. Negotiate the terms of the gift
Gifting a car is like gifting a pet. It will definitely bring the giftee joy, but it also comes with long-term responsibilities. For that reason, it’s probably not best to keep the gift a surprise. There are costs associated with owning a car that could be more of a shock to the system rather than a happy surprise.
Some of these costs will be one-time payments, like a $10 title transfer fee, but others will be ongoing, like fuel, maintenance, and
car insurance
. Some of the Arkansas car costs that you’ll want to keep in mind when discussing the gift with the recipient include:- Vehicle registrationfee: $17
- Minimum liability insurancein Arkansas: $1,741 (annual average)
- Full coverage insurance: $2,450 (annual average)
- Maintenance: $1,186 (annual average)
- Fuel: $2,649 (annual average)
These prices depend on the vehicle that’s being gifted. Some, like fuel and maintenance, will vary depending on economic conditions as well. It’s important that the giftee is ready for the responsibility of car ownership before you proceed.
MORE: Car inspection in Arkansas
3. Create a bill of sale
Even though there’s no money changing hands, you’ll still need to create a
bill of sale
for the gifted vehicle. The bill of sale needs to be signed by both the gifter and giftee and acknowledges that both agree to the terms of the exchange. While this may seem unnecessary, it’s important to have it on hand in case a legal issue or other dispute arises.
For Arkansas, the bill of sale and
odometer disclosure
form are the same (Form 10-313
). To complete this form, you’ll need the vehicle identification number
(VIN), odometer reading, and other basic information for the vehicle.4. Transfer the car title
Once the title transfer is completed, the car will legally belong to the gift recipient. There’s a title transfer form that needs to be filled out with the Arkansas Department of Motor Vehicles (DMV) and submitted at an Office of Motor Vehicles (OMV).
When going to the OMV, the giftee will need to bring documents including:
- The vehicle’s title
- A bill of sale/odometer disclosure statement (Form 10-313)
- Completed Vehicle Registration Application
- $10 title transfer fee
Remember that gifted vehicles are tax-exempt in Arkansas. Once these documents are accepted, the giftee will have the vehicle in their name.
5. Purchase insurance
The final step is providing
proof of insurance
. It’s illegal to own a vehicle in Arkansas without the appropriate minimum car insurance. If the giftee already has an insurance policy, it will be as easy as calling their provider and adding a vehicle to the policy. Depending on the vehicle, the recipient should know that this could increase their insurance costs.If they don’t already have an insurance policy, they’ll need to find one. Finding insurance can be a long and arduous process, but an insurance comparison tool can do all the hard work for you to find the best deals across dozens of top companies.
What to keep in mind when gifting a car in Arkansas
Gifting a car in Arkansas is basically the same as selling it for $1. However, if you want to give a new car as a gift, it’s probably best to bring the recipient with you. The person buying the vehicle will also have to pay that sales tax, even though gifting it forward won’t incur any extra taxes.
If the car is for a new driver, make sure that you’re both prepared for high insurance premiums—and keep in mind that those insurance premiums will be higher for sports cars than for sedans. So make your gifting choice wisely.
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FAQs
Do I have to pay sales tax on a gifted car in AR?
Nope! Gifted vehicles in Arkansas and vehicles purchased for under $4,000 are tax-exempt.
How much does it cost to transfer a car title in Arkansas as a gift?
There is a title transfer fee of $10 when gifting a car in Arkansas.
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