Gifting a Car vs. Selling for $1 in Virginia

It’s better to gift a car than to sell it for $1 in Virginia. Find out more here.
Written by Macy Fouse
Reviewed by Jessa Claeys
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It’s easier to follow the DMV’s procedure for gifting a car in
Virginia
than it is to sell a vehicle for $1 in hopes of skirting taxes. 
If you’re looking to give a car to someone as a gift, you may have read that it’s more beneficial to sell it for a dollar—but that depends on the state. What’s the best course of action to take in Virginia? Read on to find out.

Is it better to gift a car or sell it for a dollar in Virginia?

Whether you’re wanting to amaze your loved one with the ultimate gift or lend a helping hand to a friend who needs a way to get around, it’s better to give a car as a gift than sell it for $1 in Virginia. 
It may sound like $1 vs. $0 is not a big difference, but depending on your state’s tax laws, it could make a huge difference. No matter what state you’re in, selling a car means the buyer will likely have to pay sales tax on it.
Virginia car sales tax
is 4.15%—but with added state taxes and county taxes, it could be up to 7% of the car sales price!
Thankfully, gifted cars are generally tax-exempt in Virginia, so you don’t have to worry about sales tax—but it’s not as straightforward as it sounds. Only gifts from a parent to a child or from one spouse to another are tax-exempt. All other gifts may be subject to a fee of 3% of the sales price or $35, whichever is greater. 
You can still document the sale as $0 though, so there’s no need to sell the car for $1. 

How gifting a car works in Virginia

Ready for a more in-depth look at the
Virginia car-gifting process
? Let’s break it down.

1. Pay any unpaid loans

In Virginia, a car can only be given as a gift if it’s totally paid off. If you still owe money on the vehicle or have any outstanding loans or
liens on the car
, you’ll need to get those squared away before you can start the gifting process. 
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2. Negotiate the terms of the gift

This is where reality differs from those Christmas car commercials—because you’re going to have to include your recipient in the whole process. After all, owning a car involves way more expenses than the initial purchase. 
You’ll want to be sure your recipient is prepared for all the ongoing costs like maintenance, insurance, repairs, and gas. On top of that, you’ll also need to factor in various
DMV fees
Here’s a look at how much a gifted car in Virginia could cost:
  • Title transfer fee: $15
  • Registration fee: $35.75 
  • Minimum liability insurance in Virginia: Around $1,770 per year
  • Full-coverage insurance in Virginia: Around $2,400 per year
  • Vehicle maintenance costs in Virginia: Around $400 per year
  • Fuel costs in Virginia: $1,600 per year
Costs will differ pretty drastically depending on the type of vehicle, but you and your recipient will need to negotiate who will foot the bill for all of these expenses. 

3. Draft a bill of sale

We know it’s not technically a sale, but you still need a record that the transaction took place—enter the
bill of sale
. This isn’t legally required in Virginia, but it’s always a good idea to have just in case. 
You can either use Virginia’s
Vehicle Price Certification
form or
write your own bill of sale
. Be sure to include the following information, as well as the fact that it was a gift: 
  • Make, model, and year of the vehicle
  • License plate number
  • Vehicle identification number (VIN) 
  • Names, addresses, and phone numbers for both the giver and recipient
  • Odometer reading
  • Date of “sale”
  • Signature of both parties

5. Fill out a Purchaser’s Statement of Tax Exemption to avoid sales tax

To ensure your gift is tax-exempt, you’ll need to fill out a
Purchaser’s Statement of Tax Exemption
form to verify that the car was gifted. This document is required before you can apply for a
title transfer in Virginia
.
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6. Purchase insurance

Prior to the title transfer, your recipient will have to have proof of car insurance that meets
Virginia’s minimum requirements
. If they already have a policy for another car, they can simply add the new vehicle to their existing coverage. 
If the value of the new car is more than their previous car, however, their insurance rate might increase. In that case, it’s always a good idea to
compare car insurance quotes
from multiple providers to find the best deal.

7. Transfer the car title

Now that all of your ducks are in a row, it’s time to finalize the switching of owners by transferring the vehicle’s title.
For a Virginia title transfer, you’ll have to gather the following documents to take to the DMV: 
Your recipient also needs to bring a completed copy of the
Certificate of Title and Registration
form with both of your signatures. If you have any questions, check on the
Virginia DMV’s website
for more titling information. 

What to keep in mind when gifting a car in Virginia

Gifting a car isn’t as simple as handing over a wrapped box. Before you start the process of giving a vehicle as a gift, you’ll want to consider these factors:
  • Giving a car to a newly-licensed teen is sure to make you their favorite person—but don’t forget that
    car insurance for young drivers
    can get expensive. 
  • If you’re looking to buy a brand-new vehicle for someone, it’s easier on everyone if you bring them to the dealership with you to be involved in the whole process. 
  • If you want to leave a vehicle to a loved one as an inheritance, you’ll need to
    add that person as the beneficiary
    on your Virginia title.
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FAQs

If the gifted car was not from a parent or spouse, then yes—the purchase will be subject to Sales and Use Tax. However, the gifter can list the price of the vehicle as $0.
A car title transfer in Virginia costs $15, but registration could add an extra $30+ depending on the type of vehicle.
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