Gifting a Car for the Holidays? Be Sure To Consider Car Insurance

Car sales often rise in December as gifting a car during the holidays has become more popular. There is one aspect that is important to remember about giving a car, however, that is easy to forget: auto insurance. The penalties for driving a car without insurance can be steep.

Chris Tepedino is a feature writer that has written extensively about auto insurance for numerous websites. He has a college degree in communication from the University of Tennessee and has experience reporting, researching investigative pieces, and crafting detailed, data-driven features. His works have been featured on CB Blog Nation, Flow Words, Healing Law, WIBW Kansas, and Cinncinati.com. ...

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com and Safeco. He reviews content, ensuring that ex...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Nov 11, 2021

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Things to Remember

  • Vehicle sales often jump in December as people give cars as gifts
  • Most states require a car to be insured before it is driven off the lot
  • Taking into account insurance costs on a car gift can lower stress later

Light vehicles sales in the U.S. increased by 6.4% year-over-year in December 2020, marking numerous times in the past decade that more vehicles have sold in December than any other month.

Slowly, car dealerships and manufacturers have promoted gifting a car for the holidays, a trend that started 20 years ago with Lexus’s “December to Remember” commercial campaign.

There are many things to consider before gifting someone a vehicle during the holidays from the type of car to buy and features to get. One aspect not to overlook is auto insurance.

Car Insurance Requirements When Gifting a Car

As recent arrests for driving without insurance show, operating a motor vehicle without insurance in almost every state is a crime. And the punishment (up to a $5,000 fine for a first offense) can be steep.

While many people know this already, one specific aspect may take them by surprise. It involves the new car buying process.

If you buy a car from a dealership this holiday — even as a gift — it is illegal to drive it off the lot without insuring the car first. Many dealerships will outright stop you from driving the car off the lot without proof of insurance.

The easiest way to insure your new gift is to call your agent before driving it off the lot and add it to your existing policy.

You can also ask the dealership if the car manufacturer offers free auto insurance on the vehicle, which they sometimes do to entice buyers. Either way, the car insurance will need to meet the state’s minimum insurance laws.

Being aware of those can protect your car for the lowest amount of money while you give the car to your special someone.

Many times the minimum coverage needed is just liability insurance — the type that reimburses the other driver for damages done in an accident. Some states, however, may require additional coverages, especially states with “no-fault auto insurance.”

And some states go a step further and require proof of insurance to transfer the car title.

Choose the Car Wisely: Auto Insurance Costs Vary by Vehicle

Throughout the excitement of purchasing a vehicle for someone, various experts believe that this type of gift can fall flat on its hood, and part of the reason may be its associated insurance and maintenance costs.

Insurance costs for cars vary a great deal on type, brand, and MSRP. The rule of thumb is that the more expensive a car is and the more costly it would be to repair, the more expensive it will be to insure the car. Some factors to look out for that could increase the insurance cost of a vehicle are:

  • High-tech features
  • Damage possibility in an accident
  • Safety ratings
  • Lack of anti-theft technology
  • MSRP
  • Availability of parts if a repair is needed
  • History of mechanical problems

Aside from the vehicle, insurance can also vary by the insurance policy holder’s age, sex, occupation, credit score, driving record, and the ZIP code where the policy holder will store the vehicle.

Taking into account insurance costs and maintenance costs before picking the car to give can make it easier down the road when the person who received the car now has to take financial responsibility for it.