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Are You Looking to Gift a Car? How to Decide?

Gifting a car is not a new trend. There is nothing to be surprised about it. Many people have decided to gift cars to their loved ones because Christmas and New Year are on the way. Many people do it on the occasion of marriages.

It feels good to gift someone, especially those you love most, and this feeling doubles when the gift is precious. It is great to think about gifting your loved ones a car, but this is a huge gift. In other words, it involves a lot of money.

Whether you are gifting it to your spouse or your daughter who is going to marry, you may be delightful and excited, but at the same time, you need to decide its impact on your budget. There are a lot of things that you need to look over while determining.

Factors to consider while buying a car to gift to your loved ones

It is not just your budget and emotions associated with your car but the affordability of the person to whom you are gifting it. Several expenses like insurance, maintenance, and the like may bear hard on the giftee.

You cannot just make a decision based on your budget, but you will also have to consider the affordability of the person you are gifting. Here are the factors that can make your own decision:

Pay off your car loan

First off, you should pay off your car loans. It won’t be very easy for you to take out a new car loan when you already have a car loan. Even if you think you can afford to manage both loans simultaneously, you should try to pay off your car loan first.

You can come up with a financial emergency, and it can be challenging to manage both loan repayments. If you have already paid off your car loan, you will likely be able to take out a new auto loan at affordable interest rates.

People generally pay outright when it comes to gifting a car. The loan is taken out only to cover the gap. In that case, small car loans for bad credit can be an ideal option, but it is still recommended to pay off your loan first.

Ask yourself why you are spending so much money

Before you decide to pay off this much money, you should ask yourself why you are spending so much money.

  • Is the car actually needed for the person you are gifting to?
  • Are you helping them buy a car?
  • Have you considered their affordability to pay for car-related expenses like maintenance and all?

Do not forget that you are going to spend a lot of money if you finance the car. Even if you pay for it outright, it is going to take a large chunk off your budget.

Make sure that this significant expense will not put a lot of burden on your budget down the line. Otherwise, you will end up taking out new loans to meet your costs, and eventually, you will fall into a debt trap.

Understand your loan options

When you are buying a car to gift someone, you need to understand your loan options. The option you choose will decide who will get the title of the car. You have a couple of options: one of them is to take out a car loan in your own name. You will do it if you want to keep the gift to surprise.

Of course, when you are getting the loan in your own name, you will have the right to the title. If you want the giftee to take over the loan, you will have to sell the car to them so they can refinance it. Another option is to enter into a loan agreement as a co-signer.

However, if you co-sign the agreement, you will have to take the person you are gifting the car to the dealership to fulfil the rest formalities. The final option is that you can just arrange the down payment.

Once you have the money ready to pay as a down payment, the rest value of the car will be funded with a loan sanctioned in the name of the giftee. In this way, you can help the giftee to buy the car while having the right to title in their favour.

Make sure the other person is also aware of their responsibility

If you are going to buy a car for your loved ones, you should ensure that the other person is also well aware of their responsibilities. For instance, if you have decided to arrange a down payment for the car, make sure you have clearly said to the other person.

They must be able to pay off the car loan. Likewise, if you have decided to co-sign the agreement, make sure that the giftee knows that the primary responsibility of paying down the debt is theirs.

However, you should also be careful while co-signing the deal because if the giftee fails to make repayments, you will be bound to pay down the debt, and this will lower down your credit score, making it difficult for you to borrow money down the line.

If you have decided to buy someone a car, make sure that they are aware of other related expenses that they will have to incur, like car insurance premium, maintenance, and the like. There is no point in gifting a car to anyone if you are unaware of whether they can afford it or not.

The bottom line

There is nothing wrong to buy someone a car but make sure that it does not put the burden on your budget. However, at the same time, you should ensure that the person whom you are gifting it can also afford maintenance expenses.

If you are connected emotionally with that person, you may be tempted to gift a car, but you should deliberately make a decision.

 

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