Whether you’re looking to help out a family member who needs a set of wheels or simply want to move on to your next new or used vehicle, giving a car as a gift is a thoughtful yet savvy move. Not only does it save the recipient from paying extra taxes, but it also provides a way for you to free up some driveway space for your next car. If you're considering gifting a car in Ontario, here’s everything you need to know.
Before you decide to give a car as a gift, make sure that the person you want to give the vehicle to falls under the definition of a family member per the ServiceOntario guidelines. This list includes a mix of blood relatives, those who married into the family, and step-family members. A more in-depth look shows that the following types of family member are eligible to receive a gifted car:
The main benefit to gifting a car in Ontario to one of these family members is that the recipient isn't required to pay retail sales tax (RST) on the value of the vehicle. That means that you're effectively saving your family member the entire price of the car plus 13% of the purchase price that usually goes to RST.
If you want to transfer ownership of a vehicle to a friend or non-family member, however, the recipient will have to pay RST based on the Canadian Red Book value of the vehicle, much like when you sell a car privately.
If you're gifting a car in Ontario, follow these steps to alleviate any concerns or problems that may arise during the process. By doing so, you ensure a smooth, seamless experience that can get your family member one step closer to driving away at a fraction of the cost.
Before you can gift a vehicle, you have to own it outright. This is so you have a clean title that allows you to transfer ownership to the recipient. If you have a current balance on your loan, try to pay it off quickly. Once you've paid it off, you should be able to get a lien release from your lender, which means you no longer have any financial obligations to a third party.
Although your recipient won't have to pay retail sales tax when gifting a car in Ontario, some gifters may be concerned about a gift tax. Fortunately for you, Canada doesn't have a gift tax—nor do any of its provinces. As a result, you won't have to pay a gift tax like you would in the United States.
Giving your car to a family member seems like it should be pretty straightforward. However, owning a vehicle comes with a variety of upfront and ongoing costs, so the financial situation of the recipient should be considered beforehand. These costs include:
According to recent studies, the monthly cost of vehicle ownership in Canada is right around $500, which means that if you're gifting a car to someone who's unemployed, underemployed, or in school, consider whether they can afford a $500 hit to their monthly income. You may also want to have a frank discussion with them to determine whether this is the ideal move for both parties.
Once you've paid off your car loan and made sure it’s a financially feasible gift for your intended recipient, it's time to dive into the paperwork side of the equation. To start this process, you'll need to find your nearest ServiceOntario centre. This is where you'll complete all the paperwork and ensure that you get your recipient the proper tax exemption from RST. Here's everything you need to complete the gifting process in Ontario.
Although you aren't technically selling your vehicle, you should still create a bill of sale. This doesn't have to be anything fancy. You can simply handwrite one or use the pre-written bill of sale form found in your used vehicle information package (UVIP). A bill of sale makes the transfer of ownership process easier and more streamlined. Just make sure to include all the relevant information, such as your car’s vehicle identification number (VIN), make, model, mileage, and so on.
The Sworn Statement for a Family Gift of a Used Motor Vehicle is an affidavit that attests that the vehicle is being given as a gift. Without this form, you won't be able to claim the RST tax exemption for your recipient, making this a vital piece of paperwork. To make the form official, both the donor and the recipient must sign this form in the presence of a lawyer or notary public.
Every used or new vehicle comes with a piece of green paper known as the vehicle ownership permit or vehicle registration. You'll need to bring the transfer portion (found on the back) of the vehicle ownership permit when you're gifting a car in order to change the status of your vehicle from owned to "sold" (although you technically didn't sell it). The recipient may also want to fill out the plate portion of the permit during the vehicle transfer of ownership, but only if they have plates they want to put on the vehicle.
A Safety Standards Certificate (SSC) is another document required when gifting a car in Ontario. As of 2019, vehicle owners no longer have to pass the Drive Clean emissions test, but they do need the SSC, which certifies that the vehicle is compliant with emissions laws. Keep in mind that if you're gifting the vehicle to your spouse, they are exempt from having to possess the SSC; however, they must complete a spousal declaration.
If you're gifting the vehicle to your spouse, parents, or children, you need to complete the plate transfer declaration form. This form shows that you're transferring your licence plates to a new owner (and in the case of your spouse, it allows them to be exempt from the SSC, as discussed). Note: if you’re gifting the car to a family member other than your spouse, parents, or children, you cannot transfer the licence plate.
When you go to ServiceOntario, both the donor and the recipient are required to show their driver's licences. This acts as proof of identification to ensure both parties are the ones featured on the paperwork.
Both parties will also need proof of insurance in order to register the vehicle with ServiceOntario, as driving without insurance is illegal in Canada.
Keep in mind that either the donor or the recipient will have to pay the fees and costs associated with the transaction. Vehicle ownership, for instance, requires that the new owner to pay for a vehicle permit. As of 2022, a vehicle permit costs $32 and, if a new plate is needed, it will be an extra $27 on top.
Gifting a car in Ontario is a smart play, providing a family member with a set of wheels without requiring them to pay retail sales tax (RST). In addition, you save yourself the time and effort normally required to sell your vehicle to a private party (not to mention the haggling that’s usually involved).
If you find that gifting a car isn't going to work for your needs, don't stress! You can still sell or trade your vehicle in with Clutch. Simply enter a few details about your car to get a firm offer in minutes. Next you schedule delivery or pickup and you’re good to go! It’s just that easy.