This article has been updated from a previous version.
Every year at Christmas, more than a few lucky drivers are escorted outside to get the first glimpse of their gift — a car.
No official figures exist on the number of cars, SUVs, and trucks delivered by Saint Nick each Christmas, but Statistics Canada estimates around 114,000 vehicle sales occurred in Canada last December. That’s low compared to the traditional sales months of May and July but still substantial. Many dealerships are trying to hit end-of-quarter sales quotas before the end of the year, and offer decent deals on whatever is left on the lot.
How to gift a car in Ontario
In Ontario, purchasing a vehicle as a gift for someone is straightforward — you can buy one just like any other present. But what about things like car insurance and vehicle registration? How can a gift-giver ensure the recipient of the car is properly insured and road-ready by Christmas?
How to insure a gifted vehicle
Insuring a gifted vehicle is simpler than it sounds.
“It would be the same as anybody getting a new vehicle,” says Ashley Kaspar, Director of Insurance Distribution for CAA Insurance. “Typically, you would have about 14 days from the time you get your vehicle in your possession to adding the vehicle to your existing policy.”
In other words, the giver doesn’t need to set anything up with the insurance company in advance of giving the gift — it’s up to the recipient to get insurance within two weeks of receiving the vehicle.
Kaspar says anyone lucky enough to receive a car for Christmas should call their auto insurance provider as soon as possible to ensure they have the coverage they need. This is especially true if you already have an insured older vehicle and receive a brand new one for Christmas.
“The coverage you may have had on that older vehicle may not be the same coverage you want on that newer vehicle,” Kaspar says.
For example, if your older vehicle no longer has collision coverage, but you want that protection for your newly acquired vehicle, the 14-day grace period only covers your existing insurance policy. In other words, if you want collision coverage on the new vehicle, you need to sort it out before getting behind the wheel.
There is one exception to the 14-day grace period, and that’s if you are gifting a car to a family member or friend who doesn’t already have car insurance. Kaspar says this can happen if an elderly grandparent gives an uninsured grandchild one of their vehicles.
Of course, it is illegal in Canada to drive without insurance, so the recipient will need to set up their own active insurance policy if they don’t already have one. Even if they’re already listed on the gift-giver’s insurance policy as a secondary driver, they will need to set up their own separate insurance policy if a gifted vehicle is in their name.
Does the insurance company need to know that the car was given as a gift? And could the fact that it was a gift impact someone’s insurance rates? Kaspar says no to both questions.
“There is no difference between if it was a gift or if you’ve purchased it yourself.”
How to register a gifted vehicle
As with nearly everything to do with cars and trucks in Canada, the specifics of registering a vehicle vary from province to province.
For instance, if you are gifting a car to a friend in Ontario, know this: anyone who receives a new car can only register the vehicle after they have properly insured it. If you’re buying that gift vehicle from a registered dealer, you don’t need to worry about this step — the sales staff will sort it out for you.
However, if you’re buying a used vehicle, you will need to register the vehicle yourself. You’ll need proof of insurance, all the vehicle’s relevant information, the original vehicle permit from the seller, the plate portion of the permit (so the vehicle recipient can attach their licence plates), proof of purchase and your driver’s licence. Registering a vehicle isn’t free, either. For example, in Ontario, vehicle permits cost $32, a new or replacement licence plate is $59, and a licence plate sticker is either $60 or $120, depending on where you live in the province.
When you transfer the car ownership to its new recipient, they’ll have to register the vehicle in their name. If you transfer the car to a family member, inform them that they’ll require their own proof of insurance, permit and licence plates.
If they’re a new driver and don’t have plates or insurance, it’ll be up to them to sort everything out before they hit the road. By law in Ontario, a vehicle permit must be updated with a new driver’s details within six days of transferring the vehicle’s ownership.
Gifting a car could exempt you from paying sales tax
It costs less to gift a car to family than to friends in Ontario. A loophole allows someone to give a used vehicle to a member of their extended family without paying the usual retail sales tax. The government’s definition of “family” includes adopted siblings, in-laws and half-siblings.
Basically, you require all the usual documents to transfer ownership of the vehicle — proof of insurance, a vehicle ownership permit, your driver’s licence — on top of a specific sworn declaration document from the Ontario government and a Safety Standards Certificate.
This document requires both the recipient and giver of the vehicle to state their relationship to one another. It also asks the giver for information about when and from whom they originally bought the vehicle. There’s a separate form required if you also want to transfer licence plates.
Especially important to point out, given that we’re still battling the coronavirus pandemic, is that none of these actions can be done by mail. If you are gifting a vehicle in Ontario and looking to take advantage of this exception, all the paperwork must be completed in person at a ServiceOntario location.
Ensuring a vehicle is road-ready before it goes under the metaphorical Christmas tree can be a hassle, and the lucky new driver may not have it easy, either. But with a few quick phone calls to an insurance provider and some updated paperwork, they’ll be ready to set out behind the wheel of their new ride.