What to Do If You Get a Free Car

How to make sure a gifted car doesn't end up costing you.

Man stands thoughtfully in front of older dark red car in parking lotManuel Carrillo III | Capital One

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Getting a free car might sound like a win — and it often is — but it's one that can come with strings attached. From assessing your freebie's condition to sorting out the registration, here's what you might need to do if someone gives you a car or you win one through a sweepstakes or other competition.

What's the Catch?

If your gift car comes from someone you know personally, you may already be aware of its history and have some idea of its condition. On the other hand, if the free vehicle comes from a person, business, or organization that you don't know personally, it's wise to proceed with caution.

There are a few questions you should find the answers to, including: Why is the car free? Is it paid off, or is there a loan on it? If there's a loan, you'll likely need to pay it off or take over the payments. Is the title clean or branded (meaning it's been declared a loss or suffered serious damage)?

If there's any uncertainty about the vehicle, you might buy a vehicle-history report from a company such as Carfax to find out exactly what you're taking on.

Additionally, either inspecting the vehicle yourself or having a technical inspection performed may give you a better idea of its condition. Keep an eye out for rust, fluid leaks, evidence of accident damage, and problems beyond normal wear and tear. A gifted car that needs a lot of work might not be worth accepting, since the cost of catching up on deferred maintenance alone might exceed the value of an older car.

Registering the Car

In order to truly call the vehicle your own, you'll have to register it in your name.

First verify that the year, make, model, and vehicle identification number listed on the previous owner's title match the car. Then, check your state's requirements regarding obtaining a bill of sale. Your state's Department of Motor Vehicles (DMV) may require a specific form. It's important to keep a written record of when and where the car changed hands, even if no money was exchanged.

Follow state requirements regarding vehicle inspections and bring the relevant paperwork to your local DMV to get your new title. Keep in mind that most states charge registration fees, even if you didn't pay for the car.

Finally, add the car to your insurance policy before you take it for a spin.

What to Do Once You Own a Free Car

Once the official paperwork has been filed and approved, your free vehicle can be driven and treated like any other car you've bought. If you end up deciding, however, that you don't want it — or you'd rather have its cash value — you're free to sell it once its title is yours, though in certain circumstances you could end up paying capital gains tax.

Alternatively, many charities accept cars as donations, and such donations may allow you to claim a tax deduction based on the car's market value.

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Ronan Glon
Ronan Glon is an American journalist and automotive historian based in France. He enjoys working on old cars and spending time outdoors seeking out his next project car.