CarTalk.com Best of Deals Car Reviews Repair Shops Cars A-Z Radio Show

Selling my car to a friend

Hi!

I want to sell my car to a friend for less than fair market value. This will mean he pays less sales tax. I’m in NYC. Will that get either of us into trouble with the sales tax people? Big thanks in advance for insight.

Looks like they will tax it based on fair market value if more than the purchase price. Here is a link to the form your friend will need. We used to say friends don’t sell friends used cars, but life goes on.
http://www.nydmv.state.ny.us/forms/dtf802.pdf

In many states they check the value of the vehicle and question the transaction if the price is below “book” value. You may have to explain why you’re selling below book value, or your friend may have to pay tax on the true value.

However, sometimes they just ignore it and charge tax on the actual sales price.

Selling a car to a friend is risky. If anything goes wrong with the car in the future you may be blamed.

Back in the mid-'70s, my father sold me a car for one dollar, even though it was worth several thousand dollars.

A few months later, I received a letter from the NJ DMV, questioning the validity of this sale price–with an obvious desire to collect sales tax on a higher sale price. I had to complete a notarized affidavit, affirming that the sale price was really $1.00, and I had to provide an explanation for the low sale price. I simply filled in something along the lines of “intra-family transfer of title”, mailed in the affidavit, and never heard anything further regarding the issue.

However, since states are in much worse financial shape nowadays than they were back in the 1970s, it is possible that the NY authorities will be much more aggressive in attempting to collect the sales tax that they think is due to them. Don’t assume that my easy solution to the problem will be what you experience.

Agree with others - you need to check your own state policy. States got wise many years ago to the practice you’re trying to pull.

Many people sell cars to friends, only to later learn they don’t have the stomach to deal with the fallout. Suppose you sell your Honda CRV to your friend, and a week later the transmission begins to act up, or some other big component breaks. You may find yourself facing the limited choices of paying the big $$$ repair bill or loosing a friend.

On Selling Your Car To A Former Friend:

As others have pointed out, this can be risky. I’d let my friend in on this theory and maybe even use some of the money (that discounts the car below fair market value) to have the condition of the whole car thoroughly assessed by a competent mechanic. Don’t tell the mechanic about the sale to a friend (they don’t need to know.)

Then your friend can decide if he/she still wants to proceed with the deal and you will be more “off the hook” if something goes haywire. Better to discuss issues before any money changes hands.

CSA

The price is the price,but more then likely they will want adjusted market value(besides dont sell to friends or relatives,acquaintances all right-but never close friends.-Kevin

It really depends on what the fair market value really is. There are a lot of sources for the information. What year, model, and options are there on it? What is the mileage? If it’s 20% less than book value, there might be no problem. If it’s 50% of book value, there would have to be condition issues to justify the lower value.

It may not make any difference what you actually sell it for. Here in OK the excise tax is based on a valuation chart.
If the chart shows a car to be 5000 dollars and it’s actually sold for 500 dollars the tax will be on the five grand.

Around here you can’t even give a car to a relative without having the pay the assessed amount of tax on the car.

They won’t know unless you post it on the internet. It is a common frayed collar crime.