How to Secretly Buy a Car (and Car Insurance) for the Holidays
DONNA FREEDMAN (CONTRIBUTING WRITER) December 4, 2015 Auto Insurance, Insurance
Commercials featuring a brand-new car with a bright red ribbon and a joyous recipient are a
staple of holiday advertising. And as you might expect, pulling that trick off is harder than it
In real life, it takes some scheming and planning to buy a new car, get all the paperwork in order,
make sure it is covered by car insurance and keep the whole project a secret. If you’re game for
delighting your loved one with a new set of wheels, follow these steps to make the surprise go
1. Pick the right car
Be absolutely sure you know what the other person wants. Few recipients are likely to complain
about a free car, but this gift will be difficult to take back to the exchange counter. In fact, no law
obligates dealers to unwind a deal.
Whatever car you choose, the end of the year is generally a good time to buy as auto dealers are
looking to unload the current year’s models. Manufacturers also offer great incentives this time
of year. The average new car in December carries incentives worth $2,686, according to a study
by TrueCar, which tracks car pricing.
Planning to give the car to a son or daughter or someone other than your spouse? You may wind
up paying a federal gift tax if the vehicle costs more than the annual exclusion for gifts (currently
$14,000). Unless the recipient is your spouse, you should check with a tax professional.
2. Get a car loan
Run the numbers before you commit. Getting preapproved for financing will help you set a
realistic budget. Factor in your available down payment, which should be at least 20% of the
vehicle’s purchase price.
Planning to add the other person to the loan? You may not be able to do so, at least at the interest
rate you get by yourself. Lenders generally will ask for a credit check for anyone attached to the
loan. That means the loan could be rewritten at a higher rate than what you may have been able
to get on your own.
3. Register the car
If you really want to surprise the recipient, you will have to buy the car and register it in your
own name. Later the two of you can go re-register it in person. This process and cost vary. You
can check fees at a state-by-state listing maintained by the National Conference of State
If you don’t absolutely need a Christmas-morning surprise, you can save yourself some hassle by
bringing the recipient to the dealership right before the holiday. That way, the vehicle is in his or
her name from the start.
4. Buy car insurance
A new car can mean pricey car insurance. If you’re financing the car, then the lien holder is
likely to insist on full coverage insurance, which includes liability, collision and comprehensive
coverage. Talk to your insurance agent or check online to see how much the vehicle you have in
mind would cost to insure.
[New car? Comparison shopping can save you hundreds of dollars. Find low rates with
NerdWallet’s Car Insurance Comparison Tool.]
If you’re replacing a car that’s already covered by your insurance policy, your existing auto
insurance will likely extend to the new vehicle for a limited time, typically 14 to 30 days.
However, it might not be the kind of coverage a lender requires. Talk to your agent in advance
about any upgrades. If the new car is an additional car, talk to your agent to make sure you will
have coverage in place; not all policies will extend to an additional vehicle.
And, of course, let your agent know if you are trying to keep the purchase a secret.
Making a car gift a life lesson
If you’re buying a car for your son or daughter, make sure you’ve talked to your insurance agent
in advance because the cost of insuring a teen driver can be startling. Who will cover the loan
payments, gas, upkeep and parking — you or your teen? Consider having your son or daughter
shoulder at least part of the operating costs, whether it’s with money from Christmas or from a
When Liz Stapleton got her driving permit at age 16, she thought she might inherit the family’s
old pickup. To her shock, she found the keys to a new Saturn Ion under the Christmas tree.
“My parents were all, ‘Merry Christmas! You have a car payment now. Get a job,’ ” says
Stapleton, now 28 and living near Raleigh, North Carolina. She was asked to pitch in half the
monthly payment ($122) while her parents covered the insurance. Sh
e also was expected to
reimburse her parents eventually both for the insurance and their half of the car payments, which
“It was a good lesson in being accountable with money,” Stapleton says.
How to make the moment
As for that big red bow, some dealers may lend or give you one to dress up the gift. Or you can
buy them online starting at about $50. Jan Kingaard, whose Costa Mesa, California-based King
Size Bows company manufactures the kind of giant ribbons you see in car commercials, suggests
a few ways to make the gift a surprise:
Park nearby and move it early in the morning. Then blindfold the recipient and take him
or her outside.
Leave the car with a relative who’s visiting on Christmas and ask him to drive it over.
Have the car parked at a restaurant and have a valet “deliver” it after dinner.
Take the recipient to the car lot on Dec. 24 or 26, “just to look.” Point to the car you
bought and say, “It’s yours!”
Rick Robichaud, who manages Subaru of Cherry Hill, New Jersey, has had customers prepay for
cars and bring in the recipients. “We put the big bow on it, and we’ve done balloons,” Robichaud
Although a new car for Christmas looks great in television ads, the reality is a lot more complex.
Think it through before committing to such a major expense. Research the best deals and loans in
advance and don’t buy more car than you can afford. Santa comes only once a year, but car
payments are due every month.
NerdWallet’s Car Insurance Comparison Tool can help you find a good deal.
Donna Freedman is a contributing writer at NerdWallet, a personal finance website.