Would You Accept a Car as a Gift? Asking for a Friend …

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Hypothetically, let’s say you know a guy who owns a 2010 Prius. The car is mechanically reliable, fully paid off, and lightly used.

Then one day, this hypothetical guy gets a phone call from his wife’s parents … They want to buy him and their daughter a new car, free and clear, as a gift. This gift car would be larger than the Prius, have more modern and awesome features, and would be perfect for future road trips that this hypothetical guy and his wife are planning to take.

This guy you know is loving the thought of having a newer whip, especially one he can fit all of his surfboards inside plus have plenty of room in the back for his hypothetical German Shepherd!

On the other hand, this guy and his wife are mostly minimalists, and don’t need a new car. Upgraded versions of the consumer items they already own don’t add a huge amount of value to their lives.

Help this hypothetical guy out. What would you advise him to do in this situation? Should they accept the new car as a gift, or politely decline the offer?

Accepting BIG gifts Is Hard, Especially Cars!

Now, you might be thinking that this friend of yours is a complete idiot! Why is this such a tough decision? Take the car, you moron!

If it was me making the choice (and it’s definitely not me or anything …) I would be hesitant because:

Owning newer stuff increases my cost of living. A new car would add to my annual expenses, and it’s why we just got rid of our previous spare car.
Our 2010 Prius works just fine and isn’t due for an upgrade for at least 5 years, or probably longer.
My wife and I have a lot of self pride. Accepting handouts and large gifts is uncomfortable because we feel we haven’t earned it ourselves.
I’m a personal finance blogger, and many readers would never be in a position to be gifted a car. Accepting expensive gifts kind of makes me feel like a fraud, because I preach to others all day about saving and investing — and here I am getting stuff for free.

All that being said, I also believe …

Part of Giving Is Receiving

I’ve given away decent sized gifts in my life, and it feels GREAT. I love acts of kindness, showing love, helping others, sharing wealth, and all that good stuff people do when they have an abundance of something.

By refusing the car, I’m kind of belittling the process that I love so much. So here are some supporting points for why we should accept the car:

If the situation were flipped, I’d probably do the same thing. Sharing my wealth is what I plan to do in the future — probably with my kids in the form of things they wouldn’t buy themselves.
Not accepting gifts robs the giver of a good feeling. Generosity should be encouraged, not discouraged.
Although we don’t need a bigger car, it certainly would come in handy. Road trips, more room if we foster kids soon, and also it solves a problem in the coming years when the Prius dies.
When I left Hawaii in 2012, I gave away my car and motorbike to others (they were only worth a few thousand each). The car went to a work colleague who had 5 teenage daughters, and the motorbike went to a friend with no transportation. Is this the universe paying me back 9 years later? The more you give, the more you get.

Financially Speaking …

Let’s help this hypothetical friend work out how much his annual expenses would increase by taking on a newer car. Maybe that would help his decision-making.

Let’s assume the current 2010 Prius gets swapped out with a gift of a new (used) 2018 Ford Explorer.

Registration costs: I believe California has a flat registration fee/taxes for standard vehicles so I’m going to assume no change here. Annual reg is currently $186.

Car Insurance: A quick GEICO quote shows me a 2018 Explorer would be $741 for a 6 month insurance policy. That’s an increase of $440 compared to the current Prius policy of $301 for 6 months.

Gas Mileage: The current Prius is averaging 46 miles per gallon and I’m gonna assume that the new Explorer will get approximately half that. Therefore, gas prices would double. Looking back at my past annual gas expenses, we spend an average of $1,245 in gas each year (not including 2020, we didn’t travel). All in all, the new car would ADD $1,245 annually to our fuel expenses.

Maintenance: For the simplicity of this exercise, let’s assume both cars have the same annual maintenance costs. The Prius just got new tires and has no mechanical issues. I’m assuming the new car won’t have any issues over the next 5 years either. Annual maintenance: $368

All summed up, looks like accepting the new car would add $2,125 in expenses annually. Or broken down per month this would be $177 per month!

Financially worth it? Well, just looking at annual cost isn’t the complete story … Upgrading cars this year means not having to upgrade later. Paying the extra $2,000 per year now might save a once off $15,000 replacement cost for upgrading the Prius in 5 years.

Other Random Thoughts

Thinking outside the box, this might not have to be a binary decision. There could be options other than just “car or no car.” A few things come to mind:

What if we accept the new car on the condition that we get to gift our current car to someone else in need? Paying it forward is a beautiful thing.
We could also accept the new car, then buy a large unexpected gift in return for the parents later. A vacation? A surprise party where we fly in relatives and pay for expenses?
This is kind of rude to request … But we could ask the parents if this gift car could wait a few years. It would be much easier to accept if our current car were dead and needed to be replaced! I feel dirty just typing that thought.
Instead of a car, what about something the entire family can all enjoy together? This would allow the giving to take place, and more people can receive a benefit. Could that be a win/win?