Why You (Probably) Shouldn't Give a Car as a Holiday Gift

It's December, and commercials abound that feature a surprised husband or wife beholding a snow-dusted car topped with a big red bow. Lexus ignited the idea of gifting cars at the holidays with a 1999 ad called “December to Remember,” featuring a delighted spouse opening the door on Christmas morning to discover a brand new Lexus in the driveway.

For two decades, such advertisements have sent shoppers flocking to dealerships in search of arguably the ultimate holiday gift. But the commercials don’t show the dark side of undertaking such a gesture.

At the risk of snowing on your parade, here’s what to consider if you’re thinking of bestowing a very big, very expensive four-wheeled gift this holiday season.

No returns, and other complications

Most gift givers make purchases with the reassurance that if their spouse or kid doesn’t like the robe or shoes they bought, they can be returned for a refund.

There are essentially no refunds on cars, at least new ones.“In the vast majority of instances, you cannot return a vehicle purchase once the contract has been signed,” says Ronald Montoya, senior consumer advice editor at Edmunds. Exceptions include online dealerships like Carvana, as well as used car emporium CarMax, which sell only used cars and give buyers only a short window to change their mind (details below).

Saturday Night Live spoofed “December to Remember” in a 2020 parody underscoring the challenges of pulling off a well-meaning present. These faux pas include leaving the giftee stuck with the wrong color, features or mpg rating – or, even worse, putting them on the hook for continuing costs.

“When you’re gifting a car, it’s important to establish what that means,” Montoya says. “Is it just going to be the down payment, or are you paying for the whole thing entirely? If it’s just a down payment, then the recipient needs to be aware that they're going to be potentially on the hook for monthly payments.” There are also ongoing costs for taxes, title, registration, insurance and maintenance to consider.

The challenge of keeping the surprise

Shoppers also need to consider the administrative challenges the caper entails. A car is typically a household’s second-largest purchase after a home, so it’s hard to hide the sale from a spouse with access to bank and credit card statements.

Also, Montoya notes, purchasing a car in a spouse’s name means the dealership must run his or her credit, which can further threaten to spoil the surprise.

“In a lot of states, especially when you're titling the vehicle, you cannot do it in someone else's name, so they must be there to sign the paperwork, which would also, you know, ruin the surprise,” he adds.

Follow these steps to gift a car

Research your loved one’s needs. “If you’re going to do this, you need to make absolutely sure that’s what they want,” Montoya says. “The way you would probably go about it is, months in advance, you say to your partner, ‘Hey, let's go test drive some cars,’ to get a sense of what the person likes.”

Jack’s a banker from Atlanta who plans to surprise his wife with a new SUV this holiday (we’ve agreed to withhold his last name to minimize the risk of a ruined surprise.) As he seeks to replace his wife’s GMC Yukon Denali on Christmas morning, he’s already well informed about her wishes.

“I listened to my wife over the course of the year about what she likes in a car,” he said, as well as what he judges is important. The vehicle should be smaller than her current SUV, Jack concluded, but still have an elevated seating position, and it should come with heated seats and heated steering wheel but no black interior “because it gets too hot in Atlanta,” Jack said.

Shop early and consider getting help. Montoya recommends you start shopping as soon as you can for the best selection before inventory begins driving off the lots. Late December is typically a busy time for car sales, with customers hunting for end-of-year deals, swapping leased cars, or making eleventh-hour business purchases before the tax year ends.

This year, electric vehicles and 2024 models are likely to offer the best discounts and incentives, according to Montoya.

To locate the right car quickly, consider using an online marketplace. Jack used CarEdge’s concierge service – which also provides the big red bow and white-glove delivery – to find a vehicle that fit his wife’s parameters.

Use stealth financing, if you can. Not everyone has the ability to draw on liquid funds for something as big as a car. But doing so can help you hide your tracks when it comes to financing.

Jack plans to pay for his wife’s car in cash, from their joint investment account. “It’s pretty easy to get funds from there,” he said. “Plus, the statement doesn’t come until after Christmas anyway.

Buy used to take advantage of brokers’ return policies. Buying a “pre-owned car” might not feel sufficiently generous, and means you are at the whims of used-car inventory, which is often more limited than the new cars you can choose from.

But buying from a broker such as CarMax or Carvana does allow the possibility to return the car for a refund, should your recipient balk at the choice you made. Carvana has a shorter return window, of 7 days, but that period begins when the car is delivered to your home – which you might arrange for very shortly before you make the gift. CarMax offers a longer period, 10 days, but one that begins at the time of sale.

You’d need of course to choose from among whatever inventory the broker had on hand at that moment, which may or may not be to your recipient's needs or taste.

Terri Thompson bought a used car as a gift two years ago, and without a broker or a return policy. She gifted her husband Ralph with a 2006 Jaguar XK8 that he found from a dealer in Florida through eBay. The convertible arrived at their home in Las Vegas just in time for Christmas. “It wasn’t a surprise,” she said, “but I think he was just shocked that I was willing to do it.”