Car insurance/ownership conundrum
May 8, 2018 9:21 AM Subscribe
What is the best way to give/sell my daughter my car and do we have to register and insure in expensive Michigan?
My daughter is 19 (20 next month) and a full-time student at University of Iowa. She's in an off-campus apartment this year so she's not coming home for more than a week here and there. For all intents and purposes, at this point she is a resident of Iowa (although the school has rules for residency I don't think they're relevant here?).
I am getting a new car and would like to give her my old one but there are a few considerations and I'm having a hard time making sure that A. I'm doing everything on "the up and up" but also B. without paying an arm and a leg.
If I just kept ownership of the car and added her as a driver on my insurance policy, my monthly payments would go up by approximately 150%!!
However! Iowa has some of the cheapest auto insurance in the country. I discovered it is MUCH cheaper to insure the vehicle in Iowa, however it must be registered in Iowa, which means that my daughter would need to own the vehicle. Additionally, to be able to register it in Iowa, she will need an Iowa driver's license which she currently doesn't have (hers is Michigan).
So at this point I don't know if it's better to keep ownership of the car and just pay the exorbitant Michigan insurance rates, or if we should go through the process of getting her more established in Iowa. Especially considering she's going to be living there for a minimum of 2 more years, again, only coming home for a week or weekend here and there.
I read the Iowa Department of Transportation website and it seems like she meets all the criteria to get a driver's license in that state. But I'm not sure if there's something I'm missing or not considering. I also don't know if there's a big difference between gifting or selling her the car.
Is there a right answer?
My daughter is 19 (20 next month) and a full-time student at University of Iowa. She's in an off-campus apartment this year so she's not coming home for more than a week here and there. For all intents and purposes, at this point she is a resident of Iowa (although the school has rules for residency I don't think they're relevant here?).
I am getting a new car and would like to give her my old one but there are a few considerations and I'm having a hard time making sure that A. I'm doing everything on "the up and up" but also B. without paying an arm and a leg.
If I just kept ownership of the car and added her as a driver on my insurance policy, my monthly payments would go up by approximately 150%!!
However! Iowa has some of the cheapest auto insurance in the country. I discovered it is MUCH cheaper to insure the vehicle in Iowa, however it must be registered in Iowa, which means that my daughter would need to own the vehicle. Additionally, to be able to register it in Iowa, she will need an Iowa driver's license which she currently doesn't have (hers is Michigan).
So at this point I don't know if it's better to keep ownership of the car and just pay the exorbitant Michigan insurance rates, or if we should go through the process of getting her more established in Iowa. Especially considering she's going to be living there for a minimum of 2 more years, again, only coming home for a week or weekend here and there.
I read the Iowa Department of Transportation website and it seems like she meets all the criteria to get a driver's license in that state. But I'm not sure if there's something I'm missing or not considering. I also don't know if there's a big difference between gifting or selling her the car.
Is there a right answer?
Double check with your insurance company to see if she is in fact covered under comprehensive insurance (this is very common, my insurance does). Generally speaking, if she does not live in your household (ie she has a valid mailing address in Iowa), she is allowed to have you lend her the car and still be covered.
posted by ananci at 11:36 AM on May 8, 2018
posted by ananci at 11:36 AM on May 8, 2018
How often will she be driving to and in Michigan? A person who is a non-resident but who drives more than 30 days in a year in Michigan has to ensure that the vehicle is insured with required Michigan coverages. For an Iowa resident, that means, essentially, that she should make sure the car is insured with a company that is also admitted to write coverage in Michigan.
posted by yclipse at 1:40 PM on May 8, 2018
posted by yclipse at 1:40 PM on May 8, 2018
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In Michigan, if you sell to a relative, there is no sales tax, so selling or giving would be the same, tax-wise.
If you sell it to her in Michigan, she would need Michigan insurance, but that could be for a very short time.
It seems like you could sign over the title, then let her drive the car to Iowa on your insurance. She can then transfer title and get insurance in Iowa.
I'm not sure about tax in Iowa.
posted by H21 at 11:19 AM on May 8, 2018 [1 favorite]