Gifting my daughter a car

A very funny problem has cropped up. One reader writes in saying “I am gifting my daughter a car..and she says she wants a better car” what should I do?

Tough dilemma. The person asking this question is a friend. Let me describe him. He is a Vee Pee in a big engineering company, aged about 49 years, CFO, earning about Rs. 90L and his daughter is a 23 year old MBA from a premier college. So this friend thought he would present her his wife’s Zen – about 4 years old – and she would buy a bigger automatic.

The daughter, let’s call her Pooja – not her real name of course – wanted a better and bigger car and an automatic.

The father had a Rs. 4 L budget. The daughter had a Rs. 8L budget. She wanted a new automatic car.

The father was not happy with that decision. Hence, he was complaining to me.

I said

We train our children to be successful, negotiate hard, and be independent. However, when our children are all that we wonder how they managed to so.

This girl has a starting salary of Rs. 9L and an assured bonus of Rs. 3-4L. She will not pay any rent, or for food. Her father is a Vee Pee earning about Rs. 80L and her mother works in a PSU earning about Rs. 19L.

Pooja has a small sip running for the past few years – started by her father for Rs. 5000. This has an accumulated balance of Rs.675,000.

I have met her. She is a balanced kid, and has got a good job and has good prospects.

I spoke to her about her plans. She had no plans of marriage (no I did not ask her, she told me!!). Her plans were clear. She needed a car for her long drives on weekends with friends. She was planning to take a combination of auto, train, metro, …to reach her office. She has no plans to buy a house (makes sense she will inherit 2 houses from her parents anyway).

She does not want to be stuck in some place in a second hand car. She is happy to drive alone, is a good driver, and wants a good car. Her other major expense is likely to be some foreign vacations. She has seen all of India – well almost thanks to her parents. She is planning a backpacking trip to Europe with a couple of friends.

Say 10 years later, if her boss was to make her an offer, and she negotiated a better deal, would my friend not be happy as a parent?

Lets decide what we want. Then be happy.

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14 Responses to “Gifting my daughter a car”

  1. This is an interesting problem. My personal take is that the final decision is of father’s. The daughter has grown up and is fairly successful and highly capable of funding her own car. While one can take pride in the negotiating skills, the money decision has to be pragmatic. In this case, if the daughter doesn’t want the old car, the father can sell/exchange for a new one for his wife and recommend his daughter to fund her own car 🙂

  2. since its a first car for daughter, let her start with a 4 year old ZEN.

  3. It makes sense for Priya to go for her bigger car with car loan(build credit history) and have loan subsidized by her Dad’s gift of 4L.

  4. By the way your friend will also be reading this blog.

    I think what her father is doing is the right thing. It is better to start with an old car. Anyway, it is her mother’s car so she will be knowing the condition of the car too.

  5. Get her a new one, 8 Lac new car appears too low for their status. I mean for someone earning 12L per annum at 23, she should be driving atleast a BMW.

  6. Pradeep exactly how a person does not become wealthy.

  7. I’d say if she has refined her driving skills already, then go for new car. Father can part fund after selling / exchange of old one. If she isn’t skillful driver yet then it make sense to drive old car at least for few months and then exchange it for new one. Learning the lesson of skillful driving on Indian roads is vital and having old car really helps.

  8. The father has a right to complain to his friend, but perhaps he is better off with a new hobby to keep himself better occupied than to be unhappy over what his adult and reasonable daughter’s desires out of her own money. More grief will follow if he does not learn to let go !

    SD

  9. Subra,
    A family earning more than 1 crore a year is already wealthy (of course wealth is subjective depending upon where you are currently). But someone reaching the CFO position in a company must be wealthy in India. And 12L per annum salary at the age of 23 is even beyond dreams for most people.
    Also if this person is not going to buy a 25L BMW, who in this country is actually buying those?

  10. Someone of the girl’s age and professional profile can afford a car up to 4-6 Lacs. The remaining money (2-3 Lacs) can be a gift to her from her father. The comfort of an automatic in a metro can not be overstated. She should go for an automatic from an international brand with good build quality rather than selecting tin cans on wheels claiming stupendous mileage figures with questionable safety.

  11. If she is confident on her driving skill she can go for new car … So that she can show off to her friends at 23 show off is required.. Her dad can pay for insurance she can fund the car ..on top of that she can do car pooling with her friends so that atleast petrol price she no need to spend ..

  12. 1. Safety on roads is important. Also, her use case is long drives on weekends. Article says she’s a good driver. So she’s ready for a new car.
    2. Let her dad subsidize a new car in part by paying off the amount obtained by selling off the old car.
    3. For the remaining amount, let her do an exercise – a. do I take a loan? b. do I withdraw from my MF corpus? c. do I put in my savings? Let her on her own figure out how she should get the remaining amount. Its never too early to learn that money doesn’t grow on trees and that you shouldn’t expect your parents to fund 100% of all your wants all the time. Who knows, she might even decide she doesn’t want that new car! When you have to pay from your own pocket, it hurts!

  13. if it is a gift from dad, he should decide what he wants to give. of course the kid can just reject it, sell it, upgrade it – one should not bother about that. as long as he does not have to pay more than the allocated budget for the gift, perhaps it should not matter.

    daughter is an adult with a decent job – why should she be promised rent-free stay at home & assured inheritance of the houses? perhaps letting her live independent and fend for herself without the assurance of inheritance would be a much better gift…

  14. I personally feel that dad should provide her with the 8L car. I believe daughter already knows the financial situation of the house. Also, May be his daughter is not used to hand me downs and may not feel great in front of her friends.

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