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You need a Bill of Sale if Buying or Selling a Used Vehicle.

LawsOnline
May 01, 2024

Buying or selling a used vehicle can be an exciting experience for both the buyer and the seller. For the seller, whether you're parting ways with a treasured collectible investment car or the 'infamous' motorcycle that sits somewhere between ‘safe and sensible’ and ‘fast and furious,’ the outcome of cashing in on a lucrative investment, or abiding by your significant other's solid ask, is not only a financial win but, it is validation that you made a wise decision. For the buyer, whether you're searching for the sentimental 'car of your dreams' or a strictly utilitarian truck to get you from point A to point B, finally finding your ideal vehicle is not only rewarding in a practical sense, i.e. it's necessary for transportation, but it also provides a great sense of relief that all the time you spent searching was well worth it. In the United States, there are around 271,811,005 vehicles registered to private owners (see www.bankrate.com & www.fhwa.dot.gov), including automobiles, trucks, motorcycles, and buses. Out of that total number, 1.3 million used vehicles are sold each month by private sellers (see https://www.statista.com & https://www.coxautoinc.com), which is about .5% of the total ownership transfer of private vehicles each month. With all these used vehicle sales, one may ask “What is the best way to proceed when buying a used vehicle” or “What paperwork is needed when selling a used vehicle.” In the world of used vehicles, you will almost always need a Bill of Sale.

In general, a Bill of Sale is a type of transfer contract that documents the current legal owner of specific goods or property and records the exchange of ownership from one party to another. The most common reason individuals need a Bill of Sale is for the monetary exchange of a vehicle. It is helpful to understand that a Bill of Sale is just one of the many documents that you will need to transfer ownership of a used vehicle. However, the question always arises “what is needed to make an effective Bill of Sale?” In most states, it is necessary to include the following information in the Bill of Sale: name, address, and phone number of the parties involved in the property transfer; vehicle description, which should include the year, make, model, color, style, and, most importantly, the VIN number; price the buyer is paying to complete the transfer, and the date of transaction; and, finally, it is strongly advised that both parties acknowledge the transfer with their signatures and, in some cases, with a notary to witness the transaction. You can review this sample of a basic BILL of SALE or, because each state has different requirements, you can refer to a state-specific list at the end of this article.

The Bill of Sale is just one of the documents that you need to sell a vehicle. The second most important document needed in the sale of a vehicle is the Odometer Disclosure Statement. It is a requirement by federal law to identify the accurate miles on the individual vehicle. Under Federal Law 49 U.S.C. 32705, specifically section 49 CFR Pub §1.95. §580.1 Scope. “Requiring transferors and lessees of motor vehicles to make electronic or written disclosure to transferees and lessors respectively, concerning the odometer mileage.” If you review the Sample Bill of Sale above, you will see a section dedicated to an Odometer Disclosure Statement. So, for the vehicle transaction to be effective, and to complete the sale, you will need to include an Odometer Disclosure Statement with the Bill of Sale.

Considerably the most important document in the sale of a vehicle, and the one the owner of the vehicle should already have in their possession, is the title. Without the title, the seller cannot transfer ownership of the vehicle to a new party. The title is unique to the state of issue and registration. The title will have information about the current individual or corporation documented as the owner. The federal government does not create vehicle titles; each state handles its' own issuance of titles and registry of vehicle owners.*

The final documents needed for the sale of a used vehicle are state-specific; some states require them but others do not. Please check below to verify if your state requires these additional documents to complete the sale of a used vehicle. A lot of states require a Damage Disclosure Statement to identify if the vehicle has been in a major accident and may have some lingering issues. Some states require an Emission Testing and Inspection to verify that the vehicle is street ready to drive in the public. In these states, if you do not have a receipt of Emission Testing and inspection, it could prevent the smooth transition of ownership.

The remaining steps for the sale of a used vehicle are procedural. First, the current owner of the vehicle should remove the license plates so that they do not expose themselves to unnecessary liability. The license of the vehicle is different than the title and is many times handled by a different department in the state related to licensing and tax. Second, the previous owner of the vehicle will need to contact their insurance carrier to have the sold vehicle removed from coverage on their policy, and the new owner of the vehicle will need to contact their insurance carrier to have the new vehicle added to their policy.

With all these steps followed, you should have a successful used car experience. Please see the links below for each State’s individual guidelines for the transfer of a vehicle. Remember each state will have its’ own specific requirements. Be prepared to research the process for your state before you either sell your used vehicle or search for a preowned vehicle to purchase.

*Historical Fact: The idea of a motor vehicle registry of ownership in the United States was not conceived until sometime in the early 1900’s. It was officially documented on April 25, 1901 when New York, by action of its' Legislature, became the first state to require registration of vehicles. The first New York issues were homemade plates, bearing the initials of the owner without any numbers (see https://www.autonews.com/). California followed suit the following year. In 1931, New Jersey became one of the earliest states to issue a state record of ownership as a form of early title transfer (see https://www.dirtlegal.com/). The first car titles in New York were not issued until 1973. Prior to that, the registration was signed and handed over to the buyer during a sale. The title registry today is universal and, almost all states have created vehicle titles to document ownership of vehicles. Most states identify ownership of vehicles with a unique title designed in a specific mode of preference.

RESOURCES:

Number of vehicles in the United States:

https://www.fhwa.dot.gov/policyinformation/statistics/2020/mv1.cfm

Number of cars in the United States:

https://www.bankrate.com/insurance/car/car-ownership-statistics/#data

U.S. used-vehicle sales record set in 2021:

Cox Automotive estimated that overall used-vehicle sales for 2021 were 40.9 million, an increase of about 10 percent compared with 2020. Of those, an estimated 22.2 million were retail sales — vehicles sold to consumers by dealerships and other retailers such as Carvana. Jan 12, 2022 https://www.autonews.com/

You need a Bill of Sale if Buying or Selling a Used Vehicle.

RESOURCES:

STATE-BY-STATE TITLE TRANSFER OF A VEHICLE: