4 Laws to Know when You Sell a Car

To sell a used car, dealers are bound to a variety of state and federal laws to ensure that the process is legal and that they provide full disclosure. Individuals who are looking to sell a car do not have to abide by the same laws as dealers—unless they wish to become one. However, depending on the state in which you live, there are some laws to be aware of. They may not all apply to your situation, but being aware of the laws is helpful so can make an honest transaction.

4 Laws to Know

The following 4 laws apply to individuals as well as dealers. Used car dealers are subject to further regulation, but for the average seller of a used car, these do not apply.

State Lemon Laws: Not every state may make it a legal offense to knowingly sell a car with problems without disclosing them, but some do. In practice, when selling your used car to a new buyer, you want the highest price possible. However, if you know of something wrong with the car and do not disclose it, you may be unwittingly breaking the law in your state. It is "buyer beware" when making a used car purchase from a private party, but the seller should act in accordance with any regulation that applies in their state. Check with your state’s DMV for the appropriate laws.

Car Title Laws: When a used car is exchanged between private parties, by law the car’s title must be exchanged as well and sent in to the Department of Motor Vehicles. This act transfers legal ownership of the vehicle in the eyes of the state. Sellers must sign off on the backside of the title before handing it over to the new owner of the car. Buyers usually have 30 days to re-register the title with the DMV. Of course, as the seller, you are not responsible for the buyer’s actions after you make the sale, but if the title is never switched and car is involved in an accident or crime, investigators could come knocking at your door.

Dealer License: As already mentioned, individual sellers are not bound to the same laws and regulations as dealers. However, if an individual seller is in the practice of selling used cars they acquire in a privately, they are a de facto dealer and legally must obtain a license. One illegal practice is known as curbstoning, in which individuals sell cars that are not found on a dealership lot. Sellers may do this to avoid obtaining the necessary license to sell used cars. Selling one car is perfectly legal. Selling car after car requires a license.

Bill of Sale: It may not be a legal necessity in your state, but providing a bill of sale or a receipt to the buyer of your vehicle is good practice. It’s wise to do because it gives both you and the buyer a record of the transaction. It can literally be a printed Word document indicating the date of sale, agreed price, VIN and the names of the people involved.

Before you attempt to sell your used car, familiarize yourself with any laws that may apply to your situation for your state. You are not bound to the same rules that dealers are, but you still may be required to follow specific guidelines.