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What’s a Bill of Sale and What’s It For?

Hands handing over the car keys to another set of hands

A bill of sale is a notarized legal document that specifies the transfer of ownership of an asset from a seller to a buyer. Both parties sign the bill of sale, which acts as a receipt, as well as proof that the old and new owner have agreed to the terms of the sale. 

Although a bill of sale can be used for the transfer of almost any item, many people want to know: what is a bill of sale for a car? We’ll provide a comprehensive answer specifically related to transferring ownership of a vehicle and how to use a bill of sale in the process. 

If you are in the market for a new or used car, don’t forget to check with your car insurance company to find out how much your coverage will be with your new ride. 

What Should be Included in a Bill of Sale for a Car? 

A completed bill of sale should include key information describing the object being sold, and other particulars. In the case of selling and buying a motor vehicle, the bill of sale should include: 

  • The date and the date of the sale: In many cases, these will be the same, but there may be instances when a bill of sale becomes final after some conditions are met. 
  • Personal information: Full names and addresses of the buyer and seller. 
  • Price and VIN: The sale price of the vehicle is included in the bill of sale, as well as the vehicle identification number (VIN). 
  • Signatures: A completed bill of sale will include the signature of all parties. 

Regardless of whether this is a transaction between private parties or through a dealership, these components are in place to make sure there are no misunderstandings or disputes down the road. 

Not all states legally require or use a bill of sale. Some of the states that do not include North Carolina, New Hampshire and Louisiana. However, you should check with your state DMV to understand the laws where you live. 

Types of Bill of Sale for Cars 

A bill of sale for a car will resemble types used for a variety of items, from boats to firearms. Even in the situation where a car is a gift, a bill of sale can spell out information that may be important, such as any accidents the vehicle has been in and a vehicle history report. Other types include: 

  • Simple bill of sale: This is a straight transferring of property from one party to another for an agreed upon price. 
  • Conditional bill of sale: A common conditional bill of sale is the one you sign with a lender for the purchase of a car. You keep the car as long as you honor the terms of the promissory note. If you fail to do so, the lender may repossess the item.  
  • Warranty bill of sale: A warranty bill of sale is more detailed than a simple one and offers more details about the item, as well as providing a guarantee that the buyer is the full and clear owner of the item. This offers protection to the buyer, especially in cases where claims may arise in the future.  
  • Security for a loan: a bill of sale may also be used in certain circumstances as security for a loan. In this situation, the owner of the vehicle pledges the car as collateral if they default on a loan. 
Hands hand over cash to buy a car and receive car keys

How to Create a Bill of Sale for a Car 

A bill of sale for a car is an important piece of protection for both buyers and sellers. If you live somewhere that doesn’t require a bill of sale, it’s a good idea to insist on one anyway to reduce your chances of problems later. In some places, state law will dictate the different requirements included in the document. You can write and design your own or you can go to your state’s DMV site and find a template, which may be easier. 

However, you choose, here are the steps to create your own bill of sale for a car. 

  1. Date of transaction: This is the date you accept – or pay – the price of the automobile and sign over to transfer the title of the car. 
  2. Price: the sale price both parties have agreed upon. 
  3. Vehicle description: include make, model, mileage, VIN and license plates. 
  4. Warranty or As-Is: Describe if the car is being transferred as is or if it is going with a warranty. 
  5. Contact information: Both the seller and the buyer should have full contact information, including address and phone number. 
  6. Good Faith Declaration: Above the signature line, you should write an oath that the seller has provided information about the vehicle without any attempt at deception. 
  7. Signatures: Both parties should sign after the funds for the purchase have changed hands. 
  8. Notarization: Even if your state laws do not require a bill of sale or do not require a notarized bill of sale, it’s a good idea to sign it in front of a notary public anyway – just in case something comes up in the future. 

Afterwards, both parties should keep a copy of the bill of sale for their records.  

The Importance of Transferring the Title 

The buyer will use the completed document to transfer the title into their name. Transferring the title is typically required by law and needs to be done in a certain time frame. Most states conduct this business at the DMV or the tax office and there will be fees to pay. 

If you are the seller, you should accompany the buyer to the correct office to transfer the title. This will protect you if the car is subsequently involved in criminal activity or even simply involved in an accident. If you are the buyer, this protects by establishing your legal ownership of the car. 

If you purchase a new car from a dealership, they’ll typically handle all of the transfer of titles, etc. 

Why is it Important to Have a Bill of Sale? 

First and foremost, a proper bill of sale provides proof of ownership and proof of purchase. This can offer protection to both sides. If the vehicle is involved in a wreck or leaves the scene of an accident, the former owner will not be held liable. Likewise, nobody will be able to come forth and accuse the new owner of theft. 

These are some of the legal reasons you’ll want this protection. A proper bill of sale will also offer some valuable information about the vehicle, so no one is surprised. And, in some states, it means compliance with the law. 

If something does come up after the sale, this document may assist a lawyer if you need to hire one to represent you in court. Always seek legal advice to make sure your purchase or sale is above board and legal. You want the new owner to be completely responsible for the car. 

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