A bill of sale is the written equivalent of a handshake agreement. That’s why you might think it will protect you from trouble when buying a car. Unfortunately, that’s not always true. While you should obtain a bill of sale every time you buy or sell a car, doing so probably doesn’t have as much legal power as you might think.
TLDR: Always get a title whenever possible. Don’t rely on a bill of sale to guarantee ownership.
What does a Bill of Sale Actually Do?
A car title is a document used by the DMV to assign legal ownership of a vehicle. It indicates liens and salvage status, but it does not define the conditions of the sale. By contrast, a Bill of Sale is a legal document designed to protect both parties by acting as a receipt for a transaction.
An automotive bill of sale should contain information about the vehicle, the buyer and seller, and the date and location of the sale. It should also define the sale’s conditions (as is, warranty yes/no, and so forth). A bill of sale can also be used to stipulate future events, like requiring the seller to change or fix certain things about the car before the sale is finalized.
Problems with a Bill of Sale
Planning a future sale date
People will often use a bill of sale to “lock in” a sale date ahead of time. For example, Jim drafts a bill of sale saying that Bob will sell a car to Jim on Friday. Maybe Jim needs to get the money together, or perhaps Bob needs to use the car until Friday. Their agreement holds a minimal amount of legal value; the bill of sale would not likely hold up in court if Jim were to argue for rightful ownership of Bob’s car.
Buying a car without a title
It’s sometimes legal to buy a car without a title. With that said, people will often rely on a bill of sale to prove rightful ownership. For example, Pam sells Jim an abandoned vehicle from her property. She writes a bill of sale detailing how she came to own the car, its make and model, and the fact that Jim has paid her for it. But that written note won’t actually suffice to prove that Jim is the legal owner if the rightful owner can still produce a legal title.
If you’re skeptical about those facts, trust me – I was too.
Solution: An Ironclad Bill of Sale
When a seller backs out
If a seller reneges on a bill of sale, there’s not much you can do. Perhaps they encountered a higher offer, or maybe something else came up – either way, you have no legal ownership of a car if the sale was never completed.
A car buyer can empower themselves in many ways:
- Run a VIN check as early as possible
- Create an ironclad bill of sale
- Conduct the sale in a public place
- Never hand money over until the title is signed
These easy steps will keep the negotiation power in your hands and will protect you from would-be scammers and schemers.
Using a pre-made bill of sale
In most states, a premade bill of sale template is available on the DMV website. This is an easier solution than drafting your own document, though its legal power will equal that of a properly-executed handwritten bill of sale.
Writing an effective bill of sale
Ensure the bill of sale includes both parties’ names, addresses, and phone numbers. List the time and place of the sale. Include the VIN number and describe the vehicle’s condition. Report any other agreed-upon details of the sale. Obtain a picture of the seller’s photo ID if possible. Be sure both parties sign and date the document.
Trust Your Gut
Unfortunately, people are capable of anything. If something about a car-buying situation doesn’t feel right, if something about the seller seems off, or if you hear that voice telling you “no,” walk away. There will always be another opportunity to find the car you’re looking for.
We’re happy to help you write a bill of sale or feel out a situation. Please contact us with any questions or concerns about car titles, VINs, or anything related to the titling process.