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What Is an Automobile Bill of Sale?

It is important to understand the laws around automobile bills of sale in an area before buying or selling a car there.
An automobile bill of sale is a formal document that transfers ownership of a car.
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  • Written By: Kathy Heydasch
  • Edited By: O. Wallace
  • Last Modified Date: 11 November 2014
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An automobile bill of sale transfers the rights to ownership of a vehicle from one person to another. It represents a legal contract between two parties for the exchange of goods or transfer of property. The bill of sale can be for tax purposes or simply to establish clear and rightful ownership. A person buying a vehicle needs an automobile bill of sale to ensure that there are no future claims against the property.

There are certain necessary components of an automobile bill of sale. These include the names of the two parties involved in the transaction, the buyer and seller, as well as an exact description of the car being purchased. The bill of sale must also list any conditional terms of the agreement, which includes money or property exchanged for the car. In the case of a secured loan for an automobile, the seller will retain rights to the property or collateral until the terms of the agreement are met.

The vehicle identification number, also known as a VIN, should be included on an automobile bill of sale. This is a serial number attached to a particular car which can trace its ownership and registration. A VIN number is unique to every car and is a legal way of identifying and assuring rights to a vehicle.

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Terms of an automobile bill of sale can be conditional or absolute. In an absolute transfer of ownership, no amount of money or property changes hands. It is simply one party transferring ownership to another. In a conditional transfer of ownership, money or property of a designated value is exchanged in return for the automobile.

A dealership may provide an automobile bill of sale as one of the many forms filled out upon the sale of a car. It can also be a simple, one-sentence document signed by two parties. One party can sign on behalf of another person provided that person has power of attorney over his or her affairs.

When buying or selling a vehicle, there may be tax implications of the sale. If the item is a gift, the value of that gift must be reported on the receiver’s state or federal tax return as a gift received. If a car is sold to a friend or relative, the amount of the sale should represent fair market value for the car. Otherwise, it may fall under the guidelines of a gift in the tax code.

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