Vehicle Bill of Sale vs. A Release of Liability: Know the Difference

January 27, 2012

Some who are new to the car buying and selling process might think of a vehicle bill of sale as being identical to a release of liability form. The fact is that these two kinds of documentation are somewhat different, and presented for different purposes. Knowing more about these two documents will help sellers and buyers figure out their responsibilities in terms of the auto sale process.

The Bill of Sale

A motor bill of sale is a document that records information about the vehicle transaction. An important piece provided by the bill of sale is the amount that the vehicle sold for. Many U.S. states use this form to calculate auto sales tax on a vehicle when it is sold. The buyer is generally responsible for paying the auto sales tax. If the buyer does not pay this amount up front at the time of sale in a state that has an auto sales tax, it will be required by the DMV when the buyer goes to register the vehicle. Sellers can generally get a free automobile bill of sale from the DMV web site of their state.

Release of Liability

The release of liability form is a little bit different. The purpose of the release of liability is to help the seller document that he or she has surrendered the vehicle to a new owner. Without this kind of documentation, the seller of the vehicle could be held liable for any accidents or other negative events involving the vehicle even after the buyer has driven off with it. This can lead to some tricky situations for those who are selling used cars and trucks. It’s best to fully research how the home state deals with liability for an auto transaction, and know how this will affect sellers and what they can do to protect themselves.

A bill of sale will generally include more information than release of liability forms. Both will include the basic information about the vehicle, so that readers of the forms understand exactly which vehicle is being sold or surrendered. The VIN number or vehicle identification number is always important on these forms. The buyer is responsible to check to make sure the vehicle carries an accurate VIN number. Law enforcement in many states has reported that some vehicle sellers are using fraudulent VIN numbers to sell stolen vehicles.

Along with the bill of sale or release of liability form, having a legitimate title for a vehicle is extremely important. Sales transactions for a vehicle cannot be made without the title. The title must be in good condition and issued by the home state. For vehicle is carrying titles from beyond the state, other processes may be necessary to register that vehicle in the buyer’s state of residence.

While a full set of documentation including a bill of sale can often help the seller to release themselves from liability of the vehicle, sellers should contact their state DMV to see exactly what is required to prove that they no longer own and no longer drive a vehicle that once was theirs, to prevent some crazy kinds of mix-ups that could lead to a whole lot of headaches when auto sale loopholes occur.

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