Selling a vehicle can be daunting, especially when navigating the intricate web of state-specific regulations. In Alabama, understanding the unique rules and requirements surrounding vehicle sales is crucial to ensuring a smooth and compliant transaction.
In Section 40-12-260 of the Alabama Code, the seller shall return the plate to their county's license plate issuing official after selling a vehicle. Also, the new owner must register the car within 20 days of purchase by obtaining a new plate from the county's issuing official. Failure to adhere to these regulations can result in potential legal consequences or financial penalties.
Awareness of these state-specific regulations is vital to a hassle-free vehicle sale in Alabama.
Legal Requirements Before Selling a Vehicle in Alabama
The initial step in selling a vehicle is to list it for sale, whether by displaying a "For Sale" sign on the car or posting listings on online shops and sales sites. However, sellers must first consider the legal requirements and actions mandated by the Alabama Motor Vehicle Division (MVD) of the Department of Revenue (DOR) before proceeding with the sale.
Duplicating a Title
In compliance with Alabama law, sellers must possess a clear title for their vehicle. State regulations say selling a car without a clear title and current registration is illegal.
If the title is lost or damaged, individuals can apply for a duplicate. To do so, they can visit the MyDMV Portal or the MVD's Public Title Portal. Alternatively, they can submit the application in person to the County License Plate Issuing Officials.
Obtaining a duplicate certificate of title in Alabama follows the same process as obtaining a new one. The applicant must be the titled owner, a representative of the owner/next of kin, or the primary lienholder (if outside of Alabama). The required documentation typically includes the vehicle identification number (VIN, MSN, or HIN) and proof of ownership or authorization.
Duplicating a title requires a non-refundable fee of $15. License Plate Issuing Officials may also charge a $1.50 commission per processed application for processing and mailing expenses. Some counties may have additional local fees, so it is advisable to contact the County License Plate Issuing Official for more information.
Individuals can track the status of their title application by visiting the Check Application Status service on the MyDMV Portal. Typically, a duplicate title is received in ten days.
Note that vehicles older than 35 years in Alabama are exempt from requiring a title when selling a car. For other exemptions, check this page on the AL DOR website.
Getting a Vehicle History Report
Obtaining a vehicle history report in Alabama can benefit buyers and sellers. While buyers often request these reports to gain insight into a vehicle's background, sellers can also benefit from them. A comprehensive vehicle history report can provide sellers with valuable information that can be used as selling points when marketing their cars.
By disclosing a comprehensive vehicle history report, sellers establish themselves as trustworthy and transparent, which can be beneficial in attracting potential buyers.
Sellers can conveniently use the Records Request service on the MyDMV Portal to request a vehicle history report from the Alabama MVD.
Does Alabama Require a Pre-Sale Inspection?
In Alabama, there is no requirement for a pre-sale inspection of a vehicle before selling it to a private party. However, it is common for buyers to request an inspection to ensure the car is in good condition and free of any significant issues.
The buyer covers the inspection expenses, but both parties must agree on where and when the inspection will take place. Agreeing to a pre-sale inspection can provide the buyer with more confidence in the quality and condition of the vehicle they are purchasing.
Selling a Vehicle with a Lien in Alabama
When selling a vehicle with an outstanding lien in Alabama, the crucial step involves obtaining a lien release from the lienholder.
The certificate of title, which serves as the primary ownership document, cannot be transferred until the lienholder releases its interest in the vehicle. This can be achieved in two ways: either the seller pays off the remaining balance owed on the lien, or the lienholder provides an official letter explicitly releasing the lien.
If the seller is unable to pay off the lien in full, they must submit the lienholder's lien release statement to the Alabama MVD. Without this document, the sale cannot proceed legally.
Motor Vehicle Sales Tax in Alabama
Alabama's sales tax on automotive vehicles is at a base rate of 2%. This tax applies to light-duty vehicles, trucks, truck trailers, house trailers, motorcycles, and similar items. The same rules apply regardless of whether the car is new or used.
Still, the actual tax rate varies based on the county and local taxes. For instance, Foley residents encounter around 1.25% in Baldwin County taxes in addition to Foley's 0.50% locality tax. Conversely, residents in Arab pay an additional 0.5% tax due to the absence of tax in Marshall County.
Consequently, the total tax rate can significantly differ based on the buyer's location.
When a used automotive vehicle is traded in as a credit or partial payment for a new or used car, the sales tax is calculated based on the net difference. For instance, if a person receives a $5,000 trade-in credit on a $15,000 new car, they would only pay taxes on the $10,000 difference, saving money on sales taxes.
Trade-in provisions do not apply to leased or rental vehicles exchanged for new or used ones. Furthermore, dealers are not allowed to subtract trade-in allowances that surpass the selling price of the purchased vehicle from their sales tax return.
Who Pays Sales Tax When Selling a Car Privately in Alabama?
When selling a car privately in Alabama, the buyer is responsible for the sales tax. The buyer must pay the appropriate tax rate on the vehicle's purchase price. Note that it is illegal for the seller to refund or absorb any part of the sales tax amount collected.
In certain cases, there are exemptions available that allow for tax-free purchases. Non-profit organizations, charitable organizations, and sales that occur outside of the city or county where a dealership is located are a few examples of situations that may qualify for exemption.
To take advantage of these exemptions, the buyer must obtain a certificate of exemption from the AL DOR.
Sales Tax for Vehicles Sold in Alabama to Residents of Another State
When selling vehicles in Alabama to residents of another state, there are certain conditions under which the sales may be exempt from Alabama sales tax.
If the vehicle is registered or titled outside Alabama and leaves the state within 72 hours for use elsewhere, it may be exempt from Alabama sales tax.
To qualify for this exemption, the details of the exempt sale must be properly documented using the Certificate of Out of State/City/County Delivery form of the AL DOR.
Legal Requirements After Selling a Vehicle in Alabama
In Alabama, sellers and buyers of vehicles have specific legal responsibilities to fulfill during and after a sale. These obligations include providing accurate odometer disclosure statements, transferring ownership, and notifying the Alabama MVD regarding the vehicle's sale.
By adhering to these legal requirements, individuals can ensure a seamless and lawful vehicle transaction within Alabama.
Odometer Disclosure Requirements
There are specific requirements for disclosing the odometer reading in Alabama when transferring vehicle ownership.
According to the Federal Truth in Mileage Act of 1986, the seller (the transferor) must accurately state the mileage in connection with the ownership transfer. Failing to complete this disclosure or providing false information can lead to fines and even imprisonment.
However, in Alabama, certain vehicles are exempt from the mileage disclosure requirements. This includes cars that are 10 model years old or older, vehicles with a Gross Vehicle Weight Rating (GVWR) exceeding 16,000 pounds and non-self-propelled vehicles such as trailers.
For vehicles that meet the mileage disclosure requirements, the Odometer Disclosure Statement must be completed and submitted to the local AL MVD office or state MVD.
Transferring the Title to the New Owner
Transferring the title to the new owner in Alabama is a crucial step in the vehicle transaction process. The seller must sign over the title to the buyer, making it one of the most critical aspects alongside the buyer's payment.
In a private car sale in Alabama, the buyer and the seller must complete the relevant sections on the back of the title. This includes providing their legal names, signatures, addresses, the date of the sale, the odometer reading, and the purchase price.
Note that Alabama does not allow more than two owners to be named on a vehicle title.
When two owners are listed on the title connected by 'and,' they have a tenancy in common ownership rights. In this scenario, both owners must sign the title application.
On the contrary, if the owners are connected by 'and/or,' or 'or,' they have joint tenancy ownership rights with rights of survivorship, and only one owner must sign the title application.
Completing the vehicle title accurately and legibly makes it easier for the buyer to transfer registration and obtain a new license plate.
Removing the License Plates and Canceling Insurance
When selling a vehicle in Alabama, the seller shall remove their license plates before handing the car over to the buyer. Failure to do so could result in the seller being held responsible for any violations that occur after the buyer takes possession of the vehicle.
According to Alabama law, the seller has two options for the license plates: they can transfer them to another vehicle they own or surrender them to their local licensing official. The buyer is then responsible for obtaining a new license plate within 20 calendar days from the date of sale.
If the seller returns the plates, they must include a relevant form, typically the request for registration revocation. This form officially ends the registration of the car in question. Once this process is complete, the seller should cancel their insurance immediately to avoid paying for a vehicle they no longer own.
For assistance in obtaining the necessary forms when selling a car in Alabama and guidance on filling them out correctly, sellers can visit the Forms page on the AL DOR website or call the Alabama MVD at 334-242-9000.
How To Notify the Alabama MVD of the Sold Car?
The seller is not required to have a bill of sale when notifying a local Alabama MVD office or state MVD of a sold car. However, certain counties may require an Alabama bill of sale to verify the purchase and complete the title transfer.
Although not obligatory, a bill of sale is highly recommended in independent vehicle sales as it provides legal documentation of the transaction. It safeguards the buyer and seller against potential legal disagreements post-sale. If, for instance, the buyer alleges that the seller misrepresented the vehicle's condition, the bill of sale serves as crucial evidence in court.
In some counties, a dedicated bill of sale form may be available on the official government website. However, if such a form is not provided, sellers can easily access a bill of sale template online.
When completing the bill of sale, specific information must be provided, including the year, make, and model of the vehicle being sold, the purchase price and date, the odometer reading at the time of sale, the VIN, and the signatures and addresses of the seller and buyer.
A bill of sale becomes a legally binding document upon the signatures of both parties. Therefore, it is vital to ensure that all the required information is accurately included and that both the seller and buyer sign the document.