What do you do when you sell your car?

First, get a bill of sale as proof that you've sold the car. Report the sale to your state's Department of Motor Vehicles. Rules vary by state, but you'll likely need to complete a release of liability form, which officially transfers responsibility of the car from you to the buyer. Before canceling your auto insurance, ask your insurer about your options — canceling coverage too soon could create risks.

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How do I report the sale of a vehicle?

The rules for transferring car ownership vary by state. Many states require that you remove the license plates and return them to the DMV, but in Illinois, for example, the plates belong to the seller.

Start by contacting the DMV or state department responsible for motor vehicles and ask how to report the sale. Find out which specific steps to take, which forms you need to fill out, and how long you have to complete the process.

Transferring your car title is another important step after selling your car. Learn more about what's involved in signing over a car title.

What's a bill of sale?

A bill of sale is a document that serves as proof that you've sold the car. It usually includes the vehicle's description, the vehicle identification number (VIN), sale date, purchase price, and the buyer and seller's signatures. It could also include an odometer reading, but some states have a separate mileage disclosure form.

If your state doesn't require a bill of sale, it's still good to have one. This document serves as a receipt and helps protect you if there's a dispute about the sale afterwards.

You can download the correct bill of sale form through the DMV website or another website that offers them. You might need to get the completed bill of sale notarized.

What's a DMV release of liability form?

The release of liability form is separate from a car title transfer. Also called a notice of transfer or sold notice form, the release of liability officially transfers legal responsibility of the car from the seller to the buyer. Many states require it for car sales.

The information on this form tends to include the vehicle's make, model, year, and color, the VIN, your name, your contact information, the buyer's name and contact information, the car title transfer date, and the odometer reading.

Complete the release of liability form as soon as possible after selling your car. If you wait too long, you might incur a fine. You could also be liable if the buyer is in an accident, gets a traffic violation or a parking ticket, or commits a crime with the vehicle.

Pro tip:

Cancel or update any services associated with the car you're selling. Unpair phones, clear personal data, including navigation, and remove any automatic garage door or gate opening capabilities.

Should I cancel my auto insurance after selling my car?

After you've released your liability on the car, you'll need to cancel or adjust your auto insurance policy. Ask your insurance provider for options, especially if you own another vehicle.

Learn more about when to cancel insurance after selling a car.

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