Buying and selling a car can be an exciting process, but it can also be aggravating, especially for private car sales. Various state laws apply whenever a car is sold, though the transfer of a car between private parties comes with additional hurdles that commercial car sales do not have. While these laws vary from state to state, there are several areas common to all private car sales no matter where they occur.
Whenever a private car is bought or sold, the car must be transferred from one party to the other. This involves a transfer of title. When cars are bought from dealers, or otherwise financed, the car title is typically either held by the lender or given to the buyer with a lien indicated on it. Typically, liens are listed on the title document itself, and unless a title is free from a lien, it can't be transferred privately. Private car buyers (and sellers) must be able to transfer the car title to the new buyer before the state will allow it to be registered in the new buyer's name. Once the buyer's name is indicated on the back of the clean title, he or she can register the car with the state and obtain a new title. (See reference 1.)
Private car sales are subject to taxation, including sales and property tax. Some used car buyers believe that purchasing a car from a private seller excludes them from having to pay sales tax. This is incorrect. In states that impose such taxes, all car sales must include the appropriate sales tax. For example, according to the Utah Department of Motor Vehicles, a private car buyer in Utah has the responsibility to pay the appropriate sales tax. This is different from most other transactions, where the seller has the responsibility to pay the tax. (See reference 2.)
One of the major drawbacks of buying a car from a private seller is the lack of warranties or consumer protection laws that apply. Generally, only commercial car dealers or other businesses that sell cars have warranties that apply to the sale, and private sales are covered under "as is" laws, meaning the buyer is responsible for any problems once the sale is finished. A private car may still be under a manufacturer's or dealer's warranty, and some states do allow limited warranties for defects that affect safety or drivability, but otherwise, unless the seller makes specific and written warranties as part of the sale, these cars are sold as is. (See reference 3.)