In Indiana, the laws governing the sale of motor vehicles and the required documentation for such transactions are in Indiana Code (IC) Title 9 Chapter 17, which focuses on certificates of title and registration. When a vehicle is sold, the seller is mandated by IC Section 9-17-2 to provide the buyer with the properly assigned certificate of title at the time of sale.
When selling a vehicle in Indiana that is less than ten years old, the title must include an odometer disclosure statement and be signed over to the buyer.
Although not mandated, a bill of sale is recommended to prove the transfer of ownership. It should contain details like the vehicle identification number (VIN), make, model, year, purchase price, sale date, and signatures of both parties.
Legal Requirements Before Selling a Vehicle in Indiana
Before selling a vehicle in Indiana, the seller must meet several legal steps to ensure the transaction is legitimate and adequately documented. The seller and the buyer must follow the procedures regulated by the Indiana Bureau of Motor Vehicles (BMV) to avoid potential legal and financial complications.
Duplicating a Title
In Indiana, individuals must have a valid title to legally transfer ownership to another person. If the original title is lost, damaged, or stolen, owners can apply for a duplicate title through the Indiana BMV.
The new title will be marked "DUPLICATE," rendering the original void. To obtain a duplicate, individuals must provide the following documents:
- A completed Application for a Certificate of Title For A Vehicle (Form 205)
- Unexpired photo IDs such as driver's licenses, state-issued IDs, school, military, bank cards, passports, probation cards, work IDs, and membership cards
- Check, cashier's check, or money order with a fee of $15
The documents and payment must be mailed to the address below:
Indiana Bureau of Motor Vehicles
100 N. Senate Ave., Room N411
Indianapolis, IN 46204
The completed documents can also be submitted online at myBMV.com, any BMV branch, BMV Connect kiosks, or BMV Service Providers. However, if the original title is found, it should be destroyed to prevent its use in the sale or transfer of ownership of the vehicle.
Preparing a Bill of Sale
In Indiana, the seller must prepare the Bill of Sale (Form 44237), a legal document that transfers ownership of the vehicle from the seller to the buyer and is required for registration purposes with the Indiana BMV. The seller can obtain the form from the Indiana BMV website or the Indiana BMV branch.
The seller must provide their information, including the VIN, while the buyer must include details like the date of sale and sale price. Both parties must sign and date the form to certify the provided information.
Before submission, make sure to have a copy for records. Completing and submitting the form safeguards the seller from any post-sale vehicle liabilities and ensures that the BMV records accurately reflect the change in ownership. The form can be submitted at a BMV branch or mailed to the address specified on the form.
Getting a Vehicle History Report
In addition to arranging the title, acquiring a vehicle history report can offer prospective buyers essential details when selling a vehicle in Indiana.
This report will provide information about any reported accidents or whether the vehicle has ever been rebuilt, salvaged, or damaged in a flood. Being cautious of scams is crucial, so using an approved provider for accurate and reliable reports is advisable.
To obtain a reliable vehicle history report, the seller should visit the National Motor Vehicle Title Information System (NMVTIS). In this system, the seller can request reports from the NMVTIS-approved providers authorized by the U.S. Department of Justice by providing the required information and fees.
Getting a Vehicle Inspection
In Indiana, getting a vehicle inspection before selling a car is not legally required, but it can be a smart move for both sellers and buyers. When someone decides to have their car inspected before selling, they're taking a proactive step that can benefit everyone involved in the sale.
Vehicle inspection typically includes checking the engine, transmission, brakes, suspension, and other major systems.
An inspection can reveal any hidden issues with the vehicle that the seller might not be aware of. It allows the seller to fix these problems before listing the car or disclosing them to potential buyers, which helps build trust.
For buyers, a pre-sale inspection provides peace of mind. It gives them a clear picture of the car's condition, helping them make an informed decision.
Although not obligatory, some sellers opt for an inspection from an Indiana BMV branch, a certified provider, or a law enforcement officer. If choosing a law enforcement officer's inspection, the seller must complete a Physical Inspection of a Vehicle (Form 39530) and pay $5.
Advertising the Vehicle
In Indiana, specific regulations govern the advertising of vehicles for sale to guarantee transparency and honesty in transactions, as stated in the Indiana Trade Regulation or the IC Chapter 24.
According to IC Section 24-5-0.5-3, all vehicle advertising must be accurate or truthful. Sellers must provide accurate statements regarding a vehicle's condition, history, or pricing. Failing to do so would be deemed deceptive.
Additionally, under IC Section 24-5-0.5-4, sales practices must take fair advantage of consumers. Any misrepresentations or hiding of important information about an advertised vehicle would be considered immoral acts.
In Indiana, licensed motor vehicle dealers may be subject to additional advertising laws, and these rules usually include specific requirements for pricing transparency, vehicle availability, and dealership physical facilities.
Selling a Vehicle with a Lien in Indiana
In Indiana, selling a vehicle with an existing lien involves adhering to specific regulations set by the BMV. A lien indicates that a financial institution or lender has a legal right to the vehicle until the debt is fully paid.
Removing a Lien from a Vehicle Title in Indiana
When selling such a vehicle in Indiana, the seller must disclose the lien's existence to the prospective buyer and ensure that the lien is removed. Transparency is essential, as the buyer needs to understand that the lender has a claim on the vehicle. Failing to disclose a lien can result in legal issues and potentially void the sale.
Pay Off the Loan
Paying off the loan is the first step in removing a lien from a vehicle title. The vehicle owner must contact the lender to request the exact payoff amount. This amount includes the remaining principal balance of the loan and any accrued interest and additional fees that may apply.
It is essential to obtain a written payoff statement from the lender detailing the total amount due and specifying a payoff deadline. This will ensure the amount remains accurate until the payment is made.
Obtain Lien Release
Once the loan is paid in full, the lender will process the payment and provide a lien release document. This document proves that the loan has been satisfied and that the lender no longer has a claim on the vehicle.
To obtain this release, sellers can provide a release lien letter, complete and sign the appropriate lien release section on the title certificate with the lienholders, or submit an affidavit (Form 37964).
Submit the Lien Release to the BMV
The seller must submit the lien release document to the Indiana BMV in person at a BMV branch or by mail. The BMV will then update the vehicle's title to reflect that the lien has been removed.
Receive a Clear Title
Once the BMV processes the lien release, it will issue a clear title to the vehicle. This title will no longer have the lienholder's information, indicating that the vehicle is free of any liens and can be sold without encumbrance. The seller must also pay a $15 title application fee.
Motor Vehicle Sales Tax in Indiana
In Indiana, motor vehicle buyers are subject to a 7% sales tax rate. The Indiana BMV collects the sales tax at the time of registration, and the buyer must present a Certificate of Gross Retail or Use Tax Paid (Form ST-108) as proof of payment. The seller typically provides this proof.
Indiana offers a trade-in credit for sales tax purposes. When a vehicle is traded in as part of the purchase of a new car, the value of the trade-in can be deducted from the purchase price before calculating the sales tax. Note that If the traded-in vehicle's value surpasses that of the purchased vehicle, the consideration for the purchased vehicle is regarded as zero.
When a vehicle is sold in Indiana to an out-of-state resident, IC Section 6-2.5-2-3 applies. Instead of paying Indiana's sales tax rate, the buyer may pay the rate of their home state or country. It applies if the buyer plans to transport the vehicle out of Indiana within 30 days and register it in their home state.
To qualify for this, both the seller and buyer must complete an affidavit. This document, provided by the Indiana Department of Revenue (DOR), requires information such as the destination state and an affirmation of the buyer's intent. The buyer must sign this under penalty of perjury.
Note that this rate only includes the state tax rate, not local taxes. The IN DOR can audit these affidavits and may assess unpaid taxes if they find incorrect information.
Exemptions from Sales Taxes
Indiana provides certain exemptions from sales taxes on motor vehicles, though these exemptions are specific.
New Indiana residents are exempted from sales tax when transferring their vehicle's certificate of title from their previous state of residence to Indiana.
Nonprofit organizations can also benefit from this exemption if they provide a General Sales Tax Exemption Certificate (Form ST-105) to the seller. Similarly, merchants purchasing vehicles for resale must present a valid resale certificate. Government agencies are also exempt from paying sales and use taxes on vehicle purchases in Indiana.
It is essential to understand that this exemption is not universal. Charitable and religious organizations, for instance, must still pay motor vehicle sales and use taxes in Indiana despite being exempt from certain other types of taxes.
Legal Requirements After Selling a Vehicle in Indiana
In Indiana, sellers must adhere to specific legal requirements during and after a vehicle sale to ensure a proper transfer of ownership and protect themselves from liabilities. Essential steps include accurately disclosing the odometer reading, correctly transferring the title, removing the license plates, and canceling the auto insurance.
Complying with Odometer Disclosure Requirements
In Indiana, there are particular rules regarding odometer disclosure when transferring ownership of a vehicle or motor home. These rules protect against odometer fraud and guarantee transaction transparency.
Federal and state laws require the seller to provide the buyer with a written disclosure of the current mileage upon transfer of ownership during a vehicle sale in Indiana. The Odometer Disclosure Statement (Form 43230) must be signed, including the printed name and address, and a copy must be returned to the seller.
This document must state the total mileage shown on the vehicle's odometer. The seller must declare on the statement any knowledge of a discrepancy between the odometer reading and the actual number of miles driven by the vehicle. Giving the buyer misleading information about the odometer on purpose is against the law for the seller.
According to Indiana's odometer statute, failing to comply with these disclosure requirements or giving incorrect information may result in a Class B infraction.
Transferring the Title to the New Owner
The process of transferring a vehicle's title to its new owner in Indiana varies based on the specific circumstances.
For the sale of a vehicle in Indiana, the buyer must complete the title transfer 45 days after the purchase. The seller must sign the back of the title, date of purchase, and sale price in the presence of a notary to transfer ownership.
Additionally, when submitting the title and registration application documents to the BMV, remember to attach the completed Form 43230 to the application.
To complete the transfer, the buyer needs to provide proof of identification, proof of residency, proof of vehicle inspection, and the required taxes and fees to an Indiana BMV office.
The transfer fee for these transactions is $15, and there is an additional $2 fee for notarization.
Does a Seller Need To Be Present During a Title Transfer in Indiana?
The seller does not need to be present during a title transfer. However, the seller must sign the title and any other documents in advance so the buyer can take them to a BMV office to complete the transfer.
Removing the License Plates
In Indiana, upon selling a vehicle, the seller should remove the license plate at the time of sale. License plates and registration tags in Indiana are linked to vehicle owners rather than the actual vehicles through the motor vehicle registration system.
The owner or seller can also reassign it to another vehicle they own in Indiana. Per IC Section 9-18.1-11-6, they can transfer the registration and plates to a new car they own if the registration of the sold vehicle has not already expired. The transfer fee is $9.50 plus any additional excise taxes. If the new vehicle is in a different weight class, there may be extra fees.
Similarly, vehicle buyers can get a new license plate at their Indiana BMV office or transfer the plates on their current Indiana license plate to their new car at the same cost.
If the plates are being retired, the owner should contact the BMV for proper disposal methods. It is also essential to inform the BMV if the vehicle is being taken off the road permanently to avoid future registration fees or penalties.
Canceling the Insurance
In Indiana, there are specific requirements and legal considerations for canceling auto insurance after selling a vehicle. IC Title 9, Article 25, explicitly addresses the financial responsibility requirements for vehicle owners, emphasizing the importance of maintaining insurance until the vehicle's sale is finalized and properly documented.
Once the vehicle is sold, the owner should notify the Indiana BMV and their insurance company to cancel the policy. They need to provide proof of the sale, such as a bill of sale, to confirm that they no longer own the vehicle.
Canceling the insurance promptly prevents the seller from being held responsible for any accidents or violations involving the vehicle after the sale. It also stops any further premium payments for a car they no longer possess. Additionally, the seller may be eligible for a refund of any unused premiums.
How To Notify the Indiana BMV of the Sold Car?
Notifying the state releases the vehicle donor from liability for the vehicle, including registration fees and the obligation to keep it insured, once the vehicle is picked up. This notification allows the state to officially record that the owner is no longer in possession of the vehicle.
However, unlike other states, Indiana does not have a separate form or system for notifying the BMV of a vehicle sale. The notification is completed when the seller fills out the bill of sale with the buyer's information, has it notarized, and submits it to the Indiana BMV. Then, the buyer is responsible for registering the vehicle in their name and updating the BMV records.