Selling a vehicle in Colorado entails legal responsibilities. Complying with these requirements makes the transaction more seamless. This avoids potential complaints from the buyer, plus a law-compliant seller has the edge to build credibility among buyers.
Vehicle dealers in Colorado are subject to Colorado Motor Vehicle Industry Laws and Regulations. This includes disclosing accurate odometer readings, endorsing the vehicle to the new owner, and settling responsibilities on vehicles tied with lienholders.
In a typical scenario, sellers must deliver titles to the buyer within 30 days of purchasing the unit. The buyer can file a dispute if the seller fails to provide documents within this time.
Vehicle dealers should not just be profit-driven. Part of their job is establishing a trustworthy partnership for the buyers. It's a value that helps them thrive in the business.
Legal Requirements Before Selling a Vehicle in Colorado
The Colorado Division of Motor Vehicles (CO DMV) of the Department of Revenue (DOR) has set specific requirements to guide vehicle sellers. Before handing in the unit to the buyer, sellers should have a checklist of these legal requirements. No single document must be left out.
To thoroughly understand the process, these legal requirements must be provided or considered before selling the vehicle:
Title Preparation
A title is a fundamental requirement in vehicle selling. This certifies the legitimacy of ownership.
Thus, it should be properly endorsed to the buyer. The document must also be correctly filled out for it to be valid.
Duplicating a title is the seller's responsibility in case it is lost, mutilated, torn, or illegible. Colorado residents must prepare specific documents if they intend to duplicate a title. The required documents are as follows:
- Duplicate Title Request and Receipt (DR 2539A)
- A valid form of ID
- Vehicle Identification Number and/or Colorado title number
- A power of attorney (DR2175) when applying in lieu of the owner of the record
Residents may apply personally to the county motor vehicle office where they reside or apply online to duplicate a title. Applicants are directed to visit the CO DMV online services for online applications. From there, click the vehicle service tab and choose the request a duplicate title option.
Another way is to apply via mail by submitting the form DR 2593A. Sellers may submit applications by regular mail at the address below:
Department of Revenue
Vehicle Services Section
P.O. Box 173350 Rm 150,
Denver, CO 80217-3350
The same form (DR 2593A) is used for non-residents in Colorado for duplicate title requests. $8.20 is collected for a duplicate title fee.
A lien release is required in case of active liens. Resolving the lien removes the claim against the vehicle and lets the seller get a title free of any burdens. A fee of $7.20 is collected for a lien release title.
Vehicle History Report
Sellers can choose to obtain a vehicle history report. This is a go-to document if they want to provide transparent information on the vehicle's features and functions. Information obtained from this report provides buyers an insight into the vehicle's condition, title status, repairs, and mileage.
Acquiring a VHR requires a vehicle identification number. Sellers may seek help from third-party sources or access information provided by CO DMV online services.
A completed form for Motor Vehicle Requestor Release Affidavit of Intended Use (DR 2489A) is needed. This form declares the applicant's intention regarding access to the vehicle record. Aside from the VIN or plate number, additional documents may be required for further interrogation. $2.20 is collected per search/history.
For transactions via mail, sellers are advised to mail their VHR request to the address below:
State of Colorado
Department of Revenue
P.O. Box 173350, Room 150
Denver, CO 80217-3350
For in-person requests, applicants are directed to visit the address below:
Department of Revenue
Vehicle Services Section
1881 Pierce Street
Lakewood, CO 80214
Emissions Test
Vehicles subject to emissions testing might need a fresh inspection when ownership changes. The vehicle must pass a new emissions test before the sale if it requires emissions checks.
The need for an emissions inspection certificate depends on the buyer's location. A valid certificate might be required for vehicle registration in areas with regulations to control air pollution.
Colorado exempts newer vehicles from mandatory emissions testing. Gasoline-powered vehicles are exempt for the first seven years, while diesel vehicles receive a four-year exemption. However, an exception applies during the final year of exemption for gasoline and diesel vehicles.
When ownership of a gasoline vehicle is transferred in its seventh year (e.g., ownership transfer of a 2018 model in 2024), an emissions test becomes necessary. The same applies to diesel vehicles in their fourth year (e.g., ownership transfer of a 2021 model in 2024).
Additionally, the following vehicles are entirely exempt from emissions testing:
- Kit cars
- All-electric vehicles
- Motorcycles and autocycles
- Horseless carriages
- Street rods
- Farm vehicles
Safety Inspection
Another step a seller should take is a safety inspection of the vehicle. This includes checking the vehicle's brake system, lights, tires, and other essential components. Authorized inspection stations in Colorado can do this job for the seller.
The state of Colorado does not impose a mandatory inspection for the majority of passenger vehicles. However, it is crucial to give buyers an overview of the vehicle's safety status before purchasing. A buyer will not waste a penny on items detrimental to their safety, so sellers must verify if their vehicles meet the required safety standards.
Certain circumstances trigger the need for an inspection, including:
- A safety inspection may be required when registering a vehicle new to Colorado, especially from another state.
- Depending on the vehicle's age, a safety inspection might be mandated when transferred to a new owner in Colorado.
- Vehicles with a salvage title typically require a safety inspection before being registered or re-registered in the state.
Colorado exempts several types of vehicles from mandatory safety inspections. This includes vehicles eight model years old or newer, those powered solely by electricity, collector vehicles from 1975 and earlier, and non-standard vehicles like motorcycles, horseless carriages, kit cars, and farm equipment.
Vehicle Advertisement
Sellers must consider specific regulations when advertising a vehicle in Colorado. The state condones misleading advertising, such as creating the impression that a used vehicle is new. Anyone caught doing an advertisement contrary to legal regulations stipulated by the Modified Dealer Board Advertising Rules is subject to legal sanctions.
Transparency is a big deal in vehicle advertising. Sellers must declare the accurate conditions of the car, whether it is salvage or rebuilt from salvage, and flood vehicles.
The outdoor advertisement of vehicles is also governed by the provisions stipulated in the Code of Colorado Regulations. This includes parking the vehicles in areas that will not obstruct the driver's right-of-way.
Selling a Vehicle with a Lien in Colorado
When selling a vehicle with a lien in Colorado, the seller must first settle any remaining debts owed to the lienholder before proceeding with the sale.
The initial step is to determine the outstanding balance on the loan. Once the owed amount is fully paid, the seller will receive the vehicle's title from the lender, along with a lien release letter confirming that the financial obligation has been settled.
After obtaining the lien release, the seller can apply for a new title that omits any references to the lien. This process involves submitting the necessary documents and paying a fee of $7.20 to the DOR's Vehicle Services Section. The seller will then be issued a clear title, free from any liens or encumbrances.
For those applying for a lien release by mail, all relevant documents and inquiries should be addressed to:
Department of Revenue
Vehicle Services Section
P.O. Box 173350, Room 150
Denver, CO 80217-3350
Applicants may also refer to the address below for in-person applications:
Colorado Department of Revenue
Vehicle Services Section
1881 Pierce Street, Lakewood, CO 80214
For a more seamless process, the seller may visit online services provided by CO DMV.
After everything is cleared, the seller can negotiate the vehicle's sale price with the buyer. More importantly, buyers should be informed of the lien release of the vehicle to ensure that no additional burden will be passed on to them.
Motor Vehicle Sales Tax in Colorado
Sales tax is an important consideration when selling a vehicle in Colorado. The state's DOR administers sales tax collection when individuals apply for a title for cars, trucks, and motorcycles.
The state of Colorado imposes a sales tax of 2.9%. However, local sales taxes may apply in addition to the sales tax, and these additional taxes may vary in different counties and municipalities.
On average, the state and local taxes in Colorado, when combined, may yield up to 7.9%. Winterpark has the highest local sales tax rate, at 11.2%, while Cheyenne has the lowest tax rate, at 4.9%.
Individuals may refer to the Colorado Sales Tax Lookup for information on the different tax rates imposed by different counties. They can also refer to the list of tax exemptions stipulated in the regulations of the CO DMV.
Who Pays Sales Tax When Selling a Car Privately in Colorado?
When a car is sold privately in Colorado, the buyer must pay the sales tax. The vehicle's purchase price determines this tax during the registration process at the county motor vehicle office.
Colorado Sales Tax Guide offers buyers a general overview of sales tax regulations, including licensing, collection procedures, filing requirements, tax remittance processes, and recordkeeping obligations mandated by law.
There are cases when purchasers are exempted from the sales tax if and only if they meet the following criteria:
- They are buying a titled second-hand car for less than $20,000 value.
- The vehicle is delivered to a non-resident of Colorado for registration and licensing in another state.
- They own vehicles weighing more than 10,000 lbs that emit low pollution levels.
Buyers should be aware of additional fees associated with vehicle registration in Colorado. These fees cover registration, title, and processing costs.
Sales Tax for Vehicles Sold in Colorado to Residents of Another State
When a Colorado resident purchases a vehicle from another state, they are typically required to pay sales tax during the registration process in their home state. However, if a non-resident of Colorado purchases a vehicle in the state, specific rules apply regarding sales tax.
In Colorado, a vehicle sale is not subject to city, county, or special district sales tax if both of the following conditions are met:
- The buyer is a non-resident of the city, county, or special district where the sale occurs, or their primary business is located outside of that area.
- The vehicle will be registered or is required to be registered outside of the city, county, or special district where the sale takes place.
In such cases, the buyer and seller must complete a Statement of Colorado Sales Tax Exemption For Motor Vehicle Purchase (DR0780). This form confirms that the vehicle will be removed from the state within 30 days of the purchase.
By completing this form, the non-resident buyer can be exempted from paying city, county, or special district sales tax on the vehicle purchased in Colorado. However, they may still be required to pay any applicable sales tax when registering the vehicle in their home state or jurisdiction.
Legal Requirements After Selling a Vehicle in Colorado
Selling a vehicle does not end when the deal is closed. Both parties should be well-informed on the documents needed during and after a successful transaction. This includes complying with the odometer disclosure statement, transferring the title, preparing a bill of sale, removing license plates, and notifying the CO DMV of the sold car.
Odometer Disclosure Statement
The transfer of vehicle ownership involves a record of the Odometer Disclosure Statement. An odometer reading (without decimals) is required for vehicles under 20 years old. Vehicles 20 years old or older no longer need odometer information and buyer signature.
The buyer needs to affix the signature acknowledging the odometer reading. Only one signature is required for multiple buyers. The date of sale and purchase price must be indicated. For vehicles transferred to a family member for free or as a gift, the word " Gift" must be written in the purchase price box.
Transfer of Ownership
Upon finalizing a vehicle sale, sellers are responsible for transferring ownership to the buyer by correctly endorsing the title.
To ensure a smooth transfer at the CO DMV, proper endorsement of the vehicle title is crucial when selling or transferring ownership to another party. Here's a breakdown of the process:
Odometer Disclosure
Vehicles under ten years old must enter the odometer reading (whole numbers only) in the designated area and mark the odometer indicator checkbox.
Vehicles 10 years or older are exempt from odometer disclosure and buyer signatures.
Seller Information
The seller must clearly print the names of all titled owners (from the title's front) in the designated "Seller's" area and have all titled owners sign in the "Seller's Signature" section.
Buyer Information
The buyer's name(s) must be printed in the "Buyer's Hand Printed Name" area. One buyer's signature is required in the "Buyer's Signature" section to acknowledge the odometer reading.
Transaction Details
The "Purchase Date" and "Purchase Price" must be entered in the designated areas. If gifted, write "Gift" in the price section.
After completing the title endorsement, the seller can hand over the certificate of title to the buyer. The buyer can then visit any CO DMV Office to initiate the process of obtaining a new title registered in their name.
Bill of Sale
When selling a vehicle in Colorado, having a bill of sale is recommended for both the buyer and the seller, even though it is not always required. A bill of sale serves as a crucial document that records vital information about the transaction, including the sale price, date of sale, and identification of the parties involved.
In certain cases, a specialized document called the "Motor Vehicle Bill of Sale for Purged Colorado Record" may be necessary. This type of bill of sale is required when the vehicle's information has been "purged" or deleted from the state's records, typically because the vehicle is too old or has been rebuilt and salvaged.
If the vehicle's information is not readily available in the state's records, it may hinder the sale process. In such situations, a specialized bill of sale for a purged record can help overcome this obstacle and facilitate the transaction.
Having a properly drafted bill of sale not only documents the transaction details but also serves as a legal record that can be helpful in case of any disputes or issues that may arise related to the vehicle sale in Colorado.
Removing License Plates
After a Colorado vehicle sale, the seller shall remove the license plates. These remain the seller's property and don't automatically transfer to the new owner. The seller can keep the plates and transfer them to a new vehicle they own.
They can also surrender the plates to the designated motor vehicle service center. This is mandatory in specific situations, such as moving to another state or canceling insurance tied to the plates.
Improperly handling license plates after a sale can lead to legal repercussions, so following this step is crucial.
How To Notify the CO DMV of the Sold Car?
In Colorado, sellers can optionally notify the DMV about the transfer of ownership after selling a vehicle. This notification process helps remove the seller's liability for any actions involving the vehicle after the sale is complete.
As of January 1, 2019, Colorado Senate Bill 18-073 allows sellers to voluntarily notify the DMV within five days of transferring ownership. This can be done online at mydmv.colorado.gov using the "Report Release of Liability" link under vehicle services or in person at a county motor vehicle office.
By providing the required information about the vehicle and the new owner, the seller's notification will be recorded in the DMV's system, and the information will be made available to law enforcement agencies.
This process supplements the existing vehicle sales procedures in Colorado and provides an additional layer of protection for individuals selling their vehicles. It helps ensure that the seller is not held responsible for any incidents or violations involving the vehicle after the sale is finalized and ownership has been transferred to the new buyer.
While this notification is voluntary, sellers should take advantage of it to safeguard themselves from potential legal or financial implications related to the vehicle after the sale. Following this step can provide peace of mind and a clear record of the ownership transfer with the DMV.