Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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The lowdown...

  • Vehicle owners who sell their cars on the private market usually get more than they would for a trade
  • It’s important for sellers to disclose any issues that the vehicle has when you’re a vehicle seller
  • If someone test drives your vehicle and hits someone, you can be held liable for the damages as the owner
  • You must inform a buyer when the car is not insured and they want to test drive the vehicle
  • You can sell the vehicle without insurance as long as the vehicle doesn’t have a valid registration

Selling a vehicle can be a chore. It takes time to choose what channel you want to market the vehicle on, how much you want to sell the vehicle for, and when you want to set up sales appointments.

After answering questions and meeting with a potential buyer, you’ll finally get to decide if you want to accept an offer sometimes weeks after the car was listed.

While it does require some effort on your part, when you sell your car on the private market you’ll likely get more than you would from a dealer.

Make sure to have coverage lined up for your new vehicle. enter your zip code above to compare rates of top insurers.

If you’d rather spend the time to sell the car for more, make sure you understand your rights and obligations as a private party seller. Here’s what you should know about insuring the car that you have for sale:

Know Your Obligations As a Private Seller

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Selling a car is a process. If you do your homework and you take all of the appropriate steps, the process will go smoothly.

One of the first things you must do before you even list your car for sale or put a for sale sign in your window is familiarize yourself with car sales laws. If you don’t take the time to do this, you could be in for a bumpy ride.

All sellers are expected to be upfront and honest with potential buyers. All of the information in the listing needs to be true and you must be forthcoming with additional information when you’re asked for additional details.

It’s your duty to tell the buyer if the car has cosmetic or mechanical defects. You should also tell the buyer if fees are owed or if there’s a lien on the car.

It’s important that you keep a paper trailer. Print out the listing, hold onto written communications, and protect yourself so that you can show you disclosed any issues the vehicle may have if the buyer tries to sue after the transaction is over.

Also, be prepared with the following:

  • Copy the bill of sale
  • invoices for the car
  • always be prepared for the worst-case scenario

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Know Your Legal Liabilities During a Test Drive

A vehicle registration defines who’s legally responsible for damages when the registered car is involved in an accident.

To legally sell a vehicle, you have to be the legal owner of the car. Since that’s a requirement to sign a bill of sale, you must also acknowledge your legal liabilities before the bill of sale is signed.

Anytime a car is in your name you’re the legal party that parties can come after if the vehicle is in an accident. If you allow anyone from a friend to a stranger to drive your car, you need to consider the liabilities that will arise.

When a potential buyer test drives your car, an accident could be financially damaging. The victims who suffer damages or bodily injury in the test drive crash have the right to sue you.

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If Your Car is Uninsured, Tell the Buyer

It’s only natural for buyers to be interested in test driving cars before they make any serious offers. Any expert who gives buyers tips on how to choose a reliable car will tell their clients to test the car and take it to their mechanic.

Unfortunately, for your own protection as a seller, you can’t let your uninsured car be test driven.

If you tell the buyer that the car is uninsured and they still want to take the risk, think twice before taking the bait. As soon as an accident happens, the buyer could rush to say that they weren’t informed.

Even if the buyer admits they knew the car was uninsured, you are still liable for damages up until the moment that a bill of sale is signed.

If you have a lot of property and you’re looking for a loophole, one option would be to let the prospective buyer test drive the vehicle on your private property only. Vehicles must be insured to be driven on public roads only.

You still need to disclose the car is uninsured if you choose this alternative.

You Always Need Insurance on a Registered Vehicle

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Now that you know your liabilities, it’s time to move on to the laws. By law, it’s the registered owner’s obligation to comply with mandatory auto insurance laws that have been enacted in the state. Not all cars need to be insured.

If you own a car that’s doesn’t have a traditional registration, you don’t need to insure it to avoid penalties.

Typically, if you’re selling a car that’s not running or you sell a car that you’ve had in storage, the vehicle will be filed as Planned Non-Operable. This is a special DMV filing that notifies the agency that you possess the vehicle but that it’s not being driven.

Since there’s no risk of an accident when a car is not being operated, there’s an insurance exception. If you take all of the proper steps to file your car as parked and you tell the buyer that it can’t be driven, you don’t need any insurance to sell your car.

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What are the penalties if there’s no accident?

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If you take the risk and let someone test drive your registered vehicle without having an accident, you’re not out of the woods. You can still be penalized even after the car is sold if you’re audited by the DMV to show proof of insurance.

The last thing that you want to do is pay hefty fines.

In most scenarios, you need to have insurance when you’re selling a car. Make sure that you release liability by filling out a notice once the ownership transfers. If you don’t have even basic insurance, get coverage now.

Use our online quoting tool and you can instantly find the lowest rate for short-term coverage on the vehicle.