The sale of vehicles in Maryland is governed by specific regulations outlined in the Maryland Transportation Code, particularly Title 15. Individuals who intend to sell a vehicle in Maryland must acquaint themselves with these legal requirements.
To maintain compliance with these regulations, the Maryland Department of Transportation (DOT) has entrusted the Motor Vehicles Administration (MVA) with managing vehicle-related matters. The MVA establishes and enforces stringent guidelines that vehicle sellers must adhere to.
By following these regulations, sellers protect their interests and promote a fair and compliant transaction for both themselves and the buyers. Doing so fosters trust and confidence among potential buyers, allowing sellers to navigate the selling process smoothly and achieve successful outcomes.
Legal Requirements Before Selling a Vehicle in Maryland
Before selling a vehicle in Maryland, sellers must fulfill several legal requirements. These requirements can include the following:
Duplicate Title
Before selling a vehicle in Maryland, the seller must possess the official title of the vehicle. The seller must acquire a duplicate title issued in their name if the original title has been lost, damaged, or stolen. This duplicate title will then be transferred to the buyer during selling.
To get the duplicate title, the seller can apply in these ways:
- Online through the myMVA Services portal
- Through an MVA Self-Service Kiosk at any MVA branch office
- Through MVA-approved tag and title service using the Dealer Provider Lookup tool of the myMVA Services portal
Note that when applying for a duplicate at any MVA branch office or by mail, the seller must complete the Application for Duplicate Certificate of Title (VR-018) form and pay the $20 duplication fee. The seller must submit the form with their valid driver's license or state-issued ID. They will receive their duplicate title via mail in 7-10 business days.
If applying by mail, the seller must enclose the documents in an envelope and send it to:
Motor Vehicle Administration
6601 Ritchie Highway N.E.
Glen Burnie, MD 21062
Note that if someone else requests the duplicate on behalf of the owner, the person must include a notarized Power of Attorney (VR-470) in their mail to the MVA.
For further questions, sellers can contact the MVA Customer Service hotline at 1-410-768-7000.
VIN Check
Usually, buyers conduct a VIN (vehicle identification number) check on the vehicles they purchase. However, sellers can do it, too, for the vehicles they are selling.
Maryland doesn't have a dedicated online service for conducting a VIN Check. Instead, sellers can access the free tools provided by the National Highway Traffic Safety Administration (NHTSA) and the National Insurance Crime Bureau (NICB):
- NHTSA's VIN Decoder
- NICB's VINCheck Lookup Tool
These two online tools may help sellers identify any details about the vehicle, including any theft records, title status (clean, salvage, rebuilt), accident and damage history, and more.
Note that manufacturers report the information in NHTSA's VIN Decoder tool. On the other hand, the information in NICB's VINCheck Lookup Tool is from its member insurance providers.
Vehicle History Report
Obtaining a vehicle history report for a vehicle in Maryland is an important step in the car-buying process. This report provides valuable information about the vehicle's past, helping buyers make informed decisions. Sellers can get the report as added documentation for the vehicle they are selling. Getting the report also helps promote transparency to the buyer.
For accuracy and legality, sellers must only acquire these reports from data providers approved by the National Motor Vehicle Title Information System (NMVTIS).
These vehicle history reports include essential details about the vehicle, such as:
- Vehicle title information, including current status and past ownership transfers
- Date of the most recent title issuance
- Official brands, designations, or remarks related to the vehicle's title history, such as "salvage" or "rebuilt"
- Odometer reading, indicating the vehicle's mileage over time
- Document any instances where the vehicle was declared a total loss or salvage due to significant damage or other circumstances
Vehicle Inspection
All used cars that are titled and registered in Maryland are required to undergo a safety inspection. Licensed Maryland inspection stations, such as dealers, specialized service centers, or service stations, must conduct these inspections.
Vehicle owners can utilize the Maryland State Police (MSP) e-Inspection Search & Station Locatorservice to locate an appropriate inspection station.
In Maryland, sellers are responsible for inspecting their vehicles and obtaining the inspection certificate. The seller can access the MSP's Safety Inspection System to initiate the inspection. Sellers must ensure that the VIN specified on the certificate matches the VIN of the registered car.
The new vehicle owners (buyers) can then use the Safety Inspection Certificate issued by the MSP when registering the newly purchased vehicle in their name. This certificate is valid for 90 days.
Selling a Vehicle with a Lien in Maryland
When a vehicle has a lien, the lender or lienholder has a legal right to the vehicle until the loan is fully paid off. To sell the vehicle, sellers must address the lien so the buyer receives a clear title. Here are the steps involved in selling a vehicle with a lien:
Determine the Payoff Amount
To obtain a clear title and fully satisfy the lien on a vehicle, the seller should contact the lienholder to determine the precise payoff amount for the loan. This amount represents the total sum required to settle the outstanding loan balance and remove the lien from the vehicle's title.
Inform the Buyer
Sellers should openly communicate with the buyer about any existing lien on the vehicle. Sellers should clearly explain to buyers that the sale will involve paying off the outstanding loan to release the lien and successfully transfer the title. Doing so maintains transparency and fosters trust with potential buyers.
Pay off the Lien
When selling a vehicle with an existing lien, the seller must address the outstanding amount owed to the lienholder. The seller should carefully compare the lien payoff amount provided by the lienholder with the anticipated selling price of the vehicle. If the payoff is lower than the selling price, the seller can request a lien release letter from the lienholder.
This lien release letter serves as confirmation that the lienholder will remove the lien once the payoff amount is received. With this document in hand, the seller can use the proceeds from the vehicle sale to pay off the lienholder.
However, if the payoff exceeds the vehicle's selling price, the seller will need to cover the difference out-of-pocket and pay it to the lienholder. Once the lienholder receives the full payoff amount, they will release the lien, allowing the seller to legally transfer ownership of the vehicle to the buyer during the sale process.
The seller must confirm that all outstanding liens are cleared before proceeding with the transfer of ownership. This step is necessary for a legal and compliant transaction for both the seller and the buyer.
Obtain Lien Release
Once the seller has paid the full lien payoff amount to the lienholder, the lienholder will relinquish their legal interest and claim over the vehicle. At this point, the lienholder will return the original title document to the seller.
However, before the title can be fully transferred, the seller and the lienholder must complete and sign the Security Interest Filing Statement (VR-217)form. The seller must also pay the $20 filing fee.
If a vehicle's title indicates the presence of an existing lien, it is necessary to provide proof of its release. In the case of Maryland-titled vehicles, a completed Form VR-217 or an official letter from the lienholder confirming the release of the lien can serve as valid documentation. A release letter or the lienholder's signature on the title will be sufficient for out-of-state titles.
Sometimes, the seller may not have the title as the lienholder is out of state. In such cases, the MVA can issue an Out-of-State Lienholder Letter (VR-056) to the owner. The seller must give this form to the lienholder to request that the out-of-state title of the vehicle be sent directly to the MVA by the lienholder.
Get a Duplicate Title
The seller must obtain a duplicate title after receiving the original title from the lienholder. For more information on how to get a duplicate title, check the "Duplicate Title" section of this guide.
Motor Vehicle Sales Tax in Maryland
In Maryland, the standard motor vehicle sales tax rate is 6% of either the purchase price or the vehicle's fair market value, depending on which amount is higher. However, for seven-year-old or older vehicles, the tax rate can be determined based on the book value of the vehicle if it is lower than the purchase price.
If buyers purchase a vehicle from a licensed Maryland dealer, they will pay the sales tax along with the purchase price to the dealer. On the other hand, if they choose to buy from a private seller, they must pay the sales tax when registering the vehicle in their name after the purchase.
Having a clear understanding of Maryland's motor vehicle sales tax allows potential buyers to calculate the total cost of their purchase and plan their budget. It helps buyers make informed decisions and be prepared for the financial obligations associated with their vehicle purchase.
Tax Credit
If a Maryland citizen buys a vehicle out of State, they may be required to pay a use tax of 6%. However, suppose they meet the eligibility criteria for the tax credit by titling their vehicle in Maryland within 60 days of establishing residency. In that case, vehicles from states with a tax rate equal to or higher than Maryland's 6% tax rate will incur a flat fee of $100.
For vehicles originating from states with a tax rate lower than Maryland's 6%, the tax will be calculated as the difference between the two tax rates. For instance, if Maryland's tax rate is 6% and Maine's is 5.5%, the owner will pay the 0.5% difference. However, if the other state doesn't impose a sales tax like Alaska, the owner will pay the 6% Maryland tax rate.
For information, sellers can check the State Tax Rate Chart.
Legal Requirements After Selling a Vehicle in Maryland
To facilitate a seamless and legally compliant transfer of ownership when selling a vehicle in Maryland, sellers must fulfill certain obligations and carefully adhere to the prescribed transaction process. This process encompasses several vital steps and includes the following key components:
Bill of Sale
Sellers must provide the buyer with a comprehensive MVA Bill of Sale (VR-181) under these conditions:
- The vehicle must be newer than seven years old.
- The vehicle's sale price should be at least $500 lower than the book value.
- The buyer explicitly desires the excise tax calculation to be based on 6% of the sale price rather than the book value.
The bill of sale records the details of the transaction, such as:
- Names of the seller and buyer
- The vehicle's final purchase price
- Vehicle details, such as year, make, model, body type, and color
- The vehicle's VIN
- The odometer disclosure statement
- Signatures of seller and buyer
Report the Sale to the Maryland BMV
Upon completing a vehicle sale, the licensed dealers usually report the sale to the MVA since they collected the sales tax during the transaction. The sales tax is usually indicated in the Application for Certificate of Title (VR-005) form.
The dealer typically handles the vehicle titling and registration. They will just submit Form VR-005 and other necessary documents to the MVA. The buyer then receives their title and other registration documents by mail.
However, if the seller is a private individual, they don't have to report the sale to the MVA as they don't collect the sales tax from buyers. The buyer will pay the sales tax they are due directly to any MVA office during vehicle registration.
Title Transfer
The seller must promote a smooth transfer of the vehicle's title to the buyer by following the instructions specified in the title document. In cases where the vehicle had an existing lien at the time of sale, the seller has an additional responsibility. They must furnish the buyer with the necessary lien release documentation from the lienholder.
The lien release document indicates that the seller has satisfied the outstanding lien by paying off the remaining balance. It signifies that the lienholder no longer claims rights or ownership over the vehicle. By providing the buyer with this document, the seller guarantees that the buyer can proceed with the registration and ownership transfer without issues.
Return License Plate
Sellers must remove their license plates and registration certificates from the vehicle before handing the keys to the buyer. These items must be returned to the Maryland MVA to complete the necessary documentation.
Returning the license plates to the MVA is a straightforward process. Sellers are not required to pay fees when returning their license plates directly to the MVA. However, sellers can return the plates to any MVA-authorized tag and title service with a fee for this service.
Cancel Vehicle Insurance
Maryland's legislation takes a firm stance on uninsured motorists, imposing strict fines starting at $150 for the initial 30-day period when a vehicle remains uninsured. Afterward, a daily fine of $7 is levied.
Sellers should promptly reach out to their auto insurance provider and provide them with the necessary information regarding the sale of the vehicle. The insurance company may require specific details such as the date of sale, buyer information, and any other information.
The seller must request the cancellation of insurance coverage for the sold vehicle, specifying the effective cancellation date as the sale transaction date. As the seller no longer retains ownership of the sold vehicle, they must update their insurance policy accordingly. It entails the complete removal of the sold vehicle from the policy coverage.
If the seller possesses other insured vehicles, the policy coverage and premiums should be adjusted solely based on those remaining vehicles.
Prompt insurance cancellation allows the buyer to put their newly purchased vehicle under their insurance coverage to avoid penalties.