In Hawaii, vehicle selling is governed by specific legal requirements designed to protect buyers and sellers. State law mandates that sellers provide potential buyers with accurate information about the vehicle's condition and history.
The law also requires sellers to provide the buyer with a current safety inspection certificate. If the vehicle is over ten years old, a disclosure statement about the vehicle's condition must be included in the sale agreement.
When transferring ownership, the seller must complete and sign the transfer section on the vehicle's certificate of title. The Hawaii Department of Transportation (DOT) also stipulates that sellers must remove their license plates from the vehicle before finalizing the sale.
Lastly, sellers must report the sale to the county's Department of Motor Vehicles (DMV) within ten days of the transaction. This reporting helps prevent the seller from being held liable for any violations or accidents that may occur after the sale.
Legal Requirements Before Selling a Vehicle in Hawaii
Before selling a vehicle in Hawaii, sellers must comply with the specific legal requirements set by the county's DMV office. Although these requirements can vary by county, the seller generally needs to prepare the following for the buyer:
Endorsed Certificate of Title
The Endorsed Certificate of Title is crucial in selling a vehicle in Hawaii. Sellers must correctly endorse this certificate before transferring ownership.
Typically, the seller must fill in the odometer reading on the front of the title in section A. For vehicles with a lien, the lienholder must complete section B on the back of the title. If the lienholder did not complete section B, a lien satisfaction letter may be submitted instead of the lienholder's endorsement.
The seller must then date, print, and sign their name in the designated area. In cases of joint ownership, both owners are required to complete these steps. While not mandatory, notarization of the seller's signature(s) is recommended as it can prevent potential issues.
Notarization can help avoid rejection due to irregular signatures or facilitate verification when the transfer is recorded in a different county.
If the Certificate of Title is in poor condition, such as being defaced or mutilated, the legal owner(s) must apply for a duplicate title using the appropriate form before proceeding with the sale. Then, the form must be submitted to the relevant county's DMV office.
In the County of Honolulu, the Department of Customer Services (DCS) requires individuals to submit a CS-L(MVR)10 Application for Duplicate Motor Vehicle Certificate of Title to request a duplicate title for a $10 fee.
Meanwhile, the Maui Division of Motor Vehicles & Licensing requires form DMVL580 (which must be notarized) for Maui County residents, with the same fee as for Honolulu. In Hawaii County and Kauai County, all forms are available at the DMV office only.
Last-Issued Certificate of Registration
When selling a vehicle in Hawaii, the Last-Issued Certificate of Registration plays an important role in the transfer process. This document must be provided to the buyer along with the Endorsed Certificate of Title and the State of Hawaii Safety Inspection Certificate.
The Last-Issued Certificate of Registration proves a vehicle's current registration status. It is typically issued by the county's DMV or equivalent agency in Hawaii when a vehicle is registered or when the registration is renewed.
This certificate typically contains essential information about the vehicle, such as:
- The vehicle's identification number (VIN)
- The make, model, and year of the vehicle
- The name and address of the registered owner
- The license plate number
- The expiration date of the registration
The Certificate of Registration is easy to obtain if a private individual owns the vehicle, but additional steps are necessary for vehicles registered to businesses.
A letter of authorization must be on file at the vehicle registration and licensing office, designating the seller as an authorized person to conduct vehicle sales on behalf of the business. This requirement ensures that only properly authorized individuals can transfer ownership of company vehicles.
The nature of the business structure affects the authorization process. In partnerships, all partners must sign the authorization letter. For corporations, a corporate officer's signature is required on the authorization letter.
Safety Inspection Certificate
Another requirement when selling a vehicle in Hawaii is the State of Hawaii Safety Inspection Certificate. Sellers must provide this certificate to the buyer along with other essential documents when transferring vehicle ownership.
The Safety Inspection Certificate verifies that the vehicle has passed a comprehensive examination covering various components crucial for safe operation.
Specifically, it checks the following:
- Vehicle's structural integrity
- Braking system performance
- Drivetrain functionality
- The proper operation of safety features like seat belts and airbags
The importance of this certificate extends beyond mere compliance. It serves as an assurance to the buyer that the vehicle meets Hawaii's safety standards at the time of sale.
By identifying and addressing potential safety hazards, the inspection helps prevent accidents and costly future repairs. Moreover, a current Safety Inspection Certificate is essential for vehicle registration, making it a vital component in the vehicle transfer process and ensuring the new owner can legally operate the vehicle on Hawaii's roads.
Vehicle History Report
When selling a vehicle in Hawaii, providing a comprehensive vehicle history report can significantly enhance the transaction process. This document offers potential buyers valuable insights into the car's background, including its ownership history, past accidents, major repairs, and any manufacturer recalls that may have been issued.
Sellers in Hawaii can utilize the National Motor Vehicle Title Information System (NMVTIS) to obtain such a report. This system connects users with approved data providers who can access detailed vehicle records using the car's unique VIN.
While acquiring the NMVTIS report involves a fee, its information is often considered well worth the investment. The report generally covers five critical areas of the vehicle's history:
- The current title status and when it was last issued
- Any brand history
- The most recent odometer reading
- Records of total loss incidents
- Any salvage history
Selling a Vehicle with a Lien in Hawaii
Selling a vehicle with an outstanding lien in Hawaii has a unique set of challenges and requirements for the seller. A lien indicates that a financial institution or lender has a legal claim on the vehicle until the loan is fully repaid. This situation necessitates additional steps for a lawful and smooth transfer of ownership.
In Hawaii, selling a vehicle with a lien involves addressing the outstanding debt before or during the sale. Sellers typically have several options:
- They can pay off the loan before listing the vehicle, simplifying the sale process, but it may not always be financially feasible.
- They might arrange a transaction where the buyer's payment is used to satisfy the lien and transfer ownership simultaneously.
- Sellers can coordinate with the lienholder to pay off and release the lien at the time of sale.
Transparency is crucial throughout this process. Sellers should inform potential buyers about the lien's existence and be prepared to provide documentation regarding the payoff amount and lien release procedures.
Vehicles with liens in Hawaii require specific documentation. The lienholder must complete Section B on the back of the title, which is their official endorsement indicating that the lien has been satisfied.
However, sellers have an alternative option if the lienholder has not completed Section B. They can submit a lien satisfaction letter instead of the lienholder's endorsement on the title.
Motor Vehicle Sales Tax in Hawaii
In Hawaii, the taxation of motor vehicle transactions is unique as the state does not impose a traditional sales tax. Instead, Hawaii utilizes a use tax system governed by Chapter 238 of the Hawaii Revised Statutes (HRS). This system applies to motor vehicles purchased from unlicensed sellers or imported for personal use in Hawaii.
The use tax is calculated based on the "landed value" of the vehicle. This value includes the purchase price, freight charges, insurance costs, customs duties, and any other charges related to bringing the vehicle to Hawaii.
However, certain deductions are allowed, such as trade-in allowances for vehicles turned over to local dealers, out-of-state license plate fees, and retail sales taxes paid to other jurisdictions if included in the landed value.
The use tax becomes applicable when the vehicle enters Hawaii's taxing jurisdiction. For imported vehicles, this occurs when the vehicle arrives in the state and is no longer considered to be in interstate commerce.
Who Pays Sales Tax When Selling a Car Privately in Hawaii?
In private car sales in Hawaii, the buyer is typically responsible for paying the use tax. When a Hawaii resident purchases a vehicle from a private party, whether the seller is in Hawaii or out-of-state, the buyer must calculate and pay the use tax based on the vehicle's landed value.
The buyer must report this tax to the Hawaii Department of Taxation (DOT) using the Use Tax Return (Form G-26). This form allows for calculating the use tax and provides a method for reporting the transaction to the state.
Note that this tax applies not only to vehicles purchased within Hawaii but also to those imported from other states or countries for use in Hawaii. The buyer must accurately calculate the landed value and any applicable deductions to determine the correct tax amount.
Sales Tax for Vehicles Sold in Hawaii to Residents of Another State
Hawaii's tax system does not explicitly address sales tax for vehicles sold to out-of-state residents. However, the principles of the use tax can guide in these situations.
Generally, if a vehicle is sold in Hawaii but is immediately exported for use in another state, it may not be subject to Hawaii's use tax. However, suppose an out-of-state buyer takes possession of the vehicle in Hawaii and uses it within the state before exporting it. In that case, they may be liable for use tax based on the period of use in Hawaii.
Furthermore, out-of-state buyers should know their home state's tax laws. Many states require residents to pay use tax on vehicles purchased out of state and brought into their jurisdiction, even if tax was paid in the state of purchase.
In all cases, buyers and sellers should consult with tax professionals or the Hawaii DOT for guidance on specific situations, as tax laws can be complex and subject to change.
Legal Requirements After Selling a Vehicle in Hawaii
Sellers in Hawaii must adhere to legal requirements during and after selling a vehicle to avoid liabilities. The necessary steps involve having a signed bill of sale, transferring the title, informing the relevant county's DMV of the sale, removing the license plates, and canceling the auto insurance.
Having a Signed Bill of Sale
In Hawaii, the requirement for a signed bill of sale during a vehicle transaction varies depending on the circumstances. While not mandatory for most private party car sales, having a bill of sale is generally considered a prudent practice. It serves as a transaction record and can legally protect the buyer and seller.
In Honolulu County, a notarized bill of sale becomes required when selling a vehicle that is not titled in the seller's name. For this purpose, the official document is the CS-L(MVR)40 form. However, this step can be legally omitted if the seller's name appears on the vehicle's title.
The seller should retain a copy of a signed bill of sale for their records. This can prevent future disputes or legal issues as it is valuable evidence of the ownership transfer.
Transferring the Title to the New Owner
Transferring the title to the new owner during a vehicle sale in Hawaii involves several crucial steps. The buyer and seller must complete relevant sections on the back of the title, including legal names, addresses, signatures, sale dates, and odometer readings. For joint owners, all parties must sign and date the document.
The process varies slightly depending on the county. On Oahu, Maui, and Kauai, registered owners must complete section A on the front of the title. Hawaii County, on the other hand, has a more stringent verification process. Here, the county authorities will verify the signatures of all sellers involved in the transaction.
Regardless of the county, it is always a good practice for the seller to accompany the buyer when completing the title transfer. This can help avoid potential issues with signature verification and ensure that all required information is accurately provided.
During this process, the seller must provide the new owner with the endorsed certificate of title, current registration, and safety inspection certificate. This process also applies when gifting a car to a relative, with slight modifications for inherited vehicles.
Note that recent changes to odometer disclosure requirements now mandate disclosure for vehicles model year 2011 or newer until 2030 and for vehicles less than 20 years old from 2031 onwards. This update, effective from December 2020, extends the disclosure period beyond the previous 10-year requirement, exempting cars older than 2010.
Notifying the County's DMV of the Sold Car in Hawaii
After selling a vehicle in Hawaii, sellers must notify the county's DMV of the transaction. This process involves submitting a specific Notice of Transfer form, which varies by county. In Honolulu County, sellers use the CS-L (MVR) 53 form, while Maui County requires the DMVL565-2-09 form. Hawaii County and Kauai County have their respective forms.
The Notice of Transfer form requires basic information about the sold vehicle, including the names and addresses of both the buyer and seller and the seller's signature. Sellers must complete and mail this form to the address specified on the document within ten days of the sale date.
This notification is not just a formality but a legal requirement. Failure to submit the Notice of Transfer within the stipulated timeframe can result in a fine of up to $100. By promptly notifying the DMV, sellers protect themselves from potential liabilities associated with the sold vehicle and ensure compliance with Hawaii's vehicle transfer regulations.
Removing the License Plates
After completing the necessary paperwork for a vehicle sale in Hawaii, an essential step for the seller is removing the license plates from the sold vehicle. It is a critical measure to protect the seller from potential liabilities associated with the vehicle after the sale.
By removing the plates, the seller reduces the risk of being held responsible for any violations or infractions committed by the new owner while operating the vehicle. This straightforward yet important action helps to terminate the seller's legal connection to the sold vehicle.
Sellers are advised to retain the removed plates for proper disposal or potential transfer to another vehicle per Hawaii's regulations.
Canceling Insurance
Aside from removing the plates following the completion of a vehicle sale in Hawaii, the seller must also address the matter of insurance coverage promptly.
The seller should contact their insurance provider to cancel the policy associated with that vehicle. This step is crucial to avoid unnecessary expenses, as continuing to pay for insurance on a vehicle no longer owned would be financially imprudent.
Timely cancellation of insurance protects the seller from potential liability for any incidents involving the sold vehicle after the transfer of ownership. It also helps finalize the financial and legal aspects of vehicle ownership.
Sellers are advised to confirm the cancellation with their insurance provider and retain any documentation related to the policy termination for their records.