In Vermont, buying a vehicle involves navigating various regulations.
Buyers must be aware of the use tax, a state tax imposed on purchases where sales tax has yet to be collected. Other critical considerations include title transfer procedures, emissions testing requirements, and obtaining proper insurance.
In addition to these documents, buyers and sellers must be aware of the Lemon Law, which protects consumers from unfair trade.
The Vermont Department of Motor Vehicles (DMV) usually becomes part of the buying process in the state when involved parties need to verify critical information or buyers register their vehicles.
A basic understanding of the processes and requirements can help a buyer exercise due diligence and comply with state laws. It can also help buyers avoid potential pitfalls and financial losses due to paying fines.
What Is the Process for Buying a Car in Vermont?
Buying a car could be exciting for most buyers, especially for first-time owners. However, before shelling out money for a vehicle, all buyers must know the process and legal requirements.
The steps and legal documents may vary slightly depending on the type of transaction and vehicle. Buyers have two choices: a private sale or through a dealership.
Buying a Vehicle from a Private Seller
First-time buyers might feel overwhelmed because they must complete all the necessary steps and submit legal documents themselves. Regardless, they must still know what to do and how to prepare.
Title Verification
Proof of ownership is important because it assures buyers that the seller can legally dispose of the vehicle. Thus, buyers must verify the authenticity of the title presented to them.
The seller must provide a clear title, and buyers must scrutinize it. The title should contain the seller's name, signature, address, and date of sale.
Buyers with a vehicle identification number (VIN) can check for liens online through the "Search a Vehicle for Liens" service on the myDMV portal. A lien indicates that a financial institution or another party has a legal claim to the vehicle. When verifying, all information must match the generated results from the online check.
Vermont has two general types of lien: loan-related and artisan liens. For loan-related liens, either the seller settles the outstanding balance, or the buyer assumes it. In cases like assumed balances, the lienholder must still agree to this arrangement by adjusting the lien details on the title and adding the new owner.
If the new owner doesn't want to assume, the seller furnishes a copy of the lien release documents duly signed by the lienholder. Buyers should verify the authenticity of these and contact the lienholder if necessary to ensure the documents are legitimate.
Vehicle History Reports
The state is participating in the NMVTIS (National Motor Vehicle Information System), which contains data on vehicle history and conditions, such as brands, odometer readings, and other relevant information.
Brands refer to the descriptive labels "salvaged," "junk," or "damaged." Once this brand data is recorded in the system, it becomes permanently part of the vehicle's record on the system.
Often, sellers provide VHR records to buyers. However, as a precaution, buyers can obtain a separate report and compare it with the ones provided by the seller. Additionally, they should only get this report from accredited NMVTIS providers.
Buyers should avoid free-generated reports because these might contain unreliable and incomplete information. Moreover, they must take additional steps to check the vehicle even if the reports come out clean.
VIN/HIN Validation
The VIN/HIN validation requirement is essential in some circumstances. Validating the VIN/HIN of a vehicle bought is required if any of the following situations arises:
- The title has a brand on it.
- The title is bonded.
- The vehicle is registered in foreign countries, including Canada.
The only method available is an in-person application for a request for validation since a law enforcement officer must sign and attest. Applicants must avoid erasures or tampered details. Otherwise, the Vermont DMV will not accept the form.
A bonded title occurs when an individual cannot obtain a copy of the title after exhausting all options. Only Vermont residents can apply for a "title on bond." Prospective buyers can visit or call the DMV for more details.
Bill of Sale and Odometer Disclosure Statement
A bill of sale and an odometer disclosure statement are essential when buying a vehicle from a private seller in Vermont. They provide proof of purchase, confirm the sale's legality, and disclose the vehicle's mileage, protecting buyers from fraud and complying with state regulations.
A bill of sale contains data on the sale transaction, a vehicle description, and the names of all parties involved. Signatures are important; without them, the sale might be invalid.
Odometer disclosure is mandatory for all vehicles 2011 and newer for 20 years, effective January 1, 2021. It is exempted for 2010 and older models. Incomplete and false information regarding the disclosure could result in fines and imprisonment.
For example, if a vehicle manufactured in 2023 is being sold, the owner must provide an updated odometer reading for 20 years or until 2043. In the year 2044, it's no longer mandatory.
In case of any error in the manufacturer's certificate of origin (MCO), title, disclosure, or bill of sale, the person who needs to correct the error must complete the Title/MCO Alteration Statement form VN-020 and submit it to any DMV offices.
Inspection Record and Emission Tests
Under the Vermont state laws, all registered vehicles must undergo annual inspection.
Inspection and emission test records signify that the seller complies with all state regulations and conditions of the vehicle properly to pass the tests.
While sellers are responsible for providing proof of inspection and emission tests, buyers can take extra precautions. They can request an updated inspection and emission test report before finalizing the purchase. Alternatively, buyers can ask if they can have their preferred mechanic inspect the vehicle.
Transfer of Ownership
Transfer of ownership is crucial when buying a vehicle from a private seller in Vermont. It legally registers the new owner with the state and updates the certificate of title with the buyer's name.
To complete the transfer, the buyer's name should appear in the title's transfer of ownership section. The seller must also sign and clear all liens before the transfer.
If the vehicle doesn't have a title, buyers can use the bill of sale and certificate of registration to request a transfer. This circumstance applies to vehicles 2010 or older.
For multiple owners where one just recently died, new owners can ask for probate documents or a death certificate if the seller forgot to provide it.
Vehicle Registration and License Plate
The buyer's registration is considered new whether the vehicle is new or used. The original or previous registration expires once ownership transfers to another person. However, if the new owner has an existing license plate that has yet to be surrendered and is still valid, they can apply for a transfer.
To effect a plate transfer or apply for new registration, new owners must complete the Vermont Registration Tax & Title Application form VD-119. They can submit the form by mail or in person with the properly endorsed certificate of title, the bill of sale, and the odometer disclosure statement.
Proof of insurance and payment of registration fees and taxes are additional legal requirements for registering the newly acquired vehicle.
Applicants who opted to send their application form by mail can use this address: Vermont DMV, 120 State Street, Montpelier, Vermont, 05603-0001.
Buying from a Dealership in Vermont
One of the advantages of buying a vehicle from a dealership is the streamlined process. Dealers typically handle all the paperwork from title transfer to registration. Moreover, they strictly comply with the legalities, including correct and complete disclosure of odometer readings.
Financing options are also available through dealerships, which allows a buyer to spread out their payments. However, buyers must still exercise due diligence in understanding these options. To guarantee a successful transaction with a dealer, consider the following:
Verify Dealer License
Verifying a dealer's license is crucial when buying a vehicle in Vermont. It confirms the dealer's legal authorization to sell vehicles, protects buyers from potential fraud, and provides recourse in case of disputes.
While Vermont DMV lacks online services for verifying a dealer's license, buyers can still ensure legitimacy by requesting the dealer's license and directly contacting the DMV Enforcement and Safety Division. This division oversees auto dealer licensing within the state, providing a reliable means to verify a dealer's credentials.
Alternatively, buyers should be vigilant when visiting a dealer's place of business. Vermont law mandates that all dealers must display their license to operate, typically in their showroom. Observing this license on display can help buyers confirm the dealer's legitimacy.
Buyer's Guide
All dealers must include a Buyer's Guide attached to one of the vehicle's windows. The guide is a requirement by the Federal Trade Commission (FTC). It must contain important information about the vehicle, such as warranty and as-is phrases.
The guide also includes important reminders about spoken promises, obtaining VHR, and other information buyers may need to make an informed decision. It should also contain any major defects.
Understand Warranties
Before purchasing a car, it's crucial to review the Buyer's Guide to determine if the vehicle has warranty coverage or if a warranty is being sold with it. Knowing the various types of warranties can empower buyers to make informed decisions.
Buyers must be aware of the consequences if there's an "as-is" phrase in the guide. This phrase means that when the vehicle breaks down even just hours after the completion of the sale, the dealer may not fix the problem. Unlike other states, Vermont doesn't have a 3-day right to return or cancel if the vehicle breaks down right after purchase.
Another warranty is the unexpired manufacturer's warranty. Every new vehicle comes with a manufacturer's warranty that expires after a specified mileage or time period. Some newer used vehicles may still have this warranty when resold. To confirm its validity, buyers should check directly with the manufacturer.
Some dealerships may offer a full or limited warranty on a vehicle, typically covering a specific time period or mileage. The details of these warranties vary for each car, so scrutinizing the terms is essential.
Lastly, a service contract or "extended warranty" covers the cost of repairs specified in the contract. Although the dealer usually sells it at the time of the sale, it is issued by a third-party vendor.
Consumer Protection and Lemon Laws
Under Vermont's consumer protection laws, the Lemon Law is an arbitration program for vehicle buyers. It includes provisions for dealing with defective vehicles.
This law applies to brand-new vehicles and certain used vehicles under warranty. If a vehicle has a significant defect, the buyer may be entitled to a replacement or a refund after a reasonable number of attempts to repair the vehicle.
How Does Lemon Law Work?
When a vehicle repeatedly fails to be fixed satisfactorily by the dealer, buyers can file for arbitration using two methods.
The first method, "three times out," requires the initial repair attempt within the warranty period. If the vehicle is unsuccessfully repaired at least three times, buyers can file a complaint.
The second method, "30 days out-of-service," considers any time the vehicle spends at the dealer's location for four hours or more, regardless of active repairs. This period doesn't need to be consecutive.
Eligibility criteria include the defect existing at filing, a vehicle weight rating of 12,000 pounds or less, excluding government-owned and privately owned vehicles, and filing within a year after warranty expiration.
The Vermont DMV is always available for more information about lemon law.
What Are the Fees for Buying a Car in Vermont?
Buying a vehicle in Vermont includes the necessary fees to complete the transaction, whether the vehicle is new or used.
Purchase and Use Tax
Vehicle buyers must pay purchase and use tax as mandated under the Vermont Statutes Chapter 219 of Title 32.
The standard tax rate for vehicle purchases in Vermont is currently 6%. This tax encompasses the vehicle's purchase price along with any associated dealer fees or extra charges. To get a more accurate estimate, buyers can utilize the DMV tax calculator on the myDMV portal. Additionally, online payment options are available for buyer convenience.
Buyers seeking tax exemptions can do so by completing the Certification of Tax Exemption form VT-014 and presenting it to the seller during the purchase.
Exemptions
Buyers may qualify for certain exemptions from sales tax and reduced fees. Who may qualify for exemptions? Here are a few:
- Government and charitable or religious institutions owning vehicles with proper documentation
- Persons who transfer vehicles as gifts to their controlled business entity
- Permanently disabled individuals who buy vehicles with special adaptations
- Individuals paying a similar tax in another state
- Owners who previously registered out-of-state
- Veterans and military personnel
- licensed Vermont rental companies
- Transferors to trusts as part of divorce settlements within one year of finalization
Other Fees
Buyers may encounter additional fees and taxes based on their agreement with the seller. Here are some fees associated with the buying process:
- A $30 title transfer fee is required to officially transfer vehicle ownership.
- For financed arrangements, there's a $14 lien recording fee.
- Requesting a Vehicle History Report (VHR) costs between $25 to $40, depending on the provider.
After the purchase, new owners must register their vehicle, which incurs varying registration fees starting at $91 for a year. Additionally, obtaining two standard license plates costs $29.
Vermont provides incentives for electric vehicle purchases, which may include rebates and reduced registration fees. Buyers should check current state programs for the latest incentives.
Additionally, when trading in a vehicle, the trade-in value can lower the taxable amount for the new vehicle purchase. This reduction can effectively decrease the overall sales tax owed.
What Are the Insurance Requirements for Vehicles in Vermont?
Under the statute, 23 VSA § 800, Vermont mandates that all registered vehicle owners carry financial responsibility insurance. This requirement aims to ensure that drivers can cover the costs of damages or injuries they may cause to others in an accident. The state also requires proof of insurance when registering a vehicle.
Vermont law specifies minimum liability insurance coverage limits as follows:
- Bodily Injury Liability: $25,000 per person and $50,000 for two or more
- Property Damage Liability: $10,000 per accident
- Self-insurance: minimum of $115,000.
These coverage limits are the bare minimum required. Drivers may opt for higher limits for more excellent financial protection. While not required by law, drivers can also purchase additional coverages such as collision, comprehensive, medical payments, and roadside assistance to enhance their protection.
Failure to maintain the required insurance coverage in Vermont may result in paying significant penalties. These penalties may include license suspension and fines, the amount of which depends on the violation committed.
Can a Non-Resident Buy a Car in Vermont?
Non-residents can buy cars in Vermont, although they must fulfill specific requirements. To start, they need to submit form VD-119 to the Vermont DMV. Additionally, they must provide out-of-state identification, proof of address (like a utility bill or lease agreement), insurance coverage, a bill of sale, and odometer readings.
Buying from a dealership can simplify the process, as dealers are familiar with the necessary documentation. However, if purchasing from a private seller, non-residents should ensure they understand and obtain all required documents.
After purchasing the vehicle, non-residents can obtain a temporary registration from the Vermont DMV. This temporary registration allows them to legally drive the car back to their home state. It is typically valid for around 60 days, providing a window to complete the permanent registration process in their home state.