Selling a vehicle in Arkansas is subject to the regulations outlined in the Arkansas Code Title 27 Chapter 14. Sellers must familiarize themselves with these legal requirements to comply with state laws and safeguard the interests of both the seller and the buyer.
To guarantee sellers' compliance with these regulations, the Arkansas Department of Finance and Administration (DFA) delegated the management of vehicle-related matters to the Office of Motor Vehicle (OMV). The DFA and OMV set strict guidelines for vehicle sellers.
Consequently, these guidelines protect the sellers' interests and help establish trust with potential buyers. Therefore, it is imperative for anyone selling a vehicle in Arkansas to be well-informed about these state regulations to navigate the selling process successfully.
Legal Requirements Before Selling a Vehicle in Arkansas
Before selling a vehicle in Arkansas, sellers must meet several legal requirements. These include:
Replacement Title
Before facilitating the sale of a vehicle in Arkansas, the seller must possess the official vehicle title. If the title has been misplaced, destroyed, or stolen, the seller must procure a replacement title issued in their name and subsequently transfer that to the buyer. The seller should take note of the following crucial points:
Obtain the Last Titled Owner's Signature
To apply for the replacement title, the vehicle owner must complete the Application for Title or Replacement Title. The last titled owner(s) of record must sign the application form. If the vehicle is jointly owned, with names connected by "and," both owners must sign. If connected by "or," either owner may sign.
Lienholder Involvement
If a lien is still in effect, the holder can complete and sign the Official Release of Lien or Permission to Issue Replacement Title. In this case, the title will be mailed to the lien holder.
Lien Release
A lien release is required if the customer states that a recorded lien has been released. A notification will be sent to the lien holder, giving them ten (10) business days to respond if the lien release is deemed invalid.
If the lien holder doesn't respond within ten (10) business days or if they don't confirm the validity of the lien release, the title will be printed and provided to the owner. However, if the lien holder disputes the lien release, the duplicate title will be mailed to them.
Vehicle Identification
In addition to the above requirements, the applicant must provide identification information for the vehicle, such as a vehicle registration certificate, license plate number, title number, or vehicle identification number (VIN).
Payment and Application Submission
The cost for a replacement title is $10, payable to the Department of Finance and Administration. Arkansas residents can apply at any State Revenue Office.
Out-of-state applicants can apply in person or by mail, using a downloaded application form, or by requesting one at 1-501-682-7076. The completed application, along with the payment, copies of the vehicle registration, and applicable lien releases, should be mailed to:
Department of Finance and Administration
Special License Unit
P.O. Box 1272
Little Rock, AR 72203
Sellers must allow a minimum of three weeks to process the replacement title.
VIN Check
While buyers typically conduct a VIN check on vehicles they intend to purchase, sellers can also perform this to streamline the selling process. The seller can obtain relevant information about the vehicle's VIN through the Arkansas Title, Registration, and Lien Record Search.
This online service offered by the Arkansas DFA enables individuals or businesses to search for vehicle registration details, title information, and lien records. Users can access this service via the DFA website and input a VIN or title number to retrieve the corresponding information.
Sellers can use this service to access crucial data about the vehicle they are selling. They can provide this data to the buyers to make the selling process easier. However, sellers must note that online title, registration, and lien searches are limited to motor vehicles only. If sellers need records for boats or RVs, they must visit their local Revenue Office in person.
Aside from Arkansas' dedicated Record Search facility, sellers can also use the free VINCheck Service provided by the National Insurance Crime Bureau (NICB). This service covers identifying any major "brands" or titles, liens, thefts, or other ownership issues tied to the VIN.
Vehicle History Report
While buyers commonly obtain a vehicle history report for the vehicles they intend to purchase, sellers can also acquire such reports to streamline the selling process. The seller can procure a comprehensive vehicle history report on the vehicle they are selling.
The seller can obtain this vehicle history report through the National Motor Vehicle Title Information System (NMVTIS). However, sellers should only acquire these reports from NMVTIS-approved data providers.
These reports contain crucial details about the vehicle, including:
- Title information
- The most recent date of title issuance
- Any brands or designations affixed to the vehicle title throughout its history
- Odometer reading
- Records of any instances where the vehicle was declared a total loss or has previously held a salvage title
Emissions Inspection
Arkansas doesn't require any emission inspection for the vehicles sold. However, sellers can still provide this as an additional service for buyers. Buyers can also opt to arrange for the inspection themselves.
Selling a Vehicle with a Lien in Arkansas
Selling a vehicle with a lien in Arkansas requires specific steps for a legal and smooth transaction. However, generally, sellers follow these steps:
Contact the Lienholder
The seller must reach out to the lender or lienholder listed on their vehicle's title to obtain the payoff amount necessary to remove the lien. Additionally, the seller should inquire with the lender or lienholder about their specific requirements for transferring the title when there is an existing lien on the vehicle.
Releasing/Removing a Lien
When a lien is on the title, the lienholder must release their interest in the vehicle before it can be sold. It can be done by paying off the car or obtaining a lien release from the lienholder. Here is the general process:
Pay off the Vehicle
When selling a vehicle with an existing lien, the seller must settle the outstanding lien amount with the lienholder. The seller can compare the lien payoff amount against the vehicle's selling price. If the payoff is lower than the selling price, the seller can request a lien release letter from the lienholder.
This letter confirms that the lien will be removed once the payoff amount is received. The seller can then use the proceeds from the vehicle sale to pay the lienholder the payoff amount, after which the lienholder will release the lien and provide the necessary documentation to the DMV.
However, if the payoff exceeds the vehicle's selling price, the seller must cover the out-of-pocket difference to the lienholder. Upon full payment, the lienholder will release the lien, allowing the seller to transfer the title to the buyer.
Clearing all liens is mandatory before the seller can legally transfer ownership of the vehicle during the sale process.
Obtain Lien Release
After the seller has made the full lien payoff amount to the lienholder, the lienholder will relinquish their legal interest in the vehicle and return the original title document to the seller. Obtaining the original title from the lienholder is crucial, as it serves as proof that the lien has been satisfied and removed.
Get a Replacement Title
Upon obtaining the title, the seller is required to visit any Arkansas State Revenue Office to initiate the replacement title process. Alongside the application, the seller must furnish the necessary documents, including the lien release document, vehicle registration, title number, or VIN. The seller must also pay a fee of $10.
For more information, review the "Replacement Title" section of this guide. Sellers can also seek assistance from the Arkansas DFA.
Motor Vehicle Sales Tax in Arkansas
In Arkansas, all motor vehicle sales are subject to a tax rate of 6.5%. However, the total tax cost can vary depending on additional county and municipal taxes, which can add up to 5% to the overall tax amount. On average, the car sales tax rate in Arkansas comes to approximately 9.133%.
Arkansas is among the top ten states with the highest car sales tax rates, with a fixed rate of 6.5%. This rate applies to both new and used vehicles. In addition to the state tax, county, and local sales taxes also contribute to the overall tax rate. Among the counties in Arkansas, Lincoln County has the highest tax rate at 11.5%, while Carroll County has the lowest rate at 7%.
It's worth noting that starting from January 2022, there has been a decrease in the sales tax rate for trailers, used cars, and semi-trailers priced between $4,000 and $10,000. The new tax rate for these vehicles is now 3.5%.
Understanding the motor vehicle sales tax rates in Arkansas is essential when purchasing a vehicle, as it helps buyers calculate the total cost of their purchase and plan their budget accordingly.
Private Party Vehicles Sales
In private-party vehicle sales between individuals, the buyer typically bears the responsibility of paying any required local sales taxes. The seller is not obligated to collect or remit sales tax for such transactions. Instead, the tax is payable at the time of vehicle registration.
It is the buyer's duty to properly report the vehicle purchase and pay the applicable sales tax. Buyers should contact their local revenue office for information on how much sales tax they'll have to pay. Buyers can also access the DFA's sales tax calculator to get an estimate.
Out-of-State Vehicle Sales
If an Arkansas citizen buys a vehicle out of state, they are not required to pay Arkansas sales tax. However, they may still need to pay use tax on the vehicle.
Arkansas has a use tax law that requires the purchase of tangible personal property, including vehicles, to be taxed at 6.5% if the vendor doesn't collect the tax. This applies even if the purchase was made outside of Arkansas as long as the vehicle is stored, used, or consumed in the state.
Additionally, the buyer is required to remit the city and/or county tax for the location where the vehicle was first delivered in Arkansas. A list of these tax rates for cities and counties can be obtained from the "Cities and Counties Tax Rates" page of the official Arkansas DFA website.
If the buyer has legally paid sales tax in another state, they could be entitled to a tax credit for the amount paid to the other state against the tax due in Arkansas. For the credit, the buyer can accomplish the Claim for Sales or Use Tax Refund Credit for the Sale of a Used Vehicle. However, if the buyer paid less than Arkansas' tax rate, they must pay Arkansas the difference.
Legal Requirements After Selling a Vehicle in Arkansas
When selling a vehicle in Arkansas, sellers must comply with legal obligations throughout and follow the transaction process for a smooth ownership transfer. The required steps involve providing a bill of sale, notifying the Arkansas DFA about the vehicle sale, properly transferring the title to the new owner, and appropriately handling the license plates.
Bill of Sale
Complete the Bill of Sale for the vehicle sale. This document serves as legal proof of ownership transfer and includes the odometer disclosure statement. It must include the following information:
- VIN
- Buyer's information
- Dealer/seller information
- Purchase date
- Description of vehicle sold
- Odometer disclosure
- Sales price information
- Warning statement
Report the Sale to the Arkansas DFA
Arkansas law mandates that vehicle sellers must report the sale to the DFA within 30 days of the transaction date. To comply, sellers must submit the Bill of Sale documentation and the Notice of Transfer of Ownership form. These documents can be submitted either in person at a DFA tag agency office or by mail to the following address:
Department of Finance & Administration
Office of Motor Vehicle, P.O. Box 1272
Records Unit, Room 1100
Little Rock, AR 72203
The seller can also fill out the online Release of Liability form at the MyDMV portal on the Arkansas DFA website.
Title Transfer
The seller must properly transfer the vehicle's title to the buyer in accordance with the instructions provided on the title document itself. If there was an existing lien on the vehicle, the seller should provide the lien release documentation obtained from the lienholder upon satisfying the lien payoff amount.
License Plate Removal
In Arkansas, sellers are required to remove the license plates from the vehicle before transferring ownership to the buyer. Leaving the plates on the sold vehicle can make the seller liable for any violations, tolls, tickets, or crimes committed by the new owner while those plates are still registered to them.
Cancel Vehicle Registration and Insurance
After reporting the sale of the vehicle to the Arkansas DFA, finalizing the transfer, and removing the license plates, the seller has a few more important steps to complete:
Notify Insurance Provider
The seller should contact their auto insurance company and inform them that they have sold the vehicle. Specific details, such as the sale date, buyer information, etc., may be required.
Cancel Vehicle Insurance
The seller will need to request cancellation of the insurance coverage for the sold vehicle, specifying the effective cancellation date as the date of the sale transaction.
Update Insurance Policy
Since the seller no longer owns the sold vehicle, they must update their insurance policy accordingly. This involves completely removing the sold vehicle from the policy. If the seller has any remaining insured vehicles, their policy coverage and premiums should be adjusted based on just those vehicles.