Watch That Last Step: Notify The State When You Change The Car You Own

If you're looking to trade in or sell your current car for a new car, you might think that once the old car is out of your hands, you're done with it. That's not the case. Most states, like California, Oregon, and Texas, require you to notify the proper state agencies that you no longer have the car. This is the case even if you sell it to someone who immediately gets the new registration printed out. No matter the type of disposal—selling, trading in, or donating—you've got to complete this last step. Not doing so could land you in some hot water.

They Have to Find Somebody

If your old car is involved in an accident or other incident, and you have not taken care of this last notification—and thus not formally severed ties with the car—you could be held responsible for anything the car was involved in. If the buyer has already gotten the registration changed over into his or her name, it might seem unlikely that you'd be fingered for something the other driver did, like get a parking ticket. But if the department of motor vehicles in your state, or the police, can't find the buyer, you might get a call because your name would technically still be attached to the car.

You Can Protect Yourself

But if you turn in this form (or take care of the procedure online, which is available in states like California), then you can use that as your defense. Even if the other person forges a registration form with your name on it in hopes of pinning any problems he or she has onto you, you can show that you got rid of the car, and it is not your responsibility.

You usually have at least a few days to take care of this, so you don't have to rush to get it done. But you do want to take care of it quickly to avoid forgetting.

If the buyer or recipient of the car is a dealership, such as when you trade a car in, the dealership might have the form for you at the time you drop off the car. This will vary between states and dealerships. If you don't see anything that looks like it's a form to notify the state that you no longer own the car, ask. The people at the dealership will either point out the form or let you know that you need to take care of it yourself.

If you want to know more about getting rid of your old car and the legal paperwork that goes with it—and if you want to find a new car—talk to dealerships near you to find out the general procedure. Dealerships will try to make the trade-in and switch as painless and as smooth as possible.