Practice question

What is necessary for a dealer to do before a buyer's vehicle can be sold?

  1. Notify the buyer
  2. Obtain the title
  3. Receive financing approval
  4. File a notice with the IRS

Answer: B — Obtain the title

The essential step is obtaining the title because the certificate of title is the official proof of who owns the vehicle and is the document used to transfer ownership to the new buyer. A dealer can’t legally complete a sale or issue a new title to the buyer without the title in hand, since the transfer of ownership on the paperwork must be signed over by the current owner and any lien holder must be accounted for. If there’s a loan on the vehicle, the dealer needs to arrange payoff or a lien release before the title can be transferred. Without the title, the buyer cannot register the vehicle, and the sale would not be legitimate. Notifying the buyer, financing approval, or filing with the IRS aren’t requirements for the act of selling itself.

Practice more: Colorado Motor Vehicle Dealer Practice Test →