A Bill of Sale form is a written document which releases interest in a vehicle (automobile, motorcycle, trailer, boat, truck, rv, motorhome, etc.) and evidences the transfer of title from the seller to the buyer.
In most states, a bill of sale form is required for the registration of a car or motor vehicle.
It should contain the vehicle's description such as: year, make, model, odometer reading, and VIN number. Also the name, address and the signatures of both the BUYER and the SELLER.
Let's suppose you sell your car to a stranger, which is usually the case. You get the money and sign your name on the vehicle's title, releasing and transferring ownership to the buyer. The buyer drives away and a couple of block later hits a brand new Bentley or any other expensive car. The driver then gets out of the newly purchased vehicle and runs away.
Who do you think the police, insurance company and the owner of the other car will go after? That's right, you guessed it: you. And it will be a huge headache to prove that the vehicle is not yours anymore, even if you have witnesses. Because, without a bill of sale you'll have no evidence documenting the sale, no buyer's name, address, or signature.
A more terrifying what-if scenario involves someone buying your vehicle and hours later it blows up in front of a government building or school. Yes, you sold a car to a terrorist and now all the police in town, the FBI, CIA and the Homeland Security have your house surrounded. You'll eventually be able to prove that you have nothing to do with that, but it will take a while and some of the emotional damage to you and your family could be irreparable.
A bill of sale form could also be helpful to a buyer in case the seller is dishonest and reports the car stolen to the police soon after the sale. The only proof you have that you actually bought the car is the signed title, which the seller could say he left inside the vehicle.
So, don't even think about selling or buying a car without a bill of sale. Ask to see the person's driver's license and write it down the name and number. If possible, the social security number too. Do these simple preventable measures and you should be okay.
It's not absolutely necessary but, to be completely protected, have the document revised and signed by a notary public.
You could use printable bill of sale form samples you'll find online or your local Department of Motor Vehicles (DMV) should be able to provide you with these types of forms for free.
IMPORTANT: Consult with a lawyer if the property being negotiated has a lien on it or has been pledged as security for a loan. In these cases, a release from the party to whom the loan is owed must be obtained.