Can You Sell a Car for 1 in Michigan

Selling a car for $1 in Michigan is legally possible, but it’s not as simple as handing over the keys for a dollar bill. This symbolic sale can be useful for gifting or transferring ownership to family, but it comes with tax implications, title transfer rules, and potential liability concerns. Understanding Michigan’s DMV requirements and sales tax laws is essential before proceeding.

Have you ever thought about giving away your car—but not exactly for free? Maybe you want to pass your old sedan to your college-bound daughter, or help your brother upgrade from his clunker without dealing with dealerships or private buyers. In Michigan, one creative and surprisingly legal option is to sell the car for just $1. Yes, you read that right: one dollar.

At first glance, selling a car for $1 might sound like a loophole or a joke. But in reality, it’s a legitimate way to transfer vehicle ownership under Michigan law. It’s not a scam, and it’s not tax evasion—when done correctly. However, it’s not as simple as slapping a “$1 OBO” sign on the windshield and calling it a day. There are rules, forms, and potential pitfalls that every seller and buyer should understand.

This guide will walk you through everything you need to know about selling a car for $1 in Michigan. From legal requirements and tax implications to paperwork and liability concerns, we’ll cover it all. Whether you’re gifting a car to a family member, helping a friend, or just trying to avoid the hassle of a traditional sale, this method can be a smart move—if you do it right.

Key Takeaways

• Legal Ownership Transfer: You can legally sell a car for $1 in Michigan as long as the title is properly signed and submitted to the Secretary of State.
• No Sales Tax on $1 Sales: Michigan does not charge sales tax on vehicles sold for $1 or less, making it a tax-efficient way to transfer ownership.
• Gift vs. Sale Distinction: The state treats $1 sales as gifts, which may affect future tax filings or inheritance considerations.
• Title and Registration Required: Even for a $1 sale, the buyer must register the vehicle and obtain new license plates within 30 days.
• Liability Risks Remain: Until the title is officially transferred, the seller may still be liable for accidents, tickets, or toll violations.
• Odometer Disclosure Still Applies: Federal law requires accurate odometer reading disclosure, even in a $1 transaction.
• Best for Family Transfers: This method works best when transferring a vehicle between spouses, parents, children, or close relatives.

Is It Legal to Sell a Car for $1 in Michigan?

Yes, it is completely legal to sell a car for $1 in Michigan. The state does not have a minimum sale price requirement for vehicles. As long as both parties agree to the transaction and the proper paperwork is completed, a $1 sale is valid under Michigan law.

The key here is that the transaction must be documented correctly. This means signing over the title, completing a bill of sale, and submitting the necessary forms to the Michigan Secretary of State (SOS). The state recognizes such transactions as legitimate transfers of ownership, even if the sale price is nominal.

However, while the sale itself is legal, the intent behind it matters. If the Michigan Department of Treasury suspects that a $1 sale is being used to avoid taxes or defraud creditors, they may investigate. For example, selling a car for $1 to a friend right before filing for bankruptcy could raise red flags. But for genuine family transfers or gifts, this method is widely accepted and commonly used.

How Michigan Treats $1 Car Sales

Michigan treats a $1 car sale similarly to a gift. The state does not impose sales tax on vehicles sold for $1 or less. This is a significant benefit, as Michigan’s sales tax on vehicles is typically 6%. On a $10,000 car, that’s $600 in tax savings—money that stays in your pocket when you sell for $1.

But here’s the catch: the state still considers this a transfer of ownership, not a donation. That means the buyer must still register the vehicle, get new license plates, and insure it—just like any other purchase. The $1 price is symbolic, not a reflection of the car’s actual value.

When Is a $1 Sale Appropriate?

Selling a car for $1 makes the most sense in specific situations:

– Transferring a vehicle to a spouse, child, parent, or sibling.
– Gifting a car to a close family member who can’t afford to buy one.
– Helping a relative avoid the cost of a used car purchase.
– Simplifying estate planning or inheritance.

It’s less suitable for selling to strangers, friends outside the family, or as a way to quickly offload a problematic vehicle. In those cases, a traditional sale or donation to a charity might be more appropriate.

Step-by-Step Guide to Selling a Car for $1 in Michigan

Selling a car for $1 in Michigan isn’t complicated, but it does require attention to detail. Missing a single form or signature can delay the transfer or cause legal issues down the road. Follow these steps to ensure a smooth transaction.

1. Prepare the Vehicle and Documentation

Before anything else, gather all necessary documents:

– The vehicle’s title (must be signed by the seller).
– A completed Michigan Vehicle Title Application (Form TR-1).
– A bill of sale (optional but recommended).
– Odometer disclosure statement (required for vehicles under 16,000 pounds and less than 10 years old).
– Proof of insurance (for the buyer).
– Valid ID for both buyer and seller.

Make sure the car is in acceptable condition. While you’re not selling it for market value, the buyer will still need to register and insure it, so it should be roadworthy.

2. Complete the Title Transfer

The title is the most important document in any vehicle sale. Here’s how to handle it:

– On the back of the title, the seller must sign in the designated area.
– The buyer must also sign.
– In the “Sale Price” section, write “$1.00” or “1.00.”
– Fill in the buyer’s name, address, and the date of sale.

Do not leave any fields blank. If a section doesn’t apply, write “N/A.”

3. Fill Out Form TR-1

Michigan requires Form TR-1 (Application for Michigan Title) for all vehicle transfers. Both buyer and seller must complete this form. It includes:

– Vehicle identification number (VIN).
– Make, model, and year.
– Odometer reading.
– Sale price ($1).
– Signatures of both parties.

This form is submitted to the Secretary of State when the buyer registers the vehicle.

4. Provide a Bill of Sale (Recommended)

While not legally required, a bill of sale protects both parties. It should include:

– Names and addresses of buyer and seller.
– Vehicle details (VIN, make, model, year).
– Sale price ($1).
– Date of sale.
– Odometer reading.
– Signatures.

You can find free templates online or use the one provided by the Michigan SOS.

5. Handle the Odometer Disclosure

Federal law requires an odometer disclosure for vehicles under 16,000 pounds and less than 10 years old. This must be completed on the title or a separate form. Both parties should verify the mileage is accurate.

If the car is older than 10 years, this step is not required—but it’s still a good idea to document it.

6. Submit Paperwork to the Secretary of State

The buyer is responsible for registering the vehicle within 30 days of purchase. They must:

– Visit a Secretary of State office.
– Bring the signed title, Form TR-1, bill of sale, proof of insurance, and ID.
– Pay registration fees and plate fees (varies by vehicle type and location).
– Receive new license plates and a registration certificate.

The seller should keep copies of all documents for their records.

Tax Implications of a $1 Car Sale in Michigan

One of the biggest advantages of selling a car for $1 in Michigan is the tax benefit. But it’s important to understand exactly how taxes apply—or don’t apply—in this situation.

No Sales Tax on $1 Sales

Michigan does not charge sales tax on vehicles sold for $1 or less. This is because the state considers such transactions to be gifts, not commercial sales. As a result, the buyer does not owe the standard 6% use tax that would normally apply to vehicle purchases.

For example, if you were to sell a $15,000 car for its market value, the buyer would pay $900 in use tax (6% of $15,000). But by selling it for $1, that tax is eliminated.

Gift Tax Considerations

While Michigan doesn’t impose a gift tax, the federal government might. However, the IRS allows individuals to gift up to $18,000 per recipient per year (as of 2024) without triggering gift tax reporting.

Since most cars are worth less than $18,000, a $1 sale typically doesn’t require filing a federal gift tax return (Form 709). But if the car is worth more than $18,000, the seller may need to file the form—even if no tax is owed.

For example, selling a $25,000 luxury car for $1 to your adult child would exceed the annual exclusion. The seller would need to file Form 709, but unless they’ve used up their lifetime exemption ($13.61 million in 2024), no tax would be due.

Inheritance and Estate Planning

Selling a car for $1 can also play a role in estate planning. By transferring ownership before death, you remove the vehicle from your estate, potentially reducing probate costs and delays.

However, this should be done carefully. If the transfer happens within three years of death, the IRS may still count it as part of your estate. Consult an estate attorney if you’re using this method for tax planning.

Liability and Insurance Concerns

Even after selling a car for $1, the seller may still face liability risks if the transfer isn’t completed properly. Understanding these risks is crucial.

Liability Until Title Transfer

In Michigan, the seller remains legally responsible for the vehicle until the title is officially transferred to the buyer. This means:

– If the buyer gets into an accident, the seller’s name is still on the title and could be held liable.
– Parking tickets, toll violations, or emissions fines issued before the transfer may still be the seller’s responsibility.
– Insurance claims could be complicated if the seller’s policy is still active.

To avoid this, the seller should:

– Notify their insurance company immediately after the sale.
– Request a cancellation or transfer of coverage.
– Keep proof of the sale date (bill of sale, title copy).

Insurance Requirements for the Buyer

The buyer must insure the vehicle before driving it. Michigan requires minimum liability coverage:

– $50,000 for injury or death to one person.
– $100,000 for injury or death to more than one person.
– $10,000 for property damage.

The buyer should contact their insurance agent to add the vehicle to their policy or start a new one. Driving without insurance is illegal and can result in fines, license suspension, or vehicle impoundment.

What If the Buyer Doesn’t Register the Car?

If the buyer fails to register the vehicle within 30 days, the seller could still be on the hook for violations. To protect yourself:

– Follow up with the buyer to confirm registration.
– Keep all documentation showing the sale date.
– Consider sending a certified letter confirming the transfer.

In extreme cases, the seller can report the vehicle as sold to the Secretary of State, which helps limit liability.

Common Mistakes to Avoid

Even with the best intentions, people often make errors when selling a car for $1. Here are the most common pitfalls and how to avoid them.

Forgetting to Sign the Title

One of the most frequent mistakes is failing to sign the title. Both buyer and seller must sign in the correct sections. An unsigned title will be rejected by the Secretary of State.

Incorrect Sale Price Entry

Always write “$1.00” or “1.00” in the sale price field. Writing “gift” or “free” can cause confusion and delay processing. The state needs a numerical value for its records.

Not Completing the Odometer Disclosure

If the vehicle is less than 10 years old, odometer disclosure is mandatory. Skipping this step can result in fines or rejection of the title transfer.

Assuming No Paperwork Is Needed

Some people think a $1 sale means no formal process. But Michigan requires the same paperwork as any other sale: title, TR-1 form, and registration. Skipping steps can lead to legal trouble.

Selling to Someone Outside the Family

While legal, selling a car for $1 to a friend or neighbor can raise questions. If the car is later involved in fraud or illegal activity, the seller could be investigated. Stick to family transfers when possible.

Alternatives to a $1 Sale

While selling a car for $1 is a great option in many cases, it’s not the only way to transfer ownership. Consider these alternatives:

Donating to Charity

If you want to help a nonprofit and get a tax deduction, donating your car is a good choice. Organizations like Goodwill or the Salvation Army accept vehicle donations. You’ll receive a receipt for tax purposes, and the charity handles the sale.

Trade-In at a Dealership

If you’re buying a new car, trading in your old one can simplify the process. The dealership handles the title transfer, and you may get a better deal on your new vehicle.

Selling Privately for Market Value

If the car has value, selling it privately can put cash in your pocket. Use platforms like Craigslist, Facebook Marketplace, or Autotrader to find buyers. Just be prepared to handle negotiations, test drives, and paperwork.

Gifting Through a Will

If you prefer to transfer the car after death, include it in your will. This avoids any immediate tax or liability issues but means the vehicle goes through probate.

Final Thoughts: Is a $1 Sale Right for You?

Selling a car for $1 in Michigan is a smart, legal, and tax-efficient way to transfer ownership—especially within families. It saves on sales tax, simplifies the process, and avoids the hassle of finding a buyer.

But it’s not a one-size-fits-all solution. Make sure you understand the paperwork, liability risks, and tax implications. Always complete the title transfer correctly, notify your insurance company, and keep detailed records.

When done right, a $1 car sale is more than just a symbolic gesture—it’s a practical way to help a loved one while staying compliant with Michigan law.

Frequently Asked Questions

Can I legally sell my car for $1 in Michigan?

Yes, you can legally sell a car for $1 in Michigan as long as the title is properly signed and submitted to the Secretary of State. The state recognizes such transactions as valid transfers of ownership.

Do I have to pay sales tax if I sell a car for $1?

No, Michigan does not charge sales tax on vehicles sold for $1 or less. The state treats these transactions as gifts, so the buyer does not owe use tax.

Does the buyer still need to register the car?

Yes, the buyer must register the vehicle within 30 days of purchase, obtain new license plates, and insure it—just like any other vehicle purchase.

Am I still liable after selling the car for $1?

You may be liable until the title is officially transferred. To protect yourself, notify your insurance company immediately and keep proof of the sale.

Do I need a bill of sale for a $1 car sale?

While not legally required, a bill of sale is highly recommended. It protects both parties and provides documentation of the transaction.

Can I sell a car for $1 to anyone, or just family?

You can sell to anyone, but it’s best used for family transfers. Selling to non-relatives could raise questions about intent or tax avoidance.