The 21st century is defined as the era of technological development. With drastic increase in population, automation is becoming the need of the hour in order to make life more comfortable and easy. Due to the advancement and development in the field of automation and embedded system, the notion of smart car has become very popular. Smart cars are modernizing trends in the traditional automobile industry. Companies across the globe have been investing a huge amount of resources on the production and design of smart cars. Every technological development needs to overcome certain obstacles, and hence, in this paper, a design of a collision detection system for smart car using light fidelity (Li-Fi) and ultrasonic sensor on the Arduino platform is proposed. This design consists of an ultrasonic sensor, an Arduino processor, and a Li-Fi circuit. The ultrasonic is used for measurement of distance between vehicles, and Arduino processes the data and makes decisions accordingly. Data transmission between vehicles is ensued using a Li-Fi transmitter circuit and a Li-Fi receiver circuit. The transmitter circuit is mounted on the tail lights of the leading car and the receiver circuit is mounted on the front side of the car that follows. Using visible light communication, the transmitter circuit transmits the calculated speed and the information is received by the receiver circuit of the second car. On the basis of the information received, the speed of the second car is changed in order to avoid collision. In this paper, a system that can detect and thus avoid collision between vehicles and prevent accidents is proposed and studied.