Can You Finance a Car from Another State?

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

, - May 9, 2019

You can certainly finance a car from another state, but the process is a little more tedious than buying one in your home state. Depending on where you live, and the state you plan on buying the vehicle in, the process of paying tax, title, and license fees can change. If you’re considering buying a car you found in another state, keep reading to find out what you have to do.

How to Buy a Car in Another State

Each state has different tax laws. Some – such as New Hampshire and Montana – have no sales tax on vehicles, while others have flat rates or additional county and city taxes. Before you head to the dealership you want to buy from, make sure you know what your state's taxes are and what the other state’s taxes are to avoid paying extra – aka make sure it’s a reciprocal state.

When states are reciprocal, the dealer can collect sales tax from you and forward them on to your home state. If states are non-reciprocal, they won't be able to do this, but you can have the dealership roll the taxes and fees you owe your state into the loan. The dealer can then give you a check covering those taxes and fees to take to your state's DMV to help you avoid out-of-pocket costs.

For example, if you plan on buying a car in Pennsylvania and taking it back to Ohio (a reciprocal state), two calculations are done:

  1. Calculate the amount of sales tax due in Ohio (home state, 5%). If there’s trade-in credit, the full trade-in allowance is used in this calculation.
  2. Calculate the amount of sales tax in Pennsylvania (6%).

Let’s say you’re purchasing a vehicle worth $10,000, and you get $5,000 for your trade-in. Here are the two calculations you would need to do:

  1. The Ohio tax would be: $10,000 - $5,000 x 0.05 = $250.
  2. The Pennsylvania tax would be: $10,000 - $5,000 x 0.06 = $300.

As for who gets the taxes, you’re going to have to pay the rate charged by your home state (Ohio). In this instance, you pay the Ohio tax rate at the dealership in Pennsylvania. Keep in mind that the Pennsylvania dealer you bought the car from isn’t going to make you pay the difference between their sales tax and rate Ohio charges. If they try to do this, you should walk away from the deal.

On the flip side, if you live in Pennsylvania and buy a vehicle in Ohio, the Ohio dealership is going to collect the Pennsylvania sales tax. So, you aren’t getting a better deal by crossing the state line for a car, unless you can find a much lower selling price for the model you want. If you’re looking for a deal on a new vehicle, check out our best new car deals this month.

The Bottom Line

Buying a vehicle from another state isn’t as easy as it seems. You may feel you’re cheating the system by purchasing a car from a state that has lower taxes, but, in reality, you’re still responsible for paying the difference.

If you’re in the process of searching for a vehicle, you can view our new and used car sections to compare different models. If you have an idea on what you want to purchase, but don’t know where to find a dealer that deals with bad credit, we can help with that, too.

CarsDirect can connect you with a special finance dealership near you. We're partnered with dealers all across the country that specialize in helping people in many types of credit situations get financed. Complete our auto loan request form to get the process started right now!


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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

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