Can I Buy a Car in Another State?

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Automotive Content Editor

Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.

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, Automotive Content Editor - May 21, 2024

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. Buying a car in another state doesn't have to be a hassle though.

If you’re considering buying a car you found in another state, keep reading to find out what you have to do.

What to Consider Before Buying a Car Out of 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 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 the 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.

Tips for Buying a Car from Out of State

Besides differences in license, registration, and tax requirements, there are other complications that can arise when you're purchasing a vehicle across state lines. Below are some tips to help you be as prepared as possible for this arduous process.

  • Get it in Writing – When you're buying a car that's currently on the other side of the country from you, you need to make sure it’s still going to be there after you make the trip. If possible, get a confirmation in writing from the seller or the dealership, but, at the very least, communicate that you're coming and have them confirm the vehicle isn't going to be sold out from under you.
  • Don't Buy Sight Unseen – Getting that confirmation is worth it, but if the seller asks for you to guarantee the purchase financially in order to hold onto it, walk away. There's no reason to put down a large sum of money on a car you haven't been able to see, inspect, and test drive.
  • Get a Vehicle History Report – Before you even consider driving two or more states away to have the vehicle put through the rigors of inspection, make sure you get a vehicle history report. In many cases, this alerts you to any past damage that may have occurred.
  • You May Need an Emissions Test – Make sure you know the specific emissions requirements for where you live. Some states follow the California Air Resources Board (CARB) guidelines, and they're the strictest air quality standards in the country. Some states even have different emissions guidelines in different counties, so get specific when you're researching the regulations.

It's Where You Drive That Matters

The rules that govern your car depend on the state you live in, and those rules can vary greatly from state to state. Think you can save money on purchasing a vehicle in a state without sales tax? Think again. The taxes on your car get collected at your state DMV or secretary of state office when it gets re-titled and registered in your state.

If you’re buying a car out of state from a dealership, you need to know if that state has a reciprocity agreement with your state. If they do, the dealer can collect the appropriate taxes and forward them to your home state. In non-reciprocal states, you can roll the taxes and fees into your loan, so the dealership can give you a check to pay them when you register and title your car (which you have to do). But, no matter if you’re buying from a private seller or a dealer, you have to take care of this yourself, and sometimes the process can be complicated.

States also differ in their license plate laws. In some states, the tags stay with the vehicle when it’s sold. In others, they stay with the seller. In most cases, whether you buy from a dealership or a private party, you need to apply for a temporary in-transit tag that allows you to drive to your home state. To do this, you must visit the local DMV in the seller’s state and you typically need the car title, a valid driver’s license, proof of insurance, and proof of purchase (if you buy from a dealer, they do this for you). In some states, you may need an emissions test before you can be given a temporary tag. The cost of these temporary permits also varies by state.

It pays to really do your homework before jumping into an out-of-state vehicle sale. Rules and regulations can have minor details that turn into major hassles if you're not prepared for them. Make sure you know your state's laws and those of the state you're buying from, so you don't run into any problems purchasing the car or driving it back home.

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 of 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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, Automotive Content Editor

Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.

Follow On: LinkedIn

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