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If you’re buying a new or used car, you may find a better deal or more options to choose from in another state. But can you finance a car out of state? While it is possible to purchase and finance a car in another state, the process can be more complicated than buying a vehicle closer to home. Knowing the steps involved, and how to prepare in advance, can make it easier to finance a car out of state. Here’s a guide to how the process works.
Can You Finance a Car Out of State?
If you find a car you really like in a neighboring state, you might have wondered, can I finance a car in another state? The good news is, yes, you can finance a car out of state. However, individual states have different car title and license fees, as well as different tax laws. If you’re financing a car out of state, you’ll need to find out the regulations involved. Check with your state’s Department of Motor Vehicles (DMV).
What You Should Know Before Buying a Car Out of State
If you’re thinking about buying a car in another state, consider these factors:
Sales Tax
Some states like Montana and New Hampshire don’t charge sales tax on vehicles. However, unless you register the car in that state, you can’t take advantage of the savings. You pay sales tax in your home state, where you register the vehicle, not the state where you buy it. For example, if you live in Vermont and buy a car in New Hampshire, you’ll still owe the 6% sales tax charged by Vermont. However, New Hampshire residents pay no taxes on a car they buy in Vermont.
Title and Registration
You need to register the vehicle in your own state. But first you need to get it home. If you’re buying a car from an out-of-state dealership, they’ll typically take care of the title and registration paperwork as part of the transaction. They should give you a temporary registration so you can drive the car back to your state where you can do the vehicle registration. However, if you’re buying a used car from a private seller, you’ll likely need to handle the paperwork yourself. You can apply for a temporary registration at your DMV. Be sure to look up the process ahead of time so you’ll know what’s required.
Safety and Emissions
If your state requires a safety inspection, the out-of-state dealer you’re purchasing the car from should be able to do it. You’ll also have to make sure the car meets your state’s emissions requirements. These requirements vary by state. Look up the emissions regulations in your area. The dealer should be able to do both the testing and inspection for you.
Private Sales
Buying a car from a dealer is the easiest way to purchase a car out of state since they take care of most of the paperwork. However, if you buy a car from another citizen, you’ll need to work with your state’s DMV as well as the DMV in the state where you’re buying the car to ensure you carry out the sale correctly, including the registration and car title process, plus the sales tax. You may also need to take the vehicle to an inspection station for safety and emissions testing, if those are requirements in your state.
How to Finance a Car Out of State
These are the steps to take to finance a car out of state.
1. Do Research
Shop around online to find the car you want to buy. If it’s a used vehicle, look at the car’s vehicle history report, which you should be able to access via the National Motor Vehicle Title Information System using the vehicle identification number (VIN). A vehicle history report could alert you to potential red flags such as past accidents or flood damage to the car. In addition, always try to see a car in person, if possible, and have it inspected by a mechanic before you agree to buy it.
2. Understand the Car’s Value
When financing a car out of state, look up the car’s fair market value in the Kelley Blue Book or Edmunds. When calculating the total cost of the car, be sure to factor in your state’s sales tax plus licensing and registration fees.
3. Contact the Dealer or Seller
Contact the dealership and let them know which car you want to buy. They may be able to put a hold on the vehicle to give you time to get there. If the car is being sold by a private owner, arrange a day and time for you to see and inspect the car.
4. Get Car Insurance
Contact your insurance company and let them know about your plans to buy a car out of state. Then, start the process to take out a policy on your new car (you’ll need insurance before you register the vehicle). Ask your agent if you’ll be covered by insurance while driving your new car home.
5. Get Preapproved for an Auto Loan
Shopping for an auto loan can help you compare and find the best rates and terms for your needs. And getting preapproved for a car loan can help facilitate the sales process when you buy the vehicle. Preapproved car loans give an estimate of the amount you can borrow, along with an estimated interest rate. You can show this information to the dealer when you sit down to negotiate the deal. Later, if interest rates drop, or your credit score improves so that you can qualify for a lower interest rate, you may want to consider an auto loan refinance, which might save you money down the road.
6. Finalize the Transaction
When you reach an agreement with the dealer for a car loan, you can sign all the necessary paperwork to buy the car. The dealer can make any title and temporary registration arrangements for you.Recommended: 7 Tips for Lowering a Car Payment
Pros and Cons of Financing a Car in Another State
There are some advantages and disadvantages to financing a car out of state. Weight the pros and cons before you cross state lines to make your purchase. One benefit is that you might find a better selection of cars in another state, especially if the inventory is limited in your own state. Also, you could save money buying a car elsewhere. Car prices vary by region. You might find the car you’re looking for at a cheaper price in another state. However, there are drawbacks. Buying and financing a car out of state is more complicated. You may need to put in a lot of time doing research to find the right vehicle. In addition, there’s more paperwork to do. A dealer can take care of most of it if you’re buying a new car, but you’ll have to do it yourself if you’re purchasing a vehicle from a private seller.Finally, there might be other costs, such as travel or shipping expenses, that could make the transaction more expensive. Here’s a side-by-side comparison of the pros and cons of financing a car out of state.
Pros
Cons
May have a greater selection of vehicles to choose from
Paperwork and research is more complicated and time consuming when buying out of state.
You may find a cheaper price for a car in another state.
May be more expensive when you factor in travel and shipping costs for the car
The Takeaway
Buying and financing a car out of state can be complicated. But if you can purchase the car for a lower price, it may be worth it. Just be sure to do your research in advance to make sure you’re complying with your home state’s regulations for the car title and registration as well as any taxes involved. Getting preapproved for a car loan could help make the financing process easier and smoother. And in the future, you may want to consider car loan refinancing to get a lower interest rate, which could lower your payments, or a longer loan term. Lantern’s online tool can help you compare the rates and terms from multiple lenders so you can find the auto loan refinance option that’s best for you.
Frequently Asked Questions
Can you finance a car in a different state?
What are the disadvantages of financing a car out of state?
Can you finance a car from another country?
Photo credit: iStock/AleksandarNakic
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About the Author
Austin Kilham
Austin Kilham is a writer and journalist based in Los Angeles. He focuses on personal finance, retirement, business, and health care with an eye toward helping others understand complex topics.
