If you’ve found a car out of state that you want to buy or if you’re thinking about shopping for one, you might have a few questions. What taxes do you pay, and to which state? What about emission requirements, loan approvals or getting the car shipped to you?
To help you know what goes on behind the thick curtain of car buying and the government, we will go over the basics of how to buy a car out of state and what you should look for.
Why buy a car in another state?
Why even attempt this feat in the first place? The short answer is that buying a car out of state could be the best way to get what you want and a good deal.
Dealer incentives. You might live close to a state border. A dealership right over the line could have great customer incentives that dealers in your state don’t have, like two years of free maintenance or a lifetime powertrain warranty.
Rebates. Car manufacturers establish rebates based on supply and demand in different markets, so different places will have different rebates. It might be that in your state, the car you want doesn’t have any rebates, but a couple states over has $4,000 worth of rebates on it.
Online shopping. You could have found the car you wanted online, either from a site like Carvana or from a private seller who offered the best deal. Only after you fell in love with the car did you realize it was in another state. You can look here for tips on how to buy a car online.
What to know before buying a car out of state
Here are some things to keep in mind, all of which will affect the bottom line of what you’ll pay. If budget is a concern for you, check out our story on how much car you can afford.
Car taxes depend on where you will register the car, not where you buy the car. You register the car based on your residential address. So you’re in luck if you live in a sales tax-free state and find your one-true-love of a vehicle outside state lines. On the other hand, if you live in California and you’re thinking of buying a car in Alaska to skip out on sales tax, you’re out of luck. You’ll still have to pay California sales tax.
Your tax rate is also dependent on your city and county, too. Pennsylvania charges a 6% sales tax, but Philadelphia County charges 2% on top that for an effective rate of 8%. You can look up the taxes and fees you’ll have to pay by going to your state’s DMV website.
Inspections and emissions requirements
Like taxes, the inspections and emissions requirements your car must meet depend on the state where you live. Certain states have inspections and emissions requirements, others don’t. It’s a good idea to make sure the car can pass the necessary inspections before you buy it, since the vehicle must pass the tests before you can register it. California has very strict emissions requirements in particular. You could run into some major trouble in registering car if it does not pass the requirements. You can see more here from the California Air Resources Board.
Most states require all drivers to get auto insurance. How much insurance you are required to have can differ. Also, if you are getting an auto loan to purchase the car, most lenders require that you keep “full coverage” auto insurance as well. Check with the dealership, the lender or the auto insurance company for more information so you can meet all requirements. Make sure to note which state you will register the car in so they can provide the correct information.
If you are not driving the car back home, you’ll need to pay someone else to transport it. Some car-buying websites charge a flat fee. Other transport companies charge based on the distance the vehicle needs to go and its size and weight.
How do I handle the paperwork for buying a car out of state?
If you are getting the car from a dealership, the salesperson or finance manager should tell you what to do and what’s going on as you slog through the paperwork. But if you are getting the car in a private sale, you might need to be more knowledgeable.
Who needs to sign what?
The buyer and the seller both need to both sign most, if not all, paperwork.
Who is the buyer?
As you’re filling out the paperwork for buying a car out of state, the buyer is the person who is either paying for the vehicle or wants to be registered as the vehicle owner. Usually this is straightforward, but it can get confusing sometimes. For example, if a father is buying a car for his daughter, paying for it himself, but wants his daughter to be registered as an owner of the car as well, both father and daughter would sign the paperwork as buyers.
Who is the seller?
The seller is the person listed as the owner on the title of the vehicle for sale. A daughter wouldn’t be able to legally sell her father’s car if she is not listed on the title. You can’t sell something that doesn’t belong to you. Ask to see the seller’s driver’s license to make sure it matches the name that is on the title.
There are exceptions to this in cases where the owner has died or the other person has power of attorney, but we recommend consulting a lawyer or finding another car in these cases.
What if there are two names on the title?
If there are two names listed on the car’s title, look at how they are listed. If the word “and” is between the names, you will need both people to sign over the title. If the word “or” is between the names, you only need one of the owners to sign over the title.
Is there special paperwork for buying a car out of state?
Sometimes. Again, a dealership will take care of all of this, but you’ll need to make sure you have everything in order if you’re buying a car from another person instead. Check with your state’s DMV site to confirm exactly what you’ll need (links are below), but here are the most common things you’ll need to sign when buying a car out of state. Most are required for any car sale. Don’t head back home until you have them all.
A vehicle’s title is the official form that says who owns that exact vehicle. Both the buyer and the seller need to sign it.
To officially change the title to your name and register the vehicle with you as the owner, you’ll have to fill out a title application form. Some states, such as Texas, require that the buyer and seller sign the title application as well at the title. Other states, such as Virginia, only require that the buyer signs the title application.
VIN stands for vehicle identification number, and every vehicle in the U.S. has one. A VIN verification or a VIN inspection form confirm exactly what is being sold.
Bill of sale
The bill of sale lists the buyer, the seller, the car and the car’s purchase price. The bill of sale serves as both a contract and a receipt.
The odometer on a car keeps track of how many miles the car has been driven. This is important because vehicles only last so many miles, and the mileage will affect how much it’s worth and whether it’s still under warranty. The odometer can also tip you off on how likely the car may break down or need repairs.
Proof of insurance
When getting insurance for the car, ask for the auto insurance company to send proof of insurance. The declaration page shows the vehicle, the name(s) of the insured driver(s) and how much the car is insured for. At least one of the people who is buying the car needs to be an insured driver of the car.
How do I get the forms?
The seller needs to have the title. Everything else you should be able to find on your state’s DMV website. Download and print a couple of copies of the forms so that both you and the seller can have copies, and maybe take some extras in case anyone makes a wrong mark somewhere.