If you’re buying a new or used car, you may find a better deal or more options in another state. While purchasing and financing a car in another state is possible, 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.
Key Points
• Purchasing and financing a car from another state is possible. However, it’s essential to understand that each state has its own regulations regarding car titles, licensing fees, and tax laws.
• Regardless of where you buy the car, you’ll owe sales tax in your home state upon registration.
• Buying from an out-of-state dealership as opposed to a private seller can be more straightforward, as they often handle the title and registration paperwork and provide temporary registration to drive the car home.
• If you’re buying from a private seller, you’ll need to manage the paperwork yourself, including obtaining temporary registration and ensuring the vehicle meets your state’s safety and emissions standards.
• Before finalizing an out-of-state car purchase, research the vehicle’s history, understand its fair market value, and be aware of all associated costs, including taxes and fees, to ensure a smooth transaction.
Can You Finance a Car Out of State?
If you find a car you 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).
Recommended: Does Financing a Car Build Credit?
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.
Recommended: Smarter Ways to Get a Car Loan
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 a private seller, 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.
Recommended: Auto Refinance Calculator
How to Finance a Car Out of State
These are the steps to take to finance a car out of state.
1. Do Research
You can 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 with 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 you build your credit score, 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: What to Ask When Refinancing
Pros and Cons of Financing a Car in Another State
There are some advantages and disadvantages to financing a car out of state. Weigh 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 by 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 significant time researching how 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.
thumb_up
Pros:
• May have a greater selection of vehicles to choose from
• You may find a cheaper price for a car in another state
thumb_down
Cons:
• Paperwork and research are more complicated and time-consuming when buying out of state
• May be more expensive when you factor in travel and shipping costs for the car
Recommended: No Income Verification Car Loans
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, which could lower your payments, shorten your loan term, or extend the length of your loan.
If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.
FAQ
Can you finance a car in a different state?
Yes, you can finance a car in another state. However, you’ll need to register the car in your home state, so be sure to get a temporary registration from the dealer that you can use when you drive the vehicle home. Also, it’s worth noting that you’ll need to pay the taxes required in your state, and not the state you’re buying the car in.
What are the disadvantages of financing a car out of state?
Financing a car out of state typically involves more paperwork than buying a car in your own state. It might also be more expensive if you have to pay to ship or transport the car to your home.
Can you finance a car from another country?
Yes, you can finance a car from another country, but it’s more complex than domestic financing. Lenders may require higher credit standards, international documentation, and import regulations compliance. Some international auto dealers offer financing options, or you may need to secure a loan through a bank or third-party lender.
Photo credit: iStock/AleksandarNakic
SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
SOALR-Q225-025