Car buying isn’t easy, and buying a vehicle in another state can be even more intimidating. This is especially true in 2021 as new car inventory levels continue to decline, and finding a reliable new or used car becomes even more challenging. More shoppers than ever are being forced to search outside of their local area to find a car that meet their needs.
Our goal at YAA is to help you navigate the car buying process. Today we’re going to breakdown all that you need to know to buy a vehicle out of state. What are the steps involved? When do you pay taxes? Can you drive a car you just bought in one state back to another? We’ll answer these questions and more.
Let’s dive in!
What are the steps to buy a car in another state?
Buying a vehicle in another state is eerily similar to buying a car at your local dealership with a few exceptions. The steps to the sale are:
- Negotiate the out the door (OTD) price via email or phone call
- If it’s a used vehicle, arrange for a pre-purchase inspection (PPI)
- Agree to the selling price
- Place a deposit on the vehicle & sign the buyer’s order
- Take delivery of the vehicle
At a high level, that’s how you buy a car in another state. Let’s break each step down a bit further.
Negotiate the OTD price
As with any car deal, the first step is to negotiate the OTD price with the salesperson or sales manager. When buying a vehicle in another state you’ll likely be unfamiliar with their taxes and fees. It is incredibly important that you tell the dealership what your zip code is so that they can calculate your taxes and fees based on your location. We’ll touch on this more below, but taxes are paid where you register your vehicle, not where you purchase it. If the dealership doesn’t know your zip code, they won’t be able to provide you with an accurate out the door price quote.
We strongly recommend that you reference the YAA OTD Price Calculator to verify that the dealership’s OTD price matches up with the correct tax, title, and registration rates in your state.
Arrange for a pre-purchase inspection
If you’re purchasing a used vehicle from another state there are a few extra considerations you should be aware of. First, you should absolutely consider arranging for a pre-purchase inspection to make sure the vehicle is in good working condition. Second, you’ll need to ensure the vehicle can pass your state’s inspection and emissions testing. By conducting a pre-purchase inspection you’ll likely become aware of any issues that would preclude the vehicle you’re thinking of buying from passing your state’s inspection.
To arrange for a pre-purchase inspection from out of state you have a few options:
- Research and locate a local mechanic near the dealership that is selling the vehicle and arrange for them to inspect the vehicle. You can request the selling dealership to take the vehicle to the mechanic’s shop.
- Research and locate a local dealership of the same manufacturer of the vehicle you are purchasing (for example find the local Toyota dealer if you’re buying a Camry from a Hyundai dealership), and arrange for the selling dealer to drop off the vehicle.
- Use a service such as LemonSquad to send a mechanic onsite to the dealership to conduct the PPI for you.
Place a deposit & sign the buyer’s order
After an inspection report has been received and you’ve agreed to an OTD price, you’ll want to place a deposit down on the vehicle. When buying a vehicle in another state, the last thing you want to do is fly there, or arrange shipping, only to see the price change at the eleventh hour. To protect yourself from last minute changes, place a deposit on the vehicle, and also request to sign a copy of the buyer’s order. Request that the sales manager at the dealership does the same too.
The final step in the out of state purchase process is to take delivery of the vehicle. This is when you will meet with the Finance and Insurance Manager to review loan options and insurance products. As with buying a vehicle locally, you can (and should) come in pre-approved with outside financing and extended warranty coverage quotes.
Depending on what state you are purchasing the vehicle from, you may be able to “take delivery” remotely (sign all the paperwork electronically) and have the vehicle shipped to you. More on that below.
Can I buy a car in another state and drive it home?
Yes, if you buy a car in another state you can drive it back home to where you live. Unless of course you decide to buy a car in the state of Massachusetts …
In every state except Massachusetts you will receive a temporary license plate from the state where you purchased the vehicle. This temporary tag (also referred to as “drive off tags”) will allow you to legally operate the vehicle after purchasing it.
When you arrive back in your home state you will then go to your local department of motor vehicle and register the vehicle. This is when you will receive your permanent plates for the vehicle.
The Massachusetts Problem
Why is Massachusetts different from all the other states? That’s a great question. Their laws around vehicle registration are infuriatingly complex and cumbersome. Auto Influence wrote a great article on the Massachusetts Problem here: https://www.autoinfluence.com/the-ins-and-outs-of-temporary-plates/
When (and who) do I pay taxes if I buy a vehicle in another state?
When you purchase a vehicle out of state, you pay taxes in the state where you register the vehicle, not where you purchased it. The actual process of calculating the correct tax amount and remitting it to your home state can be handled differently.
For example, if it’s a neighboring state, the dealership where you purchase the vehicle will collect and remit the taxes and fees for you. You’ll then receive your permanent plates and registration in the mail. Many dealerships have software that allows them to calculate the proper sales tax and registration fees for different states, and in neighboring states they may feel comfortable handling that for you.
If you’re buying from a further away state, or if the dealership doesn’t offer to handle tax and registration remittance for you, you should contact the dealership’s title department to see if they can walk you through the steps you’ll need to take back in your home state. At this point it is also helpful to consider contacting a local dealership and asking them for assistance too. If you have a local tax professional they would also be able to help. You can of course also refer to your state and local tax laws and remit payment on your own.
Let’s say you purchase out of state and you pay for sales tax, but it is the wrong amount. What happens then? When you go to register your vehicle at your local department of motor vehicle you will either receive a credit from them, or you will owe them additional money.
If I buy a car in another state, can I have it shipped to me?
Yes, absolutely. This is a very common practice and could financially make a lot of sense for you. The dealership where you purchase the vehicle may recommend a particular shipping company and you should see what their quote is. You should also shop the quote and get bids from other providers as well.
Shipping options will range from open air freight to closed container shipping.
Can I buy a car in one state and register it in another?
Yes. The registration process is different in each state, however you can buy a vehicle in one state and register it in your home state. You’ll need to make sure the vehicle can pass your state’s emissions test and road worthiness inspection.
You’ll also need to confirm that the vehicle title is clear of any liens.
What if I have a trade-in?
If you’re buying a vehicle in another state and you have a trade-in, you should strongly consider treating your trade-in as a separate transaction from your purchase. More on that here: https://joinyaa.com/guides/car-trade-in/
Can I lease out of state?
Yes, you can lease a vehicle from another state, however some dealership’s will not allow you to. The complexity of out-of state leases is high, and some dealerships do not want the burden of mistakenly calculating the wrong taxes and fees on a lease. Before negotiating an OTD price with an out of state dealership, we would encourage you to ask them if they’re willing to lease you the vehicle with you being from another state. Be prepared to give them your zip code since each state treats leases differently.