Buying a Car Out of State Can Be a Financial Disaster. Do Your Diligence With These 5 Steps

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The perfect car can come into your life at any time: maybe it’s a new model with a particular set of luxury upgrades, or a pre-owned classic you’ve had your eye on for years. 

And in some cases, that perfect car might be in a different state. 

The Internet has made finding those out-of-state gems easier than it used to be. But once you’ve found your quarry, actually becoming its owner presents some unique challenges.

“It’s never been easier to shop, says Scott Holeman, director of media relations at the Insurance Information Institute. ”But with that said, consumers should also be cautious.”

Buying a car out of state comes with financial risks, from scams and local taxes to temporary registrations and the cost of transporting the vehicle home. Here’s what you do need to know. 

Reasons to Purchase a Car Out of State

Some people buy out-of-state in order to save some money, since expanding your search often results in more options, and potentially, a motivated seller. 

But most reasons to purchase a car in another state have to do with availability: older cars, cars with unique features, or cars that are in very high demand may simply not be available in your state. If you’re keeping an eye on online marketplaces for a particular dream car, you may find it at a competitive price far away.

Beware, of course, of prices that are too competitive, especially if you’d have to commit to the car sight unseen. 

“In my experience, if it seems too good to be true, it is,” says classic cars expert and appraiser Steve Linden. “People fall for scams every day, and it’s so important that someone you know physically sees the car.”

Pro Tip

Due diligence, such as performing a VINCheck or requesting a vehicle history report from CARFAX or AutoCheck, is much more important when you can’t see a car in person.

Considerations When Buying an Out-of-State Vehicle

Buying a car out of state brings up a variety of questions that wouldn’t affect an in-state purchase. When you’re considering an out-of-state vehicle purchase, keep these issues in mind:

Am I Getting a Good Deal by Buying a Vehicle Out of State?

There are some unavoidable costs associated with buying a car out of state. You must either drive the car back or pay for it to be transported, and wise buyers will either hire an inspector or visit themselves to see the vehicle (or do both) before purchasing. These costs can offset most if not all of a good deal, so the main reason to buy out of state is when you cannot otherwise get the make, model, or customization you want.

Do I Have to Pay Taxes Twice if I’m Buying a Car in a Different State?

Usually, you’re responsible for the sales tax in your location of primary residence, though state rules vary. In many states, if you are immediately taking the car back to another state, you won’t pay any sales tax and will simply pay applicable taxes when you register the car and apply for a title in your home state. A dealership may also charge you the correct sales tax for your state of residence and mail it in. In such a case, any applicable local sales tax may be assessed later on.

You’ll want to research the particulars of your state; sales tax may be due for example when you file an application for a motor vehicle title. 

Does This Car Meet Your State’s Emissions Standards?

California has led the way in establishing more stringent emissions regulations for cars, and many other states have followed suit. However, if you are buying a new car in a state that isn’t requiring the California Air Resources Board (CARB) standards and moving it to a state that has adopted these standards, you’ll want to verify that the car is “California-certified.” 

“To find out whether a car, truck, or motorcycle is California certified, check the emission label under the hood,” the California Department of Motor Vehicles advises. “The label should read that the vehicle conforms to California regulations, or that it is legal for sale in California.”

If your desired vehicle is used, you’ll just want to make sure that, like any other vehicle, it meets the federal EPA emissions requirements, no matter where you’ll be registering it. 

Steps to Buying a Car Out of State

If the car is unique enough or the deal is good enough, many people move forward with an out-of-state car purchase. Here’s what you’ll need to make sure you’re ready to do so.

1. Make Sure the Car Exists and Belongs to the Seller

A variety of internet-based scams mention a sought-after car being available for a fraction of its value, luring interested car buyers into a scheme to take their money. Being able to see the car in person, or to send a trusted third party, is key to moving forward with the sale. 

This is rarely a concern when working with a reputable dealership. However, you also want to know how long a dealership will hold the car, in case other interested buyers emerge, jeopardizing your plans.

2. Do Your Research

Inspections, done by someone unaffiliated with the car’s seller, are helpful for understanding the condition of the car. This may also provide you with negotiating leverage. If you’re looking at a classic car or other car that isn’t new, you might also pay for a professional appraisal of its value to secure financing or to share with your insurance company to get accurate coverage, if lenders or insurers require this.

Beyond those steps, you’ll want to run the VIN through a service like VINCheck, and you can even just Google the number; requesting a vehicle history report from CARFAX or AutoCheck is also a smart choice to understand the full history of the vehicle. What you learn about the title or history of the car may give you pause about buying in a different state. The National Insurance Crime Bureau keeps an updated list of things to watch for, from a vehicle that’s been reported stolen to a flooded vehicle that has been disguised as having a clean title.

3. Check in With Your Insurance Agent

Giving your insurance agent a call once a year is a good idea anyway to make sure your coverage still mirrors your situation, but it is also helpful right before purchasing a car out of state. 

“If this is a dream purchase, fulfilling your bucket list, you don’t want to spoil that moment by not having enough coverage,” says Holeman. 

Your insurance agent can verify what insurance coverage you’d have while, for instance, driving a car back from another state. In any case, you’ll also want to call them immediately, ideally the next business day after you complete the purchase, to add the new car to your policy.

4. Arrange for the Transportation

You can either drive the car back yourself, which may require that you fly or otherwise arrange for transport to the location, or you can pay for it to be driven to you by a professional. 

“I tell people that if you are the adventurous type, go pick up the car and drive it back; I have great stories from driving back that way,” says Linden. “If you don’t want that stress, though, just have it transported.”

Many companies exist to both broker transportation agreements and to transport cars themselves. If you choose to have your car transported, those companies may or may not carry insurance, so verify that they are insured before automatically choosing the lowest price. You’ll also want to decide, based on the value of the car, whether to transport it enclosed or in the open; enclosed will protect your car more, but may also cost more.

5. Handle Registration and Tax Concerns

Before making that trip to get the car, verify if you need a temporary registration in the state of purchase. You don’t want to be pulled over by a police officer for driving without a license plate and not know what to show them.

When your car arrives in your state, you’ll typically have a window of time, perhaps as short as 30 days, to register it. At this point, usually, you’ll pay your outstanding sales tax. 

Bottom Line 

Many of the same steps govern how to buy a car out of state as with any vehicle purchase. 

Still, an out-of-state purchase can present bigger challenges, since it is harder to do an in-person evaluation of the car. Make sure you’re avoiding scams; get an independent inspection if you can’t be there in person; understand the tax and insurance implications; and arrange to go get the car yourself, or have it transported to you. 

When you prepare adequately, you can enjoy the rewards of buying a car in another state.