If the vehicle you want to own isn’t available in your area, or you think you can get a better deal elsewhere, you might consider buying a car out of state. But be aware that crossing state lines can complicate the process.
Last updated: July 7, 2021
Do Your Homework
If you’ve always bought your cars locally, be ready to have a different experience with an out-of-state purchase. Each state has its own regulations and processes governing things like emissions, taxes, insurance and registration. Although you’re trying to save money, hidden pitfalls could force you to spend more. So do your homework and learn the rules in both your state and the state where you plan to buy before you start shopping.
Calculate the Costs
If you’re physically traveling to a different state to buy a car, consider all of the costs associated with the trip and buying process and weigh them against whatever savings you’re expecting. That includes obvious things like delivery fees, hotels, gas and tolls, but also indirect costs like missed workdays.
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Don’t Be Lured by Tax Exemptions
States like Oregon, New Hampshire, Delaware, Montana and Alaska don’t charge sales tax to their residents. But in most cases, you’ll pay tax in the state where you register your car, so the promise of waived sales tax only applies to the people who live there.
Don’t make the mistake of thinking you can save big money by driving from Pennsylvania to Delaware, for example, to buy a car without paying sales tax. You’ll pay when you register it back home.
Watch Out for Taxes With Other Names
Some so-called tax-exempt states find a way to tax the purchase of motor vehicles by adding a fee to the long list of DMV fees. For example, Delaware residents pay no sales tax, but a 4.25% “document fee” is collected on the purchase price of vehicles.
Buy Before You Move
If you currently live in a state with no or low sales tax and you’re moving to one where sales tax is higher, it might make sense to buy a car before you relocate. In most states, you have to buy a car at least 90 days before you move if you want to avoid paying higher taxes when you transfer the registration to the higher-tax state.
Never Try To Fool the Tax Man
People used to buy cars in states with no sales tax using a P.O. box or other dummy addresses to beat the residency requirement. States caught on long ago and cracked down hard on this practice.
It’s considered tax evasion, and if you do it, prepare to deal with the penalty. You’ll need to pay the taxes and likely a fine that would wipe out the savings you were counting on.
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Look Into Tax Exemptions
Many states offer legitimate ways to avoid sales tax. In Michigan, for example, you don’t have to pay sales tax if you buy a vehicle from an immediate family member. Massachusetts waives the tax on vehicles transferred to people who have a disability. Colorado offers a tax break on used cars that have a previous in-state title and a taxable value of less than $20,000.
Explore State and Regional Tax Credits
The federal government offers tax credits up to $7,500 for the purchase of electric vehicles, which you can take advantage of no matter where you live or buy your car. But dozens of states and regions offer their own tax incentives for the purchase of electric vehicles or those that use alternative fuels. For example, Delaware offers rebates from $1,000 to $3,500, depending on the vehicle and the price.
Avoid Costly Emissions Expenses
Some states, most notably California, have famously strict emissions standards. If you live in California or a state with similarly stringent laws, keep in mind that some cars could be legal in another state but not in yours, where it will eventually have to pass inspection. Before you buy out of state, make sure the car your considering is cleared for your state’s emissions standards.
Negotiate Free Delivery
When you buy a car in a different state, you’ll have to get it home. Many dealers deliver to a buyer’s home, and some will do so for free if a buyer requests it. But this standard rarely applies to distance purchases. You could, however, use free delivery as a bargaining chip during negotiations or even as a condition for purchase.
Ask the Dealer for Transport References
If the dealer won’t or can’t ship the vehicle to you for free, maybe they’ll refer you to a transport company they use. In many cases, transport companies offer dealers and their customers reduced rates on vehicle deliveries since dealerships are good customers to have. If you must pay to ship, see if the dealer can score you a discount with a friendly transport firm.
Drive Your New Car Home
It might be cheaper to drive your car home than to get it transported. As previously stated, this includes expenses like gas and tolls. And if it’s a long-distance trip, remember to budget for lodging, food costs and days off.
Investigate Regional Supply and Demand
There’s no single cheapest state to buy a car. That’s because regional supply and demand dictate sticker price. A car’s price can swing by as much as $1,500 depending on where it’s listed, according to Carfax.
Match the Vehicle Style to the Region
One of the biggest drivers of supply and demand — and therefore, price — is the style of the vehicle as it pertains to the climate and culture of the region. For example, convertibles tend to be in higher demand in warmer climates, while colder climates place a premium on big, all-weather vehicles like SUVs.
Search for Regional Offers
You can find out where the car you like is selling for less by searching for local offers and incentives. That’s often as simple as checking for “local offers” or some similarly worded page on the automaker’s website. That will show you where your model is being packaged with incentives like 0% financing or cash rebates.
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Talk To Your Insurance Company
Usually, your current insurance policy will extend to your new car — as long as you tell your insurer within a specific time period after you buy. But this isn’t always the case. You don’t want to leave something as important as insurance to chance — doing so can cost you money, potentially canceling out what you might’ve saved from buying out of state.
Talk to your insurance company while you’re car shopping, ask about out-of-state purchase policies and make sure you’re covered before you make the trip — you won’t be able to drive home or even secure financing until you do.
Carvana is an online car dealer that serves the entire country, and you can shop for vehicles, secure financing and buy a car without ever leaving the site. You can pay cash, or use Carvana’s financing department or your own lender.
When the transaction is complete, you can either have the car delivered or pick it up at one of two dozen “car vending machines” in cities across America. If you choose to fly and drive, Carvana will cover some of your airfare. All cars come with money-back guarantees.
Like Carvana, Vroom offers online nationwide car shopping. It also cuts out the middleman, which the company says allows it to pass savings along to their customers. Vroom offers financing through more than a dozen lenders so you can shop for offers. It also provides a money-back guarantee.
Look Into Shift
If you live in California, Shift covers several parts of the state — but you can buy a car from Shift no matter where you live. When you find a vehicle you like, you can visit a Shift location, or a concierge will bring it to you to test drive and answer any questions. Not only might you find a good deal on a car, but Shift handles all the paperwork if you do decide to buy.
AutoNation boasts an inventory of more than 100,000 new and used cars. The site promises savings of up to 40% off MSRP for new cars. The company’s pre-owned inventory follows the AutoNation 1Price “priced to sell” format, which eliminates haggling and, according to the company, guarantees the lowest price.
When you’re buying a car out of state, don’t forget the basic rules that apply to all vehicle purchases. First and foremost, get preapproved for financing before you go shopping.
If you start looking for financing at the dealership, you’ll be limited only to the offers they give you. When you lock in your buying power beforehand, you’ll be negotiating from a position of strength and you’ll be able to walk away knowing you got the best deal.
Budget For the Car, Not the Payments
When discussing your budget, dealers will often try to steer the conversation toward what you can afford to pay every month. That’s because if they string out the payments long enough, they can sell you a car that you can’t actually afford through monthly payments that appear to be doable. The problem is, you’ll pay much more interest in the long run, making the car more expensive than it should have been.
Get a Vehicle History Report
A vehicle history report like Carfax is an absolute must for any used car, whether you buy in the state where you live or halfway across the country. In most cases, a free report will come with the car — often attached directly to the ad. But if one isn’t offered, that could be a red flag.
You need a history report even if the car is certified pre-owned. It will inform you of any accidents, repair work, damage and anything else that could help you negotiate a better price or walk away altogether.
Get an Inspection
Like a vehicle history report, an inspection is a must, whether or not the car underwent a thorough inspection as part of a certified pre-owned multipoint check. Even if the seller is perfectly scrupulous, their mechanic could miss something. Get an inspection on any used car, particularly if you’re buying out of state.
Factor Ownership Costs Into Your Budget
The cost of the car, taxes and registration fees are just the beginning. Every car in the world comes with ongoing ownership costs like fuel, repairs, service and maintenance.
Consider fuel economy as part of your budgeting plan, whether you buy out of state or not. And visit sites like RepairPal for estimates on what kind of annual ownership costs you can expect.