Should I Buy an Out-of-State Car?

Summer 2021 Update: As of this writing, the COVID-19 pandemic has receded and local economies are rapidly opening up, which would ordinarily be a great thing for car sellers and shoppers alike. But due to a global microchip shortage, year-over-year new car inventory is down by roughly half, just as Americans are getting back to normal life and gearing up for the summer driving season. With demand outpacing supply, prices for both new and used cars have skyrocketed in recent months — which may have you thinking about crossing state lines to get the car you want. This article is a great resource for learning about out-of-state car purchases, but please also see "Shopping Tips During the Global Microchip Shortage" for our experts' broader advice on navigating today's difficult marketplace.

It's tempting to think you can get a better deal — or avoid sales tax — by shopping out of state. But when you try to register the car in your home state, it could turn into a bureaucratic nightmare. So before you make a deal, find out what your state's registry will require to make the vehicle street legal.

There are three areas to research up front:
1. Emissions requirements
2. Sales tax collection
3. Registration requirements

As you consider these issues, keep in mind that buying the car from a private party will be different from purchasing it at a dealership, which can answer registry questions and provide the necessary paperwork. When you buy from a private party, you have to deal with these issues on your own.

There are other out-of-state buying concerns we don't cover here, such as prepurchase vehicle inspection and shipping. Follow the links at the end of this article for more information on those topics.

Checking emissions requirements

California has the strictest air quality standards in the nation, so most manufacturers build their vehicles to meet its regulations. Fourteen other states and the District of Columbia have adopted the standards set by the California Air Resources Board (CARB). Buying a car in any of those states means it will pass the requirements of all 50 states. However, some cars are still made only to be sold in non-CARB states. If you bought a new car in a non-CARB state, you might not be allowed to register it in a CARB state.

The states adopting CARB standards include Arizona, Connecticut, Maine, Maryland, Massachusetts, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont and Washington, as well as the District of Columbia.

There are many exceptions to registering non-CARB cars in CARB states. For example, here are the DMV rules and exemptions for registering non-CARB cars in California. Note that once a non-CARB vehicle has more than 7,500 miles, it is no longer considered new and can be registered in California, assuming it can pass the smog test.

Check the website for your state's DMV or registry of motor vehicles to see the laws that govern the registration of out-of-state vehicles where you live.

Locating the emissions plaque

Every car has a plaque that tells if it can be sold in California and, by extension, any of the other CARB states. The plaque is either on the underside of the hood or, in some cases, on the door jamb. The owner's manual will usually describe where the plaque is located.

However, if you are shopping remotely and need to know if the car conforms to CARB standards, you should ask the salesperson (or private seller if the car has been driven less than 7,500 miles) to confirm that it is 50-state compliant. If the seller seems unsure, request a photo of the vehicle's emissions plaque.

Sales and use tax issues

Often people mistakenly assume that they can save money by purchasing a car in a state that has a lower sales tax. The tax collectors are way ahead of you: You pay sales tax based on where you register the car, not where you buy it.

In some cases, the dealership where you buy the car will collect your state's sales tax and then pass it along to your home state. However, keep careful records that show you paid the tax to avoid having to pay it a second time when you register the car.

If it's a private-party sale, the DMVs in most states collect sales tax when you register the car. Sales tax is a percentage of the purchase price of the car, as reported on the bill of sale.

Some states also have what's called a "use tax" on vehicles brought over from another state. Take California, for example. Unless you purchased and used your vehicle outside California for at least 12 months before you brought it into the state, you would need to pay the use tax. The use tax will be based upon the purchase price of the car, minus the sales tax you paid to another state.

Make sure to brush up on these sales and use tax issues before making the purchase.

Handling temporary registration

You'll want to verify that the dealership can handle the registration from another state. Dealerships often employ people trained in DMV rules or hire a third-party company to assist in the transaction. The dealer will give you a temporary registration to allow you to drive the car home. Ask how long the temporary registration lasts so that you know how much time you have. You don't want to be caught off guard if you're pulled over for an expired registration. Make sure you hang onto your sales paperwork in case there is a delay in the registration. It will have all the pertinent information you need when following up with the dealership or DMV.

There's a bit more to keep track of when buying a used car from a private party. The seller should give you a signed title so you can prove you are the new owner. Depending on the laws of your state, you may also need to apply for a temporary registration so you can drive the used car home and complete the registration. Once you're back in your home state, the DMV may need to give the car a safety inspection to ensure that the brake lights, seat belts and other important items are in working condition.

If your home state requires a smog certification before registration, this is your responsibility. It's smart, however, to ask the seller for proof that the vehicle has recently passed a smog test so you can see if it is likely to pass in your state. Refer to the earlier section on emissions to verify its CARB status.

To sum up: Because of potential tax and registration problems, it's always easier to buy cars in your home state. However, if you are a bargain shopper or someone looking for a rare vehicle, the entire nation can be your car lot. Just make sure you understand these three important issues — emissions, sales tax and registration — before you seal the deal.