How to Buy a Car Out of State with a Loan

Buying a car out of state can be an exciting yet daunting process, especially when financing is involved. Whether you're searching for a better deal, a specific model, or simply expanding your options, purchasing a vehicle across state lines requires careful planning. With rising inflation, supply chain disruptions, and fluctuating interest rates, securing an auto loan for an out-of-state purchase adds another layer of complexity.

This guide will walk you through every step—from researching lenders to handling taxes and registration—so you can confidently navigate the process.

Understanding the Benefits of Buying Out of State

Lower Prices and Better Selection

One of the biggest advantages of buying a car out of state is access to a wider inventory. Some states have lower demand for certain models, leading to better pricing. For example, electric vehicles (EVs) may be cheaper in states with fewer incentives, while trucks might cost less in urban areas where demand is lower.

Avoiding Local Market Markups

Due to microchip shortages and supply chain issues, dealerships in high-demand regions often add hefty markups. Crossing state lines could help you avoid these inflated prices.

Securing an Auto Loan for an Out-of-State Purchase

Check Your Credit Score First

Before applying for a loan, review your credit report. A higher score means better interest rates, which is crucial in today’s high-rate environment. Use free services like Credit Karma or Experian to monitor your score.

Get Pre-Approved

A pre-approval from a bank, credit union, or online lender gives you negotiating power. It also sets a clear budget, preventing overspending. Some lenders specialize in out-of-state auto loans, so research options like LightStream or Capital One Auto Finance.

Compare Local and National Lenders

Local credit unions may offer competitive rates but could have restrictions on out-of-state purchases. National lenders often provide more flexibility. Always read the fine print regarding geographic limitations.

Researching the Right Vehicle

Use Online Marketplaces

Websites like CarGurus, Autotrader, and Cars.com allow you to filter searches by location, price, and features. Look for dealerships with strong reputations and read customer reviews.

Consider Shipping Costs

If you can’t travel to inspect the car, factor in shipping expenses. Companies like Montway or Sherpa can transport the vehicle, but costs vary based on distance and vehicle type.

Verify the Vehicle’s History

Always request a Carfax or AutoCheck report to check for accidents, recalls, or odometer discrepancies. If buying from a private seller, insist on a pre-purchase inspection by a trusted mechanic.

Handling Taxes, Fees, and Registration

Understand Sales Tax Rules

Sales tax is typically paid in the state where the car will be registered, not where it’s purchased. However, some states require partial payment upfront. Research your home state’s DMV website for specifics.

Temporary Tags and Transit Permits

Most dealerships provide temporary tags allowing you to drive the car home. If buying privately, check if your state offers transit permits to avoid legal issues.

Registering the Vehicle

Once home, visit your local DMV to complete registration. Bring the title, bill of sale, loan documents, and proof of insurance. Some states require emissions or safety inspections before registration.

Finalizing the Deal

Review All Paperwork

Ensure the sales contract, loan agreement, and title are accurate. Mistakes can delay registration or cause financial headaches later.

Confirm Insurance Coverage

Notify your insurance provider before driving the car off the lot. Most policies offer a short grace period for new purchases, but you’ll need full coverage if financing.

Plan Your Trip

If flying to pick up the car, book refundable tickets in case the deal falls through. Bring a friend for a second opinion and a safer drive back.

Avoiding Common Pitfalls

Scams and Fraud

Be wary of deals that seem too good to be true. Avoid wire transfers for private sales and always meet in public places.

Hidden Fees

Dealerships may add unnecessary fees like "documentation" or "processing" charges. Negotiate these upfront or walk away.

Loan Rejection Risks

If your loan falls through after agreeing to purchase, you may lose deposits. Have a backup financing plan or consider a co-signer.

The Future of Out-of-State Car Buying

With the rise of online dealerships like Carvana and Vroom, buying out of state is becoming more common. However, economic uncertainty and changing interest rates mean buyers must stay informed. Always consult financial advisors or auto experts before committing to a long-distance purchase.

By following these steps, you can secure a great deal on your dream car—no matter where it’s located. Happy car hunting!