There are a number of things consumers with tarnished credit need to consider if they're thinking of financing a vehicle from a dealership in another state
When Bad Credit Financing Gets Complicated
Here at Auto Credit Express, a consumer we assume had poor credit asked us this question: "Can I purchase a vehicle from a different state?"
The correct answer to this question is "yes, if you are willing to put up with some minor inconveniences."
Buying a Car in Another State
Because most lenders are national and licensed in every state, getting approved at an out–of-state dealer and then driving your new car home shouldn't be an issue.
But at the same time, borrowers need to do their homework ahead to time so they don't have to possibly come up with hundreds of dollars out of pocket in order to title and register the new vehicle in their home state.
The reason buying a vehicle in another state can be like walking through a minefield has to do with the fact that motor vehicle sales are not taxed the same way in each state. For instance, Alaska, Delaware, Montana, New Hampshire and Oregon have no sales tax, while New Mexico has no sales tax on vehicles.
In addition, in some states with a vehicle sales tax, the value of the trade (or, sometimes, a portion of it) can be deducted from the price of the new car with the tax computed on the difference.
If that isn't complicated enough, there are also reciprocal and non-reciprocal states. Simply put, if the state in which you buy a vehicle has a reciprocal agreement with the state in which you live, the dealer will collect the sales tax (based on the tax rate, as well as the way a trade-in is computed, charged by your home state).
If, on the other hand, the state where you buy your vehicle does not have a reciprocal agreement with your home state, the dealer will not collect any sales tax (although the dealer will typically collect a fee for an in-transit permit that will allow the buyer to legally drive the vehicle for a set period until it can be titled and registered in the home state).
But here's the catch: if the vehicle is purchased in a non-reciprocal state and funds aren't set aside for sales tax, title and registration fees required in the buyer's home state, that money will have to come out of the buyer's pocket when it comes time to register the vehicle.
Here's what buyers can do to avoid this problem:
1. Before purchasing a vehicle in another state, find out if that state is reciprocal or non-reciprocal (this can be done by checking with the DMV of either state)
2. If the state is non-reciprocal, arrangements should be made with the dealer to include these charges when computing the deal. That way, the dealer can cut a check back to the buyer that will cover the fees charged by the buyer's home state.
The Bottom Line
Credit challenged car buyers can purchase a vehicle from an out-of-state dealer. But before doing this and if they live in a state that charges a vehicle sales tax, they should check to see if the dealer's state is reciprocal. If it isn't, they need to arrange with the dealer to have a check cut back to them for tax, title and registration fees. Otherwise, these buyers will have to come up with the money out of their own pockets.
If you are looking for a car and have bad credit, apply online with us. Our team at Auto Credit Express will match you with a dealership that will give you the best shot at driving away in a vehicle.