Buying a car in Texas means you’ll need to understand the processes, risks, and different scenarios that go along with the purchase. When done correctly, drivers in The Lone Star State can move on to their next chapter with a smooth transition. But when done incorrectly, it can be a nightmare.
There are different things to be aware of and different things you’ll need depending on the party you are purchasing your vehicle from. While everyone needs auto insurance in Texas, to complete the purchase of a car, you’ll also need money to pay the motor vehicle sales tax, a title for transferring, your registration, and local fees.
But when you break things down further, you can see that there are many different types of transactions that can affect your experience. Every day we help Texas motorists stay protected at Freedom Insurance Group and are here as a proud resource. Learn more about the buying process, the steps you can take, and what you’ll need to ensure there aren’t any bumps in the road.
How To Buy a Used Car in Texas
When buying a car in Texas, there are certain steps that need to be taken and for used vehicles, all of these dynamics are even more paramount. You’ll need to keep written records of your purchase and the information about the vehicle for your own records. Should you receive your title and there is an error, you’ll need to contact your local county tax office for correction.
There is no charge if it’s an error from the county or a department, and using your local county tax office can help protect you in multiple ways. Title Check is an invaluable tool that helps you verify vehicles before you purchase them, a tool that is highly recommended.
If you are conducting a transaction during the weekend, the Vehicle Transit Permit is available to keep you legal while driving the vehicle to your county tax office or elsewhere. Application for your car’s title can take 20 business days but if you haven’t received it within 30 business days, contact the Texas Department of Motor Vehicles.
When buying a used car in Texas from a dealer, keep your payments up-to-date and get written confirmation for flexible deadlines. It’s also worth mentioning that in Texas, dealerships can repossess your car without notice, so keeping accurate records is vital.
Buying a Car in Texas From Out of State
After buying a car in Texas from out of state, there are several steps you’ll need to take to ensure the process goes smoothly. For starters, you’ll need to have the vehicle pass a Texas state inspection before registering the car in your name. Furthermore, you’ll need to take the following to your local county tax office, along with the applicable fees:
- A Vehicle Inspection Report
- Proof of liability insurance meeting the State of Texas minimum requirements
- The odometer reading (if applicable)
- The original out-of-state title or other valid ownership evidence
- Proof of sales tax payment or current foreign/military ownership document
- A completed Application for Texas Title and/or Registration (Form 130-U)
Next, to avoid delinquent transfer penalties, you must title your vehicle in your name within 30 days of the sale and register it within 30 days of bringing it to Texas.
If you’re buying a car in Texas and importing the vehicle from outside of the United States, it must meet all federal and state importation requirements before you can title and/or register it in Texas.
In this case, your first step is to properly import your vehicle, ensuring that it meets the Federal Motor Vehicle Safety Standards (FMVSS) established by the National Highway Traffic Safety Administration (NHTSA) while following the guidelines provided by U.S. Customs and Border Protection.
Next, you’ll need to obtain a safety inspection for your vehicle from a Texas-certified Safety Inspection Station, which will provide you with an original Vehicle Inspection Report (VIR) signed by the inspector.
Your vehicle must be inspected by a trained auto theft investigator who is a law enforcement officer of this state or a political subdivision of this state. After obtaining the Law Enforcement Identification Number Inspection (Form VTR-68-A) signed by the investigator, you can apply for Texas title/registration at your county tax office.
When applying for title/registration, you’ll need to provide several documents, including:
- S. Department of Transportation Form HS-7 (or any other document establishing customs entry/clearance and compliance with, or exemption from, federal safety standards)
- A completed Vehicle Inspection Report
- Your completed inspection report on the bottom of Form VTR-68-A
- A completed Application for Texas Title and/or Registration (Form 130-U)
- Documentation of ownership. If the document is printed in any language other than English, you must provide a certified English translation.
Can You Buy a Car Without a License in Texas?
Yes, you can buy a vehicle in Texas without a driver’s license. This includes buying a car from a private seller in Texas or buying a car from an individual in Texas. While the law doesn’t prevent you from purchasing a vehicle, there are some caveats you’ll need to consider:
- If you don’t have a license, you legally can’t test drive it or drive it home on your own. Of course, the exception to this is if you are driving within state guidelines while possessing a driving permit.
- However, dealerships don’t always allow this either. It will vary from place to place, which can provide difficulties in your shopping experience.
But if you are prepared for these issues, you can buy a car in Texas even without a license. Regardless of your reasoning, there are many for purchasing vehicles without a license, you’ll still need to provide a form of ID when purchasing your car. Any valid ID, including a passport or state-issued ID, will do.
Is Buying a New Car Tax Deductible in Texas?
If you choose to itemize your deductions, you can deduct the sales tax or deduct your state and local income tax when buying a car in Texas. This allows you to subtract sales tax from your vehicle purchase at the state and local levels.
While you should always seek the counsel of a licensed financial professional before making tax decisions, this situation means that Texas drivers will want to deduct sales tax in situations where state and local sales tax paid equates to a higher total than the amount you’ll pay for state and local income taxes.
You’ll also need to be sure that the rate of the sales tax you pay is equal to the general sales tax rate when you buy a car in Texas, to qualify. Your options allow you to either keep every sales receipt you incur throughout the year to deduct the actual sales tax you paid or estimate sales tax paid based on your income on the IRS’s Sales Tax Deduction Calculator.
But in most cases, working with a professional to determine what is best will be the best option for you. This is heightened even more by the complication that comes with the IRS’s calculator not calculating larger item purchases, including vehicles.
There are maximum limits that you’re going to have to abide by for the sales tax you can claim and if you’ve purchased the vehicle for your business, there are separate rules that apply. These parameters encompass an overview of your options when buying a car in Texas for personal use only.
Best Time To Buy a Car in Texas
Buying a car in spring may not be the best idea as dealers often hold onto their stock before the next year’s models arrive, making it harder to negotiate a better deal. Additionally, dealers may be aware of the extra cash available from tax refunds and use this to their advantage by raising prices.
However, towards the end of summer and the end of the year, dealerships are keen to make room for newer models. They will be eager to clear out their old inventory and are more likely to make a deal that saves you money. When buying a new car in Texas, this could give you the upper hand in negotiations.
It’s also a good idea to be patient and wait until the end of the month to make your purchase. Dealership managers may be trying to meet a certain sales quota and may be more willing to negotiate towards the end of the month, offering you a better deal than at the beginning of the month.
Drivers should also note that location will play a role in the amount you pay for a vehicle. Studies show that the cheapest city in Texas to buy a car as a whole is the Dallas metro area.
Credit Score To Buy a Car in Texas
While the exact credit score you’ll need will vary, the higher the better, of course. A minimum of 660 is the standard when it comes to buying a car in Texas if you wish to receive a loan with favorable interest rates. An increasingly important consideration at a time when rates continue to remain elevated.
But again, it depends on the lender you are using. There are some lenders which provide loans for borrowers with lower credit scores and focus on markets with high-risk clientele. Beyond your credit score, other factors, such as your income, status of employment, and monthly expenses are also factored in.
Many things also go into determining your credit score, such as how much money you owe, the length of time you’ve had credit, new credit, the mix of credit you possess, and more. Depending on these factors, your credit rises, falls, or remains the same.
There are different categories of credit scores and a 660 is considered prime. While not the highest of the tiers, you’ll receive more opportunities and better rates than those holding near-prime, subprime, or deep subprime scores.
Most commonly, lenders that provide funding for vehicles will look at one of two of the most common methods for measuring a credit score: FICO and VantageScore. Lenders choose between the two, with most looking at FICO Auto Scores. These scores can be as low as 250 and reach as high as 900.
Higher scores indicate a higher likelihood that the person taking out the loan will pay it back. It’s also worth noting that auto insurance companies will review your Auto Insurance Score (AIS) when calculating your premium and if you have a low credit score, your AIS will be affected.
This can lead to a denial of coverage but you should remember, AIS is only part of the equation. Several other factors go into determining how much you’ll pay, but just like securing a loan, your credit score matters. Therefore, it’s overall best practice to maintain a positive credit score with a higher total rather than a lower total.
Buying a Car Without a Title in Texas
The easiest way to put it is simply. Buying a car in Texas without a title is illegal. Doing so is risky for many reasons, including the possibility for a titleholder to claim ownership of the vehicle down the line, but considering potential legal ramifications, it’s best to avoid this practice.
Your car title mandates that you legally have ownership of your vehicle. You’ll need it for a variety of things including registering your vehicle with the Lone Star State or getting a loan. There is also important information that is found on your title, including the VIN, notices of liens, make, model, and owner’s name and address.
There are instances in which vehicles don’t have titles for legitimate reasons and methods of handling them. But if a vehicle doesn’t have a title, proceed with caution. Sellers must produce titles and if they do not, it could be a red flag that the vehicle is a part of illegal activity.
To solve the problem of a missing title, you can request the seller to obtain a replacement title, which is a simple and affordable process available in every state. A clear title simplifies the buying and registration process.
However, in case the car has never been titled, was titled in another state, or has any other issue, the state may issue a bonded title requiring additional ownership and value proof. For a specific term, the buyer purchases a bond equivalent to the car’s value, and if no contest arises by the end of the term, the bonded notice can be removed from the title.
Lacking a title or its equivalent makes it nearly impossible to conduct a legal car sale, register the vehicle, or obtain license plates. Although a traditional auto loan without a title is unattainable, you can still obtain auto insurance coverage if you have a valid driver’s license and an insurable interest in the vehicle.
Buying a Car With a Bonded Title Texas
If you need to transfer or replace a lost title for a vehicle in Texas, you can obtain a bonded title, which is given when the original title is missing or has errors. You’ll need to apply for a bonded title by paying a surety bond to prove ownership, which can be paid by a bonding company on your behalf.
Bonded titles are only available to you if you are a Texas resident or a part of the U.S. military, have possession of the vehicle, and do not have it classified as junked or non-repairable.
Submit a Bonded Title Application, along with any evidence of ownership, acceptable photo ID, and a $15.00 administrative fee to the nearest TxDMV Regional Service Center to fulfill your application. If you are going through this process for an out-of-state vehicle, you’ll need to have the vehicle identification number verified by a Texas-certified Safety Inspection Station.
You’ll need to obtain a vehicle identification number inspection if the vehicle has never been titled or registered in Texas. This is conducted by an auto theft investigator on the Law Enforcement Identification Number Inspection form. Upon the successful approval of your application, you will receive a Notice of Determination that grants you either a bonded title or a Tax Assessor-Collector Hearing.
In order to secure a Bonded Title, you will be required to purchase a surety bond equivalent to one and a half times the appraised value of the vehicle, which is assessed by the Texas Department of Motor Vehicles. The bond must be purchased within a year from the issuance of the notice.
Finally, you’ll take the original Notice of Determination for a Bonded Title or Tax Assessor-Collector Hearing and other required documents to your county tax office within 30 days of purchasing your surety bond.
At the same time, you are required to submit a Completed Application for Texas Title and/or Registration, a Law Enforcement Identification Number Inspection form, if there is no record in Texas, a Vehicle Identification Report if titled out-of-state previously, and documents from customs documents if you import the vehicle. Additional paperwork is necessary when dealing with commercial vehicles.
Buying a Car From a Private Seller in Texas
Buying a car in Texas from a private seller can come with many negative consequences if not properly done. There are many hardworking Texans that are looking to sell their vehicle without dealing with a dealership. But not everyone is equally as honest.
You can run into serious financial and legal issues if you purchase a vehicle from an individual that doesn’t have all of their affairs in order. This means more headaches down the line and potentially can cost you a substantial amount of money.
Before doing anything, you’ll want to use the state’s title check to ensure that the vehicle is in fact theirs, and any other issues that may be of concern to you as a buyer. Additional documents as mentioned above may also be necessary to help you avoid unwanted issues later.
The best practice would be to have the seller bring all necessary paperwork to your local county tax office to complete the transaction. This way, all parties can mitigate risks involved in transactions of this nature. Here are some additional tips that can help you on your purchasing journey:
- You’ll still want to test drive the vehicle and ensure it’s in good operating order before purchasing. If the vehicle is a “lemon,” your recourse is often limited and costly, if available at all.
- Trust your gut. If something feels off, it probably is. If a deal is too good to be true, there is likely a reason. Conduct due diligence and shy away from potential scams.
- Transactions can lead to a variety of scams and heated moments under the wrong circumstances. This is yet another reason both parties benefit from going to local county tax offices, to ensure a fair, peaceful, and legitimate transaction is brokered.
What To Do After Buying a Used Car in Texas
Before buying a used car in Texas, you’re going to need to have an auto insurance policy in place. When purchasing a vehicle, it’s important to work with an agent to ensure that you are insured to drive your vehicle home.
You should also conduct a title check if you are purchasing a vehicle from an individual or a less-than-reputable source. Remember, ownership is determined by who has the title, therefore, if you fail to complete this process, you could have ownership of your vehicle contested.
Once this is squared away and you’ve purchased your new vehicle, keep your registration and proof of insurance in your vehicle. If you are purchasing a vehicle from a dealer, you’ll receive temporary tags and registration until you can set everything up permanently. But you only have 30 days to get your affairs in order, so don’t procrastinate.
This goes along with transferring your title, but you’ll need to get a Texas title application form, the signed vehicle title, and any necessary supporting documents to complete the process. From here, you’ll want to be sure your title transfer processes, you are registered in the state of Texas, and that you have your plates by the time your temporary tags expire.
At What Age Can You Buy a Car in Texas?
When buying a car in Texas, keep in mind that there is no specific age requirement for a person to be recorded as the owner of a vehicle on the title and registration. However, many dealers may be hesitant to sell to someone under 18 years old due to potential legal issues.
It is important for dealers, whether the sale is retail or financed, to exercise caution when selling to minors. So, while minors can legally purchase a car and enter into a contract with a dealer, they typically have the ability to void the contract before turning 18.
This includes all related sales documents and disclaimers, which can present challenges for all parties. To avoid any potential issues, it is best practice to have a parent, guardian, or someone over the age of 18 sign documents related to the purchase of the vehicle.
If you are purchasing a vehicle through financing, dealers may even request that a parent or guardian co-sign on the bill of sale and retail installment contract paperwork. This ensures that the adult who signed the contract is bound by its terms, even if the minor is not.
Car insurance for teenagers in Texas is also typically expensive. This can present yet another hurdle because dealers will need to inquire about proof of insurance before selling or registering a vehicle in a customer’s name.
If the minor buyer cannot afford liability insurance, there can be registration issues or the dealer may face a lawsuit for negligent entrustment if the buyer drives the vehicle off the lot without insurance.
Therefore, when buying a vehicle in Texas as a minor, it’s best to have an adult involved, signed onto the paperwork, and be in communication with your insurance agent throughout the process.
Can You Return a Car After Buying It in Texas?
In Texas, once you sign a purchase contract for a car, there is no grace or cancellation period. There is no return policy, with few exceptions. Unfortunately, Texas doesn’t have a buyer’s remorse law that allows returning a vehicle within a specific number of days, unlike some other states. So, it’s crucial to carefully consider your options before making a purchase.
Although some limited situations may allow returning a vehicle, such as if it’s a “lemon” or if there’s a loophole in the contract, these are rare occurrences and cannot be relied upon.
In the event of a lemon, manufacturers are required to pay you back the full purchase price through repurchase and reasonable incidental costs incurred as a result of the vehicle’s shotty performance.
Some dealerships may offer a 24-hour grace period for returns, but this is uncommon. Also, if you buy the car somewhere other than the dealer’s place of business, you may have three days to force a refund, but it’s also not a reliable option. This further highlights the importance of listening to your gut and conducting due diligence before purchasing a vehicle.
Safeguarding your payment receipts and documents is also important when it comes to proving your vehicle should be repurchased. But preferably, outside the car’s glove compartment to protect against theft and dishonest business practices.
How To Save On Auto Insurance When Buying a Car in Texas
No matter which journey you are on, purchasing your vehicle is an important event in your life, but protecting your vehicle is equally important. Not all auto insurance is equal nor is the needs of drivers. This is why who you enroll with for your car insurance matters.
At Freedom Insurance Group, we’ve been helping drivers in Texas save since 2005, through our relationships with top-rated brands and a personalized approach to coverage. We compare your auto insurance needs, compare rates among a variety of brands, and then deliver you personalized protection for less.
There are a lot of factors that go into how much you’ll pay and these can vary from brand to brand. This is why we compare your coverage needs among our many partners to ensure you’re receiving the best possible rate for your premium.
Because we work with multiple brands, we also have more access to discounts and bundles for your home insurance. To get started, contact one of our agents, or use our online auto insurance quote tool to see how much you can save on coverage when buying a car in Texas.