The Expert Podcast

So the question comes up quite a bit: what is the best state to register and title your car? A lot of people ask, "What's the easiest state that I can use to title my car?" If you have a vehicle you've purchased without a title and you're running into problems in your state, many times the instinct is to try to pick another state to use to title or register your car. At first, this might seem like a good idea. The problem is a lot of people think, "Oh, my state’s really hard. My state’s the hardest state to title a car." The only reason that they have that opinion is because it's really the only state they've had any experience with. Most people have never tried to title or register a car in another state. They may have heard things through the grapevine or on some web forum or social media that other states are easy. They might have heard loopholes about Vermont or Montana or other states.

Here's the problem: every state has rules about how to get a title and registration. Guess where those rules come from? They come from the federal government. Even though titles and registrations—like this certificate—are issued by the state, it's not the state that makes up the rules; they're just the ones who enforce the rules and execute the rules. The rules come from the federal government, and all states have to abide by them. All states use the same criteria. The most basic one is that in order to get a new title for a vehicle, you're supposed to have the old title signed over to you or a couple of other options. Some states allow you to do a bonded title with a bond. Some states allow you to do a court order title. But no states allow you to do a title with just a bill of sale. You might say, "Well, I heard Vermont did a bill of sale." Well, Vermont used to do a registration with a bill of sale; they didn't give you a title—they gave you a license plate. So no states have ever given titles with a bill of sale because federal law doesn't allow it.

So why are people using loopholes? Well, for the most part, the reason that people use loopholes is to try to avoid and evade other things like taxes. The reason people use Montana LLCs is to do tax evasion. If you register or title a car in Montana, you don't have to pay sales tax, so that could save you a lot of money. The problem is if you are a resident of, let's say, California, and you decide, "I'm going to go to Montana and register my car there so I don't pay tax," two things are going to happen. First, no state is allowed to give a title to a person who is a nonresident. So if you're not a resident—your driver's license is not from Montana—they're not going to give you a title. So what people do is they form an LLC, they form a corporation in Montana, put the title in the corporation name, and then drive it around with a Montana license plate.

So first, you have to form that corporation, which is not that hard to do and doesn't cost that much—maybe three to four hundred bucks. The problem is whatever state you're driving in—California, Texas, Illinois, New York—whatever you're driving around with your car with a Montana license plate, now there's no law against driving it in another state. But states that are notorious for tax evasion, like Montana, that license plate is going to stick out like a sore thumb. There are what's called ALPRs—automated license plate readers—all over the country. They're on police cars, they're on tow trucks, they're in parking lots, they're on street signs that read every plate that goes by and runs plates. If it sees a Montana plate, it's going to run that plate, and if it sees it come back to an LLC, that's a red flag. They're going to look at the name on the LLC, and if that name is a resident of the state, there are counties right now in New York, California, and other states that are actively searching for Montana license plates. They backsearch the corporation, they find the name, and they look to see if you're a resident of their state. Even if they don't find that, if they see the same license plate go past that ALPR reader at a certain parking lot, street sign, or intersection every day on your way to work, they're going to pull you over.

If they see you driving with a California license in a Montana license plate, they're going to refer you to California’s Franchise Tax Board. Every state has a taxing authority that collects sales tax. People are being fined; some are even having criminal records because of this.

What's another reason you might want to go out of state? Maybe your car won't pass inspection in your state. Maybe your state has a smog inspection or safety inspection, and your car is not going to pass. If you register a car in another state to avoid inspection, the same thing is going to happen: it's going to be found out, and your car will be impounded because it's not safe for the road. Another big problem with an out-of-state loophole is insurance. When you go to your insurance agent to purchase an insurance policy for your vehicle, you have to tell them what's called a garaging address. Now, that doesn't mean you have to have a garage where you park your car; it just means you have to tell them where your car is most of the time.

So let’s say if you do a Montana LLC, where are you going to tell them the garaging address is? If you tell them it's in Montana, that matches the LLC—okay, great, here's your policy. But if you're driving around in Illinois all the time and, God forbid, something happens to your car—it's in an accident, it injures somebody, it's stolen, or it's damaged—even if someone else crashes into you and it's their fault, they're going to look at the garaging address and say, "Your car is not supposed to be in Illinois all the time; it's supposed to be in Montana. What were you doing in Illinois? Your driver's license is from Illinois; your employment is in Illinois. Why were you in Illinois?" You can't just say, "Well, I was just here on the weekend." They're going to ask you to prove it—show records where that car was in Montana—or they're going to deny your claim, and you're out that money.

Or you can give them your address in Illinois where you live on your policy, and then they're going to ask you, "Well, why are you titling it in Montana? What's the reason for it?" They might not insure your vehicle because it doesn't match. It's what's called a fraudulent jurisdiction. They're going to think that there's higher risk involved with that policy because you're titling in one place, registering in another, and living in a third place. It's not going to match up. So insurance is going to be another problem that most people don't think about.

Now, what's the easiest state? The easiest state is the state you live in because all the states have the same rules for titling and registration. Every state has a method you could use to get a title, whether it's a bonded title, court order title, VT transfer, prior on a contract—there are many methods you could use. All of those methods are easier, cheaper, and faster than going to some out-of-state place. They always are easier, cheaper, and faster. So don't feel like you have to go out of state to get a title. It's not going to save you any money; it's going to take longer because you have to deal with the other state. Even if you decide to do it at some point, there may be liability because of taxes or insurance or other factors.

Now, some people just feel like they have to go out of state because they want to feel like they're getting away with something. That's fine, but just realize that your own personal interest in getting away with something is going to cost you time, money, and everything else. Now, the good news is this: getting a title is not that hard. If you walk into the DMV without a title and say, "Give me a title," they're going to tell you they can't help you because they don't have the insight into all the methods you can use.

Our website, cartitles.com, is a free consumer resource to get all the methods of getting a title, and you could do it all yourself for free. We have a title service if you want us to do it for you; we even have title consulting if you want to consult with a certified title agent to give you instructions on exactly how to do it. So don't fall for the trap of doing an out-of-state title for some loophole because it's not really going to save you anything in the long run.

Even that Vermont loophole that did exist for a while took longer and cost more money than doing it in your state because Vermont was charging people outrageous sales tax fees—more than they would have paid in their own state. It took longer because you had to wait for Vermont, and then you had to get your plate. Now that's been shut down since the federal government stepped in and made them shut down because it was not proper. So don’t feel like you're forced to go out of state. Use your own state. It might seem annoying, but all the other states do the same thing. Just because your state is hard doesn't mean the grass is greener somewhere else. They all use the same rules, and if you try to do something somewhere else, it's just going to raise a red flag and subject you to more scrutiny.

If you found this video helpful, be sure to click on other videos on our channel to see if there's further information that could give you more insight into resolving your particular situation.