Buying A Car In Texas

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Buying A Car In Texas

Postby Leesbro63 » Tue Dec 18, 2012 10:37 am

We are Pennsylvania residents but my 19 year old son will soon be going to college in Texas. He is going to need a car and I plan to get him a new one. As it's about 1400 miles, I am inclined to get the car in Texas. I might even want to lease a car. What are the logistics of all of this? My guess is that it's cheaper to keep him on our family auto insurance policy here in PA. If I lease in Texas, can the lease be written as a PA lease? And if I buy in Texas, can I get some sort of paperwork so that the car can be registered here in PA? Or might it make the most sense just to get the car here and ship it or have it driven to Texas?

Anyone who can help me tease out the nuances of this will be appreciated.
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Re: Buying A Car In Texas

Postby livesoft » Tue Dec 18, 2012 11:19 am

I'd call my auto insurance company about this first. Then I'd ask Bogleheads second.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Buying A Car In Texas

Postby texasdiver » Tue Dec 18, 2012 12:46 pm

Not sure what logistics you are referring to.

If you buy a car in Texas you'll owe Texas sales tax of 6.25% at the time of purchase and then will have to pay for the licensing fees which is about $55. A lot of people do trade-ins with the dealer at the time of purchase to reduce their tax liability as the sales tax is on the net purchase (new car price minus trade in value).

If you bring a car to Texas that already has PA plates you will not owe sales tax, you will only owe a $90 new resident fee on top of the normal roughly $55 registration fee.

What this means is that if you are bringing in a new car from out of state from a state that has sales tax similar to Texas then it is a wash. However if you are bringing in a car from a state that doesn't have sales tax (such as Oregon) then you come out way ahead. I bought my last car in Oregon when we were moving to Texas, put Oregon plates on it using my parent's address and then only had to pay about $140 to swap out the Oregon plates for Texas plates. Had I bought the car in Texas I would have owed about $1500 in sales tax.

Alternatively, if he is going to be on a college campus then it will be common to see license plates from many different states. Many students take their cars from home and I don't think there is anything illegal about keeping the PA plates on the car through college if his home address remains PA. I live in a college town and see cars with plates from all over parked around campus. It will just mark him as an out-of-state college student for the local cops. But once he sets up TX as his permanent residence and becomes independent he needs to put Texas plates on it (if it is in his name)
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Re: Buying A Car In Texas

Postby Leesbro63 » Tue Dec 18, 2012 12:58 pm

The plan is to keep the car in my name with Pennsylvania plates. I would like to buy it in Texas with some sort of "temporary transit" plate that will remain on the car for a short time until I fly back to PA and register it here and pay PA sales tax. Then I'll mail the PA plate to junior in Texas. I know people in PA buy new cars in surrounding states all the time like this. Insurance has already told me that this is the cheapest way to go. There is only a 50/50 chance junior will remain in Texas after graduating, so we'll cross that bridge when we come to it.

So again I ask what are the logistics? If I do this, will PA require the car to be physically seen here (say, for a PA inspection sticker)? If so, it won't work. Will Texas sell a car on a "transit" plate and not collect sales tax...as states do up here for cars going out of state?
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Re: Buying A Car In Texas

Postby texasdiver » Tue Dec 18, 2012 1:04 pm

I'm not sure what you are trying to accomplish by putting PA plates on a car that you are buying in Texas and that will remain in Texas. Seems like the much easier route would simply be to put TX plates on the car for the duration of the time it will be in TX. You might have to use your son's college address to register it but that shouldn't be a problem. It is common for out of state companies and individuals to register vehicles in TX. You can probably put your PA address into the TX DMV system so that you get the registration renewal letters and such. If/when the car moves back to PA that would be the time to switch to PA plates.

I don't think insurance companies are going to care one bit about which plates are on the car. They are only going to care about the physical location of the car and the primary driver.
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Re: Buying A Car In Texas

Postby Leesbro63 » Tue Dec 18, 2012 1:12 pm

You might be right. I guess I am just thinking that this is really a Pa resident away at college, not a Texas resident there for the duration.
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Re: Buying A Car In Texas

Postby texasdiver » Tue Dec 18, 2012 1:39 pm

Leesbro63 wrote:You might be right. I guess I am just thinking that this is really a Pa resident away at college, not a Texas resident there for the duration.


Small town Texas can be very parochial and this state is replete with speed traps and the like. Your kid is probably better of driving around in a car with TX plates then with some "Yankee" plates on the car.

Just saying......

If you already had the car and it already had PA plates then that is one thing. But if you are getting a new car in TX I don't see any advantage at all in trying to put PA plates on it and the possible disadvantage of being marked as being a tourist or college student from out of state for the next 4 years.
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Re: Buying A Car In Texas

Postby Polar_Ice » Tue Dec 18, 2012 2:31 pm

Since you don't have the car I would register it in TX. I see no good reason to register in PA. I have lived in TX and agree with other posters that he will be more likely to get pulled over with PA plates. Also he is more of a target for theft and other things with PA plates since most people will know he is a student. I would buy a good used car since you can always drive it back to PA to sell it and maybe get more in PA for a rust free car. Just watch out for used car dealers in TX. I would buy a used car from the original owners on craigslist with all the records and can give you the history. Also you could find a local shop or pay a service to inspect the car before buying it. At a minimum run a carfax on it.
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Re: Buying A Car In Texas

Postby Leesbro63 » Tue Dec 18, 2012 3:02 pm

No. I don't want to get involved with the risks of buying a used car, esp that far away. The real old used cars are...well...real old. And the later better ones are priced too close to new to give up the real factory warranty and to take on the risk of buying used.

I'm thinking maybe a Nissan Altima, new, 2013. And that will be his car. He's 19 and has proven responsible. He'll start with a new car and once it's time to replace that, he should be able to do it on his own nickel. I bot my daughter a new 2010 Honda CR-V in college and now she's working and the car is still in excellent shape. The plan worked for her, outta work for junior.
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Re: Buying A Car In Texas

Postby ginyah » Wed Dec 19, 2012 9:25 am

You mentioned possibly leasing the car. In my experience most leases have low mileage limits on them. If your son drives the car from Texas home on vacations he will be putting mega miles on the car and when you turn it in at the end of the lease you will have huge additional fees. Much better to purchase than lease, IMO.
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Re: Buying A Car In Texas

Postby Leesbro63 » Wed Dec 19, 2012 12:24 pm

Actually, he'll NEVER drive the car home...it's 1500 miles. So a low mileage lease would work fine. I read that Texas requires sales tax on the full sales price of the car, however, from the lessor that ends up getting into the lease payment. Making leasing in Texas somewhat more costly than leasing in most places where the sales tax is on the lease payment, not he gross selling price of the car.

If this is really true how do they compete in the leasing game in Texas?
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Re: Buying A Car In Texas

Postby texasdiver » Wed Dec 19, 2012 12:31 pm

Before choosing a specific car I'd take a look at the situation for usage and parking.

If your son is going to an urban campus with extensive mass transit and potentially limited parking options (on-street parking) such as say Rice in Houston or SMU in Dallas then I'd be looking for some sort of small economy car that will be easy to navigate in the urban environment, easy to park, and not to expensive so you don't freak when it gets dinged up from on-street parking in a campus area. Maybe something like a Honda Fit or Kia Soul or some other small hatch back.

If your son is going to a more suburban or rural campus where he's likely to be spending lots of time on the freeway getting to and from school, work, or just driving into the city on the weekends then perhaps something a big bigger and more freeway worthy. The freeways around here are big and people drive fast.
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Re: Buying A Car In Texas

Postby Leesbro63 » Wed Dec 19, 2012 12:35 pm

More like the former.
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Re: Buying A Car In Texas

Postby johnubc » Wed Dec 19, 2012 12:38 pm

PA plates will require a PA inspection every year - seems costly to being the car up for the sake of inspection.
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Re: Buying A Car In Texas

Postby Leesbro63 » Wed Dec 19, 2012 3:10 pm

Naah. If you are out of state it doesn't matter. My daughter had a car in Georgia for a few years with current PA plates but an expired PA inspection sticker.
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Re: Buying A Car In Texas

Postby Leesbro63 » Wed Dec 19, 2012 3:12 pm

What's the deal with leasing in Texas? I hear that the lessor must pay sales tax on the entire sales price of the car...versus most other states that have tax only on the payment...which is effectively only taxing the part being "sold". Seems that this would cause leasing to be less attractive in Texas vs other places. Yes? No? Any details?
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Re: Buying A Car In Texas

Postby Sam I Am » Wed Dec 19, 2012 3:38 pm

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Re: Buying A Car In Texas

Postby Leesbro63 » Wed Dec 19, 2012 4:23 pm

That's interesting. But IN THE REAL WORLD, how does this all play out? Are large downpayments on leases the norms (to cover the sales tax)? Are the payments higher than in other states? Do people avoid leasing in Texas because of this penalty? Is there some sort of alternative financing "deal" that is the "Texas alternative" to leasing?
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Re: Buying A Car In Texas

Postby texasdiver » Wed Dec 19, 2012 5:57 pm

Leesbro63 wrote:That's interesting. But IN THE REAL WORLD, how does this all play out? Are large downpayments on leases the norms (to cover the sales tax)? Are the payments higher than in other states? Do people avoid leasing in Texas because of this penalty? Is there some sort of alternative financing "deal" that is the "Texas alternative" to leasing?


No, they still lease here in Texas because people are stupid and want a fancier car than they can otherwise afford....just like everywhere else in the US. Typically what the dealer will do is fold the tax into the monthly lease payment so you are in effect borrowing the amount of the sales tax payment from the dealer and paying it back monthly over the 24-month lease period. This means your up-front cost to lease a car isn't really different compared to other states, but the monthly lease payment will be $25-50 higher to pay for the financed tax payment. Here's a good explanation:

http://www.leaseguide.com/Articles/texas-auto-lease.htm

BTW, this is not just a Texas issue. Arkansas, Illinois, Maryland, Oklahoma, and Virginia also charge sales tax on the entire price when leasing.
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Re: Buying A Car In Texas

Postby Leesbro63 » Wed Dec 19, 2012 6:07 pm

Thanks. Oddly, there would be little to no advantage to leasing in Pittsburgh vs Texas. Because PA adds 3% to the tax on lease payments. Meaning that buying a car in Allegheny County (Pittsburgh area) or in the Philadelphia would have a 7% sales tax. But the actual tax is 10% of the lease payment...which is about the same as the "Texas penalty" amount of charging sales tax on the full sale price. Can't win either way.
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Re: Buying A Car In Texas

Postby Leesbro63 » Wed Dec 19, 2012 6:09 pm

texasdiver wrote:BTW, this is not just a Texas issue. Arkansas, Illinois, Maryland, Oklahoma, and Virginia also charge sales tax on the entire price when leasing.



And as I mentioned in my prior post, you can really add Pennsylvania to that list too as the tax on leasing is much higher than the tax on buying here. And at least in Texas if you buy the car at lease end you don't pay sales tax. In PA you are paying the higher lease tax then still paying sales tax on the buy out price at the end of the lease. So it's actually worse here.
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Re: Buying A Car In Texas

Postby Leesbro63 » Wed Dec 19, 2012 6:15 pm

Here is another question/issue: Insurance. I like the idea of my kid getting his own insurance, either in PA or Texas. And putting the car in his name with my name not associated with it. Yet because he is in college and I am providing 100% support, could I still be held liable if he committed a costly tort and didn't have enough insurance?
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Re: Buying A Car In Texas

Postby ScottW999 » Wed Dec 19, 2012 6:48 pm

I am not an insurance expert. But when my kids were in college and had cars, I made them the owners of the vehicles and they had their own insurance. You don't want to have any liability issues as an owner of the vehicle. I am sure an attorney or insurance agent will chime in with an official answer.
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Re: Buying A Car In Texas

Postby Leesbro63 » Wed Dec 19, 2012 7:00 pm

Yeah, that is my thinking as well.
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Re: Buying A Car In Texas

Postby fsrph » Wed Dec 19, 2012 7:35 pm

Leesbro63 wrote: So again I ask what are the logistics? If I do this, will PA require the car to be physically seen here (say, for a PA inspection sticker)? If so, it won't work. Will Texas sell a car on a "transit" plate and not collect sales tax...as states do up here for cars going out of state?


I live in Pa. I thought about buying a new car out of state and regestering it in Pa. Don't know if this was mentioned yet but the out of state dealer told me the car would have to be inspected in Pa within 10 days of registration.

From http://www.dmv.state.pa.us/new_resident ... icle.shtml "A vehicle newly registered in Pennsylvania must be safety inspected within ten (10) days of the registration date."

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Re: Buying A Car In Texas

Postby Leesbro63 » Wed Dec 19, 2012 7:55 pm

I think that only means the car can get ticketed in PA if it doesn't have a PA sticker within 10 days. But that's moot if the car isn't in PA to be noticed.
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Re: Buying A Car In Texas

Postby zebrafish » Wed Dec 19, 2012 9:29 pm

Buy in PA: gun rack optional

Buy in TX: gun rack standard
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Re: Buying A Car In Texas

Postby Leesbro63 » Wed Dec 19, 2012 9:40 pm

What about the steer horns on the front bumper?
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Re: Buying A Car In Texas

Postby texasdiver » Wed Dec 19, 2012 10:09 pm

Leesbro63 wrote:What about the steer horns on the front bumper?


No, that was the old Texas. You gotta keep up with the times. Now you take that old car and spend a fortune on rims http://www.carid.com/chevy-caprice-wheels/

Preferably ones that light up and keep spinning when the car is stopped.
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Re: Buying A Car In Texas

Postby second-guesser » Thu Dec 20, 2012 12:40 am

Your child may not need a car the first year if he attends U.T. Austin. Most first year students live on campus and the
bus system is excellent. Plus dorms have parking fees . My daughters attended U.T. Austin and did not use their cars that
much the first couple of years. I would stress buying a safe car with multiple truck and SUV drivers in the lone star state.
Many of the major schools are in cities with highways. My guess is that buying a car in Texas or Pa. would not make
that much difference ; the type of car is probably the determining factor regarding cost. Plus lease vs buying would
not change depending on location ; it is generally preferable to buy. Incidently most people like Texas regardless
of what you hear ; people here are very friendly.

S-G
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Re: Buying A Car In Texas

Postby Leesbro63 » Thu Dec 20, 2012 10:20 am

Who ever said I heard that people AREN'T friendly in Texas? :confused
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Re: Buying A Car In Texas

Postby NerdGirl » Fri Dec 21, 2012 11:47 am

Hi,

I just wanted to say there is a local Texas radio show with car reviews and local dealer recommendations. The host used to run a large dealership himself. I don't know if it really helps to throw this guy's name around when you are buying locally, but I'm sure it doesn't hurt! We used him for a reference buying a toyota a while ago.

Not sure if I'm allowed to post the link, but google "jerry reynolds car pro". He can probably give you a contact at a dealership near the college and hopefully you can make most of the "deal" via email before you get here.

Good luck! Hope your son loves his university. I have a "Aggie" college student son and he definitely loves his!
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Re: Buying A Car In Texas

Postby Leesbro63 » Fri Dec 21, 2012 12:04 pm

Frankly I'll probably buy from the dealer closest to the university, even if the price isn't rock bottom. I won't tell him/her that in advance, but the convenience for a kid with no prior dealer experience will be worth it to me. I'll shop it a bit but will end up at the local dealer unless he's a total thief. And yeah, I get it that you can buy from a distant dealer and take it locally for service. But if there is any value at all these days to a dealer-customer relationship, it's worth it to me in this situation. Absolute rock bottom price is not the #1 priority in this case.
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Re: Buying A Car In Texas

Postby aja8888 » Fri Dec 21, 2012 12:42 pm

It sounds like you have your mind set on buying a car for the boy, and that's good for him and the economy.

We have put three kids through Texas colleges (A&M, Sam Houston (2)), and have a granddaughter currently enrolled as a freshman in Sam. The first three did not need (or want) a car while living on campus as the school is self sufficient for students. There are even fast food restaurants on the campus these days.

Some kids have bicycles, but most walk between the buildings. Cars just sit in the parking lots. Once the kid is off campus in an apartment (which is more fun than a dorm), a car is nice to have.

Our granddaughter has an older Toyota Camry (1998) and lives in the dorm. The only time the car gets used is when she comes home for the weekend (about 60 miles each way).

Just some food for thought.
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Re: Buying A Car In Texas

Postby Sam I Am » Fri Dec 21, 2012 1:06 pm

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Re: Buying A Car In Texas

Postby aja8888 » Fri Dec 21, 2012 1:22 pm

A good, entertaining move to watch before sending a kid off to college is Animal House with John Belushi. :beer

(of course, that's not representative of college life these days!)
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Re: Buying A Car In Texas

Postby texasdiver » Fri Dec 21, 2012 1:42 pm

My wife and I already have a plan for this even though we are a few years out.

My oldest daughter is 14. When she gets to the age that she needs a car to drive in HS (after school job or athletic practices etc.) then she will adopt by wife's 2003 Honda CR-V which was bought new, garaged, and religiously maintained and mainly only used for commuting. My wife will move up to a new Prius. When daughter moves on to college she can take the CR-V with her if she needs it which she may not depending on the campus. She will not be getting a new car. I don't care how badly she wants that convertible Mini Cooper.
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