Dealers Offering 'Buy a Car, Get an LLC' Deals: Scam or Secret?

Are you thinking about buying a vehicle with a Montana LLC from a dealership? What happens if your neighborhood car dealership is offering a car for sale with a Montana LLC included? Buckle up, because navigating this territory comes with its own set of twists and turns, but it could pay off in a very real way.

We've got you covered – as experts in this field, we understand the legalities and how to maximize your savings while minimizing headaches. So join us on this journey through the maze of buying a vehicle with a Montana LLC from a dealership.

What does an LLC in Montana have to do with this car?

Montana is preferable for car registrations over many other states because of its lack of sales tax and foregoing inspections and emissions testing for most vehicles. Consequently, Montana has gained a reputation as a tax haven for vehicle purchases, and using an LLC adds an extra layer of security to that process. See, you must have proof of residence to title and register a vehicle in Montana, and that residency requirement is easy to fulfill by forming an LLC in the state of Montana and then titling the vehicle in question to the LLC instead of to yourself.

While this is something you could do yourself with enough time and patience, it’s a process that’s riddled with potential pitfalls that could cost you real money or land you in troublesome legal waters, on top of potentially wasting your time if you’ve never done it before. It’s advisable to let a professional service like ours register your vehicle in Montana on your behalf, whether you’re a dealership looking to sell or a person looking to buy.

Now that we understand what the LLC in Montana has to do with the car, the benefits to a car dealer become clear. Some car dealerships have taken to selling cars that are already registered to LLCs in Montana as a method of passing convenience onto the buyer – at least, that’s what they say. But is that the whole story?

It’s mostly about money

Here is a very important distinction: the Montana LLC has nothing to do with the car beyond the fact that an LLC must be used if the owner maintains their domicile in another state besides Montana, which a lot of people do.

See, a person’s domicile is recognized as their primary residence. There are thousands upon thousands of examples, though, of people maintaining more than one residence. It could be a rental property, either long-term or short-term (or both), or a vacation property, something along those lines. 

Montana State Code Title 35, Chapter 8 contains all the information about LLC formation, legality, and use cases in Montana. For a variety of reasons, people create LLCs in states where they do not permanently reside.

So, why go through all of the effort of creating a Montana LLC just to get your car titled? The biggest reason is money. Montana has no state sales tax, so if you buy a $65,000 truck for example, you pay nothing in sales tax instead of, well, a lot.

Of course, there are costs associated with the LLC itself, and it is not quite as simple as walking into your DMV and getting that vehicle tagged since there’s an LLC involved in the mix as well.

It’s also about convenience

The dealer selling you the car knows all of this. They also know they are saving you many steps:

• No need for DMV paperwork. The vehicle is already owned by the Montana LLC, so  you’re buying the LLC that just happens to own a car. That means no title is transferred, no registration is changed, and no plates are reassigned.

• Vehicles over 10 years old don’t need to be inspected or pass emissions since Montana doesn’t require those steps for older vehicles – even if your local area requires those things.

• No taxes and fees. Not only are you not going to pay any sales tax when you buy this vehicle, you also aren’t going to pay certain car-related dealership fees since, in effect, the dealership isn’t selling you a car, but a business that owns a car.

How do I finance the car in this situation?

Alright, so here’s a tough one: one of the important characteristics of the Montana LLC is that a lender cannot hold the lien of any vehicle in the LLC. In other words, traditional loans are out of the question when buying a car where the dealer is including an LLC.

There is a financing option available to owners or buyers who want to take advantage of the Montana LLC program, whether you go through us or a dealer offering a package sale.

Our preferred provider is Lightstream. Lightstream offers lending packages that allow you to hold onto the title, giving you the latitude to both have a loan and continue to hold the title yourself. This is the best way (and maybe the only way) to have a loan out on a Montana LLC vehicle instead of buying the vehicle outright with a cash purchase.

At the end of the day, as a prominent financial advisor often says, cash is king. If you can buy the vehicle with cash, it will definitely work in your favor better when you buy a vehicle using a Montana LLC.

Yes, options are available for you if you want to finance, but you must be approved, and most of these lenders are very picky about who they lend to, considering they are not holding the title as collateral. Not a dead-end deal by any means, but it is a reality. When you purchase the vehicle outright in the regular non-LLC way, there are no such issues.

We can suggest that using cash to purchase the vehicle or pay it off if it is owned on a lien is the fastest and simplest way to purchase a vehicle with an LLC. Take this advice for what it is: advice, not a financial suggestion. 

Is this a scam?

We don't like saying “it depends,” but it depends. There is a lot of trust in this situation when you are buying a car with a Montana LLC from an established dealership.

• Presumably that dealership is not in Montana. Do they understand the legal requirements to sell a Montana business to a new owner?

• Do they understand the requirements of maintaining the LLC, such as having a dependable Registered Agent and paying all annual fees, and did they maintain all that while the car was waiting to be sold?

• Are they reporting this car as a sale under their dealership, and does this car come with common dealership extras (like a limited warranty, for example)?

That last one is very important. It’s possible that a car dealer could use a Montana LLC to obfuscate dirty dealings. In other words, they might be selling this car off the books or somehow skirting their state’s requirements for car dealers. Not that you would have any way to know that –  the biggest question is, is this place ripping you off or scamming you?

Bring a legal expert

Assuming all of the title info comes back clean, and you want to move forward with the purchase, then you need to make sure that all of your paperwork is available and in order. A clean title is all you need to see for the car, but for the business there is a lot more that needs to change hands.

If you’re buying an existing Montana LLC from a dealership as part of a car purchase, our best advice is to bring a legal expert along for the ride. Have an attorney look over all the paperwork to ensure that nothing is hidden within. Car dealers often advertise that a Montana LLC saves you from having to do DMV paperwork, but they don't tell you that there is a lot more paperwork involved in selling an entire company – that's a lot more opportunities for a shady operator to try and pull something over on you.

While few people are comfortable with DMV paperwork, even fewer understand the intricacies of corporate paperwork. Bring legal help or take copies of all the dealership’s paperwork to your attorney for review prior to buying the car.

Scrutinize the car heavily

Because Montana does not require inspections or emission testing for vehicles more than 10 years old, if the car the dealership is offering is that old, you need to be extremely attentive with inspecting the car before purchase. We would suggest going as far as to have a third-party mechanic inspect the condition of the vehicle.

The first thing you should do with all vehicle acquisitions, regardless of vehicle type and how you intend to purchase it, is to pull a VIN check. We have written about this simple little program a lot, including my own personal story about how it saved me from buying a lemon. 

Do I end up with a Montana plate and title?

Yes! The vehicle in question is already registered to an LLC in Montana, which means it already has a Montana title and license plate in the name of the business. You are simply buying the business, so the car is technically not changing hands, so it will retain its existing title and license plate and everything else that has already made it street legal.

So, what do I do?

Dirt Legal has been the largest and most trusted name in Montana LLC car purchases since the early days of the concept. Now that more people are finding out about the benefits of this process, it's no surprise we are seeing car dealers offering vehicles that are already owned by Montana LLCs.

This isn't necessarily a red flag for you as a buyer, you just need to make sure that all due diligence is done. Understand that this is different from buying a car in the traditional way. Make sure you can trust the dealer to not disappear on you when you need them the most, and have a legal professional look over all the paperwork to ensure they aren't sneaking anything else into the deal without telling you.

But if the car checks out and the LLC checks out, you could be the proud owner of a car that doesn’t need to be inspected or emissions tested and for which you owe no sales tax at the time of purchase. Neat!

Dirt Legal can help

If you already have a vehicle – or are looking to buy one – and want to take advantage of the benefits of a Montana LLC, our industry-leading Montana LLC program is backed by a 100% Money Back Guarantee.

Make sure to check out all of our Montana LLC articles; odds are we have written and spoken about almost every conceivable angle of the Montana LLC vehicle program at one time or another. If you can’t find the answer, get in contact with our representatives. We have done tens of thousands of registrations in our history, so whatever your issues are, we have probably already seen them at least once.

Give us a call if a situation sounds too good to be true and we will help you unravel it!