If Your Car Is Financed, Can You Even Register it Out-of-State?

Where Can I Register My Car Out of State If It's Financed? 2 Simple Solutions

We talk about the Montana LLC registration program a lot and with good reason: it is our flagship program that we have used to register thousands of vehicles over the years. It is our best seller because it is the most versatile registration program in our inventory and it is the one that will save you the most money in sales tax.

But there is one glaring problem with it: you need to own the vehicle outright to do it. Generally speaking you can’t do our Montana LLC registration for vehicles with a lien. So where does that leave you?

We’ll find out. 

1. Register Your Financed Car in South Dakota

If you have a lien on your car (or truck, RV, UTV, etc), you are faced with some limitations.

Why South Dakota Works for Out-of-State Registration

We don’t recommend South Dakota primarily for out of state registration because it doesn’t quite afford you with the same security as a Montana LLC. It’s not that a SoDak registration isn’t legal; South Dakota is perfectly fine with it.  

South Dakota always delivers.

South Dakota has a low sales tax rate (4%) making it attractive to people looking to get below the national average of 7% (although rates soar well above 10% in some parts of the country). South Dakota also has no in-state residency requirements, which is the primary reason why they work so well with a financed car (since you are the owner and not an LLC with limited or no banking or buying history). 

• Low sales tax (4%)

• No Residency Requirement

• Straightforward Registration Process

Steps to Register Your Car in South Dakota

The process of getting your vehicle registered in South Dakota is not difficult. We at Dirt Legal have been working on and with South Dakota for out of state registration services for years now and have helped hundreds of people just like you get their paperwork in order.  This simplified flow chart covers the process as well as anything!

Once you hit the buy button, we handle the rest of the process for you. Too easy. 

2. Use a Montana LLC – With Your Bank's Permission

Okay, so this next solution takes a little bit more effort and persuasion. We make a generalized statement that you can’t do the Montana LLC with a financed vehicle, and it is a generalized statement for a reason: it is true in a lot of cases. But not all cases. 

Banks will sometimes make an exception and allow you to title and register a vehicle through an LLC with a lien, but they have to be okay with it and put it in writing. 

See, this is not a Montana thing, per se. This is actually an LLC thing. Most auto loans and financing include a clause or two that require the vehicle to be titled in the name of the individual. Banks do this because it ensures the lienholder (i.e., your bank or credit union) has a clear claim on the vehicle in case you the borrower defaults. If the vehicle is titled in an LLC, the lender will probably consider it a transfer of ownership which will probably violate the terms of the loan. 

This is to protect the lienholder’s interests. When they require the title to be in the borrower’s personal name, they know for a fact that their rights are protected. Banking is all about risk, and it poses a high level of risk when the bank isn’t really sure who they can go after if they need to reclaim the vehicle. 

However, it can be done. You need to talk to your bank and explain exactly what you are doing if you plan on buying a vehicle with a loan and titling it through a Montana LLC. If they are amenable to it, they can write a letter approving the process and then we can proceed on our end. Like we have said about insurance, it is in your best interest to be completely transparent about the process. 

Why Choose a Montana LLC for Registration?

Alright, so even though it does take a little more work, maybe even a little massaging to convince your lender to give you the green light, we still suggest the Montana LLC registration process over South Dakota for a couple of key reasons. 

• No Sales Tax

This one is pretty obvious, but I’ll throw it out there again: Montana has no sales tax, while South Dakota still has a 4% sales tax rate. That can amount to a lot of cha-ching depending on what you are registering. Let’s say you are titling a $75,000 vehicle. That will be zero dollars through Montana, but it will still set you back $3,000 in sales tax in South Dakota. 

• Legal Vehicle Ownership via an LLC

One of the biggest issues our customers face is if they are ever pulled over and have to explain why the tag and registration says X state when they live in Y state. If your vehicle is registered in South Dakota, it will be in your name which is fine, but almost all states have a requirement that you register the vehicle within a few weeks upon moving to the state. This same rule is usually interpreted the same way with out-of-state registrations. 

However, when you own a vehicle with a Montana LLC, the owner is the LLC which is still you. But since the vehicle is being used primarily outside of the state of registration (Montana), it is best if it is owned by the LLC, so it can be parked and operated anywhere. 

How to Register a Financed Car with a Montana LLC

There is only one extra step to register your financed car with a Montana LLC than an unfinanced vehicle and that is a letter from your lender okaying it. That’s it. When they give it the green light, the rest of the process looks the same on your end. 

The process is simple: 

1. Buy the product/service.

2. Complete the order form.

3. We ship out paperwork for you to fill out. You fill it out. 

4. Either mail it back in a pre-addressed, postage-paid envelope or upload the paperwork. 

5. We do all the preparation and send the documents to the Montana DMV. 

6. The order is shipped directly to you from the DMV. 

The letter should be sent to us as quickly as you can get it so we can proceed with your order. 

Which Option is Right for You?

Our default for financed vehicles is a South Dakota registration but that doesn’t mean it is the best for you. If your bank won’t work with you, it may be your only move. And here’s the deal: most of the time people run into problems when they are running a street-legal OHV in a state that has not approved of those. Yes, reciprocity is a real thing but when it comes to vehicles like UTVs or surplus army trucks in states like Colorado and California, you can run into problems. And yes, there have been cases where the authorities weren’t having it regardless of where the vehicle is tagged. 

But if you are just cruising down to the coast for the winter in an F-250 and fifth wheel trailer wearing South Dakota plates, the odds are very low for you to be randomly pulled over. Unfortunately, it happens a lot when people try it with UTVs, and a lot of the time it is the Montana LLC ownership that keeps them out of hot water, or gets them out of it. 

With that said, the best all-around registration service is through our Montana LLC registration program. It gives you the most freedom to do what you want, and it is also a much better option for repeat registrations. You can title and register as many different vehicles as you want in one LLC. This helps drive the cost down since you won’t have to pay for LLC formation for each new addition, and it also helps lower the relative cost of the LLC renewal fee.

Whichever one you choose, our staff will be with you every step of the way throughout the entire process. You can always call us and get a status update, or check in on the secure link we send you after purchase.