Buying, insuring and registering a car in the U.S.

Step 1 — Sort out your license and your full budget

You need to be allowed to drive before you take the car home, and the rules depend on your state. See our guide to driver’s licenses and state IDs.

Insurers may ask for your Social Security number, your years of driving experience and your driver’s license number. If something is missing, an agent may help (NAIC — A Shopping Tool for Auto Insurance).

Budget for the whole car, not just its price. The FTC suggests counting registration, insurance, gas and maintenance (FTC — Buying a Used Car From a Dealer), and asking for an “out-the-door” price in writing, which includes taxes and fees (FTC — Financing or Leasing a Car).

Step 2 — Compare loan offers before you shop

You can borrow directly from a bank, credit union or finance company, or apply through the dealer (FTC — Financing). A dealer-arranged loan generally has a higher rate, because it includes extra interest that pays the dealer for handling your financing (CFPB). Compare:

• APR (annual percentage rate): the yearly cost of the loan, including interest and the lender’s fees (CFPB).
• Loan term: a longer loan lowers your monthly payment, but you pay more interest overall. The total cost matters, not only the monthly payment (CFPB).

The CFPB suggests getting preapproved by a bank or credit union before you visit a dealer (CFPB). Shop for loans close together: credit inquiries within 14 to 45 days of each other count as one (CFPB).

No U.S. credit history? Your credit reports and scores are some of the most important factors in the rate a lender offers (CFPB). Without a strong credit history, you may need a co-signer, a person who takes equal responsibility for the loan (FTC — Financing). Our guide to building credit from scratch explains where to start.

Step 3 — Choose a dealer or a private seller

From a dealer. Dealers must display a Buyers Guide on every used car they offer, and you’re entitled to one when you buy online too. It says whether the car is sold “as is” (you pay for any repairs after the sale) or with a warranty, and it overrides anything in your sales contract (FTC). If the sale is conducted in Spanish, the dealer must post a Spanish-language Buyers Guide (FTC — Dealer’s Guide to the Used Car Rule). Get spoken promises in writing, and search the dealer’s name with words like “scam”, “review” or “complaint” (FTC).

Example: in California, many dealers can transfer the title and issue temporary registration for you, and every dealer must show you an NMVTIS vehicle history report (see Step 4) (California DMV).

From a private seller. The FTC rule behind the Buyers Guide covers dealers who sell more than five used vehicles in 12 months (FTC — Dealer’s Guide). Example: in California, after a private purchase you have 10 days to transfer ownership. You need the title signed by the seller, a smog certification, and the fees and use tax (California DMV). If a lender (a “lienholder”) still has a claim on the car, its signature is needed on the title too (California DMV).

Step 4 — Check the car’s history, recalls and condition

Start with the VIN (vehicle identification number). It has 17 characters and appears on the lower left of the windshield and on the registration card (NHTSA).

• Title history. The Justice Department’s National Motor Vehicle Title Information System (NMVTIS) shows title information, the latest reported odometer reading and any “brand”, a label such as “junk”, “salvage” or “flood” (DOJ — NMVTIS). Reports come from the approved providers listed on its official site (DOJ). A clean report isn’t a guarantee, because some data may be missing (DOJ).
• Recalls. Search the VIN on NHTSA’s recall page. It shows unrepaired safety recalls, but not recalls more than 15 years old. When a recall applies, a local dealership fixes the recalled part for free (NHTSA).
• A mechanic you choose. A history report usually doesn’t list mechanical problems. The FTC suggests an independent inspection even if the dealer “certified” the car, and considering another dealer if one refuses. A state safety inspection is different: it only checks whether the car is unsafe to drive (FTC).

Step 5 — Read every paper before you sign

• Before you sign a loan, the lender must give you written disclosures showing the APR, finance charge, amount financed, total of payments and total sale price. You can insist on getting them earlier (CFPB).
• Don’t sign a blank or partly filled-in form, and get copies of everything (CFPB).
• Add-ons such as extended warranties or GAP insurance are optional, and their price is negotiable (CFPB). Dealers often bring them up late, or add them without telling you (FTC).
• Make sure the deal is final before you drive away (FTC — Financing).
• Federal law doesn’t give you three days to cancel, though some states require a right to cancel; check your state attorney general’s website (FTC).

Step 6 — Insure the car before you drive it

By law in most states, if you own a car, you must have some auto insurance (NAIC). Example: California requires insurance on every vehicle driven or parked on its roads, with proof kept in the car (California DMV).

• Liability coverage pays for injuries and damage you cause to others, and state minimums differ. Limits are written as three numbers, such as 25/50/15: the most the policy pays per injured person, per accident, and for property damage, in thousands of dollars. You pay anything above your limits (NAIC).
• Examples of legal minimums (not prices): California, $30,000 / $60,000 / $15,000 (California DMV); New York, $25,000 / $50,000 for injury, $50,000 / $100,000 for death and $10,000 for property damage (New York DMV).
• Collision and comprehensive pay for damage to your own car. State laws don’t require them, but a lender usually does until the loan is paid off. There’s no such thing as a “full coverage” policy (NAIC).
• Example: New York registers a car only with New York–issued insurance and doesn’t accept out-of-state policies (New York DMV).

Why it may cost more at first. Insurers commonly consider years of driving experience. Rates are lower for people who have kept a car insured than for people who have never had coverage, and, where state law allows, insurers may use an insurance credit score (NAIC). Each insurer weighs these differently, so the NAIC suggests getting at least three quotes (NAIC). Ask each insurer how it treats a driving record from abroad.

If no one will insure you because you’re a new driver or have no prior insurance, ask your state insurance department about its program for high-risk drivers; premiums there are higher (NAIC). Before you pay any insurer, check with the department that the company and agent are licensed (NAIC — Auto Insurance).

Step 7 — Title, register and inspect the car

Find your state’s official agency in the USA.gov directory (USA.gov).

• Title. It proves who owns the car. Example: in California, a change of owner or lienholder must be reported to the DMV within 10 days (California DMV).
• Registration. If the dealer doesn’t register the car, you do it yourself (California DMV). Keep insurance in force: in New York, a lapse can get your registration and driver’s license suspended (New York DMV); California suspends a registration if it doesn’t receive proof of insurance (California DMV).
• Inspections differ by state. Examples: California requires a smog (emissions) inspection when you register or renew, with exceptions (California DMV — Smog Inspections). New York requires a safety inspection every 12 months and when ownership changes, plus an emissions check for most vehicles; after a private purchase, you have 10 days from registration (New York DMV — Inspections).

Shipping a car from abroad instead? Read what U.S. customs allows first.