The solution to states' budget woes: Vanity license plates?

Vanity license plates have long been popular with American drivers, with 9.3 million vehicles boasting personalized plates. Despite the demand, some states don't even charge for vanity plates. Now, with many states facing budget crunches, increased surcharges or annual fees for these customized plates are being considered as a moneymaking tool. Will it work? Here, a brief guide:

How much do these plates cost?

Currently, most states charge $25 to $50 for vanity plates, with several, including Massachusetts and New York, applying annual renewal fees. Arizona allows license plates to be personalized for free.

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And that's changing?

Yep. Texas is leading the charge. This year, it held the nation's first vanity plate auction, putting up popular customized tags for bidding. One, branded "PORSCHE," sold for $7,500, says Nancy Keates at The Wall Street Journal. "AMERICA" went for $3,000. Delaware recently started selling special historic plates for $100. The state also allows drivers to transfer their license plates to others, which creates a private market of its own. The license plate "6," for example, was recently bought for an incredible $675,000.

Why would people pay so much for license plates?

People buy vanity plates to boost their self esteem, a symbol of "who I am and what I want people to know about me," says life coach Caroline Adams Miller, as quoted by The Wall Street Journal. Personalized plates also carry prestige, and people are willing to pay for that, says Frank Vassallo, whose own license plate is "9," as quoted by the Journal. Still, one study warns that for each dollar increase in price, drivers are 0.1 percent less likely to purchase them — which is "statistically significant." So states shouldn't get too greedy.

How much money could be raised?

Two years ago, Texas hired a private contractor to design a series of vanity plates. Plates with scenic landscapes or sports-themed backdrops range in cost from $55 to $795, and the program has raised $5 million so far, says Joe Tone at the Dallas Observer. The first auction that the state held generated $139,400. Over the next five years, the state hopes to raise $25 million from similar auctions.

Sources: Dallas Observer, DMV Answers, My Plates, Wall Street Journal