The Cheapest States To Buy a Car: Where You Can Save the Most

When new car prices hit $48,451 in 2023, the hunt for bargains becomes crucial for budget-conscious buyers. But here’s what many people overlook: the state where you purchase your vehicle can dramatically impact your total cost of ownership. Whether you’re shopping for a new ride or a pre-owned option, state sales taxes and dealership fees can push your final bill thousands of dollars higher — or lower — than what you’d pay just across the border.

To identify which states offer the best deals, we analyzed data from leading automotive and financial sources including Kelley Blue Book, ISeeCars, AARP, and LendingTree. By examining new and used car prices, state sales tax rates, and average dealership fees across regions, a clear pattern emerged: certain states create significantly more favorable conditions for car buyers than others.

States With Zero Sales Tax: The Ultimate Advantage

The most straightforward path to savings comes from living in a state with no sales tax on vehicle purchases. Three states stand out in this category: Delaware, New Hampshire, and Oregon — each offering 0% sales tax on car transactions.

Oregon takes the top spot overall for affordability. Despite having average car prices around $51,299 for new vehicles and $28,218 for used cars (based on 2023 data), Oregon combines its zero sales tax with exceptionally low dealership fees of just $353. This combination places it as the cheapest state to buy cars nationwide.

New Hampshire ranks third nationally, combining 0% sales tax with car prices about 5% below the national average. New car prices averaged $45,928 while used cars came in at $25,263. Dealership fees remained well below average at $1,372, making the overall purchase experience remarkably affordable.

Delaware secures the fifth position, offering 0% sales tax but facing higher dealership fees ($2,486) that prevent it from climbing higher. Still, car prices averaging $47,502 for new vehicles help offset this disadvantage.

Low Sales Tax States: Strong Alternatives

Beyond the zero-tax leaders, several states with minimal sales tax create competitive advantages. Montana and Alaska demonstrate how extremely low dealership fees can overcome higher car prices.

Montana ranks second despite car prices exceeding the national average by 15%, achieving this through 0% sales tax combined with dealership fees of just $537 — the third-lowest in the nation. Alaska ranks fourth, benefiting from the lowest dealership fees in the entire country at just $315, which compensates for car prices more than 20% above average.

Hawaii (4.44% sales tax), Virginia (5.77%), and Wisconsin (5.43%) offer moderate tax rates that, when paired with reasonable dealership fees and competitive car prices, make them attractive options for budget-conscious buyers.

The Role of Dealership Fees and Car Prices

Across the cheapest states to buy cars, the interplay between multiple factors determines affordability. North Carolina and New Mexico demonstrate how low dealership fees can mitigate higher sales taxes. North Carolina charges 7% sales tax but compensates with dealer fees averaging just $1,996 for new cars and $1,623 for used vehicles. New Mexico similarly features 7.61% sales tax yet maintains affordability through prices only 4.79% above national averages and reasonable dealer fees.

The data reveals that no single factor determines overall affordability — successful car purchases depend on understanding the complete picture. A state might have high sales tax but extremely low dealership fees, or average car prices but superior tax incentives.

Making Your Purchase Decision

When evaluating cheapest states for buying cars, consider your personal situation. If you’re relocating, the tax and fee structure becomes critical. If you’re local but willing to shop regionally, even crossing into a neighboring state could result in meaningful savings — potentially thousands of dollars on a major purchase.

The research methodology analyzed each state across car values sourced from Kelley Blue Book and ISeeCars, sales taxes from AARP, and dealership fees from LendingTree. All data reflects conditions as of late 2023.

Your state of residence genuinely influences what you’ll pay for your next vehicle. By understanding which states offer the most favorable combination of low sales taxes, competitive car prices, and reasonable dealership fees, you can make an informed decision that maximizes your purchasing power.