Which State Sells the Cheapest Cars? A Data-Driven Guide to Vehicle Affordability by State

If you’re considering a major purchase like buying a new car, you may already know that prices vary significantly across the nation—with average new cars reaching around $48,451 in 2023. What surprises many buyers is that the state where you reside can dramatically influence the total cost of ownership. Depending on where you shop, you could save thousands of dollars simply by understanding what state sells the cheapest cars and the financial factors that make certain states more affordable than others.

According to research conducted by GOBankingRates using data from Kelley Blue Book, ISeeCars, AARP, and LendingTree, three primary factors determine whether cheapest cars are available in your state: sales tax rates, vehicle pricing relative to national averages, and dealership fees charged to complete the transaction.

The Three Cost Drivers That Determine What State Sells the Cheapest Cars

When comparing vehicle affordability across different regions, it’s essential to understand that the final price you pay involves more than just the sticker price. The states that offer the cheapest cars balance multiple financial elements:

Sales Tax Impact: State sales taxes on vehicle purchases range from 0% to over 7.6%, directly affecting your total purchase cost. Some states have eliminated sales tax on car transactions entirely, creating an immediate advantage for buyers.

Vehicle Pricing: New and used car prices fluctuate by state, with some regions averaging 20% above or below the national mean. Geographic demand, supply chain variations, and local market conditions drive these differences.

Dealership Fees: Processing and transaction fees charged by dealers vary from as low as $315 to over $2,750, representing another significant cost variable that buyers often overlook.

The Zero Sales Tax Advantage: States Offering Maximum Savings

For those seeking the cheapest cars with the lowest total cost of ownership, four states stand out by eliminating sales tax entirely on vehicle purchases: Oregon, New Hampshire, Delaware, and Montana.

Oregon leads the category with not only 0% sales tax but also the second-lowest dealer fees in the nation (averaging $353). Despite used car prices running approximately 3.7% above the national average, the combined tax savings and minimal dealership charges make this state exceptionally attractive for cost-conscious buyers.

New Hampshire combines zero sales tax with car prices that run 5.21% below the national average and dealer fees well below the $2,000 mark, creating an accessible option for budget-minded shoppers.

Delaware and Montana similarly benefit from eliminating sales tax, though both states see average vehicle prices running 15-20% above national figures. Montana compensates with the third-lowest dealer fees nationally, making it competitive despite higher vehicle prices.

Lower-Tax States: Finding Affordable Options in States With Sales Tax

For buyers unable to relocate to tax-free states, several regions with moderate sales tax rates still offer cheaper cars through competitive pricing and reasonable dealership fees:

Alaska presents an intriguing case: while vehicle prices exceed national averages by over 20%, the state boasts the lowest dealer fees in the entire country (just $315). This combination positions it as an affordable option despite the high sticker prices.

Hawaii defies expectations by offering new and used cars priced 3.58% below the national average, combined with moderate 4.44% sales tax and reasonable dealership charges, creating surprising affordability for an island state.

Virginia, Wisconsin, and North Carolina represent mid-range affordability, with sales taxes between 5% and 7% balanced by car prices near or slightly above national averages and moderate to low dealership fees.

New Mexico and North Carolina round out the more affordable regions, with New Mexico particularly notable for having relatively high sales tax (the 16th-highest nationwide) yet still maintaining competitiveness through lower vehicle pricing and reasonable dealership charges.

Making Your Decision: Comparing What State Sells the Cheapest Cars

The total cost difference can be substantial. A buyer comparing the least expensive state with the most expensive could save several thousand dollars across the transaction. The decision should weigh your personal situation: if proximity to major dealerships is important, states like Virginia and North Carolina offer reasonable affordability. If you’re purchasing a vehicle through alternative channels or can travel, the zero-tax states—particularly Oregon and New Hampshire—present maximum savings opportunities.

When evaluating where the cheapest cars are available in your area, consider the complete financial picture. High sales tax can often be offset by lower vehicle prices or minimal dealership fees, meaning the “least expensive state” depends on whether you’re buying new or used and the specific dealership fees your chosen dealer charges.

Understanding the Data: How Affordability Rankings Were Determined

Research analyzing vehicle affordability across states examined multiple factors simultaneously: average new and used car prices compared to national benchmarks, state sales tax rates, and average dealership transaction fees. Data was sourced from reputable institutions including Kelley Blue Book for national vehicle valuations, ISeeCars for state-level pricing, AARP for tax information, and LendingTree for dealership fee data. Based on 2023 research, states were ranked considering the cumulative impact of all three factors—price deviation from national average, sales tax percentage, and total dealership charges—on the final cost of ownership.

By understanding regional pricing variations and tax structures, prospective buyers can make informed decisions about where the cheapest cars are realistically available, potentially saving thousands in the process.