Where To Find the Cheapest Place To Buy a Car: State-by-State Breakdown

The average price tag for a new vehicle climbed to $48,451 as of August 2023, making geographic location a critical factor in your purchasing decision. Whether shopping new or used, the state where you buy can significantly impact your bottom line—potentially saving or costing you thousands of dollars. This guide identifies the most budget-friendly markets and explains why certain states offer better deals than others.

What Makes One State Cheaper Than Another?

Car affordability depends on three primary factors: vehicle pricing, sales tax rates, and dealership fees. While new and used car prices fluctuate across regions, the most dramatic variations come from state sales taxes and dealer transaction costs. Two buyers purchasing identical vehicles in neighboring states might face vastly different total costs.

Research from GOBankingRates drew data from Kelley Blue Book, ISeeCars, AARP, and LendingTree to identify regional cost differences. The analysis considered August 2023 pricing for both new and pre-owned vehicles, combined with typical dealership fees charged in each state.

The No-Tax Advantage: Oregon, Montana, and New Hampshire

Oregon emerges as the cheapest place to buy a car, thanks to zero sales tax on vehicle purchases. With an average new car price of $51,299 and used car price of $28,218, Oregon’s real competitive edge lies in exceptionally low dealer fees—just $353 for both new and used vehicles. This combination ranks Oregon first nationally for overall affordability.

Montana follows closely despite car prices running 15% above the national average at $56,186 (new) and $30,906 (used). The state compensates through its dual advantages: zero sales tax and remarkably low dealer fees of only $537. This structure allows Montana buyers to overcome above-average vehicle pricing.

New Hampshire rounds out the no-tax trio with the lowest car prices among this group—$45,928 for new cars and $25,263 for used vehicles, representing a 5.21% discount against national averages. Combined with zero sales tax and modest dealer fees of $1,372, New Hampshire delivers substantial savings.

The Low-Tax Strategy: Delaware and Alaska

Delaware offers zero sales tax alongside below-average car prices (2% below national levels). New vehicle pricing sits at $47,502 while used cars average $26,129. However, dealer fees of $2,486 prevent the state from climbing higher in overall affordability rankings.

Alaska demonstrates that even high car prices—$58,377 for new, $32,111 for used—can translate to affordability when other factors align. With only 1.81% sales tax and remarkably low dealer fees of $315, Alaska still ranks in the top four for cheapest place to buy a car. The state’s geographic isolation explains both inflated vehicle prices and compressed dealer margins.

Middle-Tier Options: Hawaii, Virginia, and Wisconsin

Hawaii surprises many buyers with new car prices running 3.58% below the national average at $46,718, plus a low 4.44% sales tax. Dealer fees average $2,179 (new) and $1,620 (used), keeping Hawaii among the more affordable options despite its island location.

Virginia maintains near-perfect alignment with national average pricing—just 0.42% above—while charging a moderate 5.77% sales tax. Dealer fees ($2,486 new, $1,971 used) stay comfortably below national norms, securing Virginia’s place as a solid mid-tier choice.

Wisconsin combines modest sales tax (5.43%) with car prices only 1.30% above average. Though dealer fees reach $2,753 for new cars—highest in this tier—the overall package remains competitive nationally.

Higher Tax States With Reasonable Prices: New Mexico and North Carolina

New Mexico charges the 16th-highest sales tax at 7.61%, yet maintains affordability through prices just 4.79% above average and reasonable dealer fees ($1,603 new, $1,230 used). New car pricing averages $50,770 while used vehicles cost $27,926.

North Carolina tops the list with a relatively high 7% sales tax, but low dealer fees ($1,996 new, $1,623 used) help offset this burden. New car prices average $50,100 and used cars $27,558—about 3.4% above national levels—making North Carolina competitive despite the higher tax rate.

Key Takeaways for Smart Car Shoppers

The cheapest place to buy a car extends beyond just vehicle price. States without sales tax provide obvious advantages, but dealer fees and regional pricing variations play equally important roles. Alaska and Montana prove that high sticker prices don’t guarantee high total costs when supported by minimal fees and no state sales tax. Conversely, mid-tax states like Hawaii and Virginia offer value through moderate pricing and controlled fees.

When planning a major vehicle purchase, calculate your total out-the-door cost across multiple states if possible. Even a cross-state transaction might justify the effort when facing significant price differences. Understanding regional cost structures transforms car buying from a local inevitability into a strategic financial decision.