10 Least Expensive States To Buy a Car

With the price for a new car reaching new heights last year, it certainly pays to shop around when it comes to making this major purchase. What you may not realize, however, is that your state of residence also can play a huge role in the amount it will actually cost you to own a car.

Both new and used car prices can vary from state to state, as can the fees that dealers charge you to complete the transaction. Ultimately, you might have to cough up thousands of dollars more to drive a car off the lot where you live than you would if you resided just one state over.

To find the states where it is the least expensive to own a car, GOBankingRates sourced data from Kelley Blue Book, ISeeCars, AARP and LendingTree. The average prices of new and used cars across various states, along with the cost of dealer fees, were the data points used to determine average overall costs.

While some states were more expensive than others in certain categories, for the purpose of the study, all factors were considered equally. The results are presented below in reverse order, with the most inexpensive state appearing last. 

• Sales tax: 7.00%
• Aug. 2023 avg. new/used car price: $50,100/$27,558
• Aug. 2023 avg. new/used dealer fees: $1,996/$1,623

North Carolina has relatively high sales taxes, but the relatively low dealer fees help make things affordable. Prices for new and used cars run about 3.4% above the national average.

• Sales tax: 7.61%
• Aug. 2023 avg. new/used car price: $50,770/$27,926
• Aug. 2023 avg. new/used dealer fees: $1,603/$1,230

Sales tax in New Mexico is quite high — the 16th-highest in the nation, as a matter of fact. But the state still scores well in terms of affordability because prices are only 4.79% above the national average and dealer fees are relatively reasonable.

• Sales tax: 5.43%
• Aug. 2023 avg. new/used car price: $49,080/$26,997
• Aug. 2023 avg. new/used dealer fees: $2,753/$2,069

Dealer fees in Wisconsin are the highest in the top 10, but they’re still quite affordable on a national basis. Coupled with car prices just 1.30% above the national average and moderate sales taxes, Wisconsin makes it into the top eight.

• Sales tax: 5.77%
• Aug. 2023 avg. new/used car price: $48,656/$26,764
• Aug. 2023 avg. new/used dealer fees: $2,486/$1,971

Virginia’s sales taxes are moderate, but car prices are right in line with national averages, coming in just 0.42% above. Dealer fees are comfortably below national norms, although new car fees are among the highest in the top 10.

• Sales tax: 4.44%
• Aug. 2023 avg. new/used car price: $46,718/$25,698
• Aug. 2023 avg. new/used dealer fees: $2,179/$1,620

Perhaps surprisingly, Hawaii actually has cars that are priced 3.58% below the national average. A 4.44% sales tax and four-digit dealer fees — although still well below average — help keep the state out of the top five.

• Sales tax: 0.00%
• Aug. 2023 avg. new/used car price: $47,502/$26,129
• Aug. 2023 avg. new/used dealer fees: $2,486/$2,486

Delaware is one of just four states in the country that have no sales tax on car purchases, helping explain why the state ranks in the top five. Even though car prices are about 2% below the national average as well, the state can’t climb any higher due to the relatively high amount of dealer fees attached to a car purchase.

• Sales tax: 1.81%
• Aug. 2023 avg. new/used car price: $58,377/$32,111
• Aug. 2023 avg. new/used dealer fees: $315/$315

The average car price is more than 20% above the national average in Alaska. So how did the state rank in the top four in terms of affordability? Having the lowest dealer fees in the entire country helps balance out car transactions in Alaska.

• Sales tax: 0.00%
• Aug. 2023 avg. new/used car price: $45,928/$25,263
• Aug. 2023 avg. new/used dealer fees: $1,372/$1,372

Dealer fees are well below average in New Hampshire, but they still crack the four-digit level. Fortunately for car buyers, the state charges no sales tax on purchases, and car prices themselves are among the lowest in the nation, at 5.21% below average.

• Sales tax: 0.00%
• Aug. 2023 avg. new/used car price: $56,186/$30,906
• Aug. 2023 avg. new/used dealer fees: $537/$537

Montana car buyers benefit from the double whammy of 0% sales tax and extremely low dealer fees, which rank the third-lowest in the nation. This is in spite of the fact that car prices themselves are actually more than 15% above the national average.

• Sales tax: 0.00%
• Aug. 2023 avg. new/used car price: $51,299/$28,218
• Aug. 2023 avg. new/used dealer fees: $353/$353

Oregon tops the list when it comes to car affordability. Having no sales tax makes a huge difference but so too does the extremely low amount of dealer fees, which are the second-lowest in the country.

Methodology: To find the cheapest states to buy a car, GOBankingRates analyzed each state across multiple factors to determine the best and cheapest state to purchase a new or used vehicle. Using the national average car value for each month sourced from Kelley Blue Book and the average car price for each state sourced from ISeeCars, the average car values for each month can be calculated and the month-over-month and year-over-year changes can be found. The sales tax for each state was sourced from the AARP, and the average dealership fees for each state were sourced from LendingTree. The states were ranked using the largest percent difference from the Kelley Blue Book national average for August 2023, the largest percent of state sales tax, the cost of dealer fees for a used car, and the cost of dealer fees for a new car. All data was collected and is up to date as of Sept. 27, 2023.