Which States Offer the Cheapest Car Deals: Understanding Regional Price Variations

When you’re shopping for a new vehicle, the location where you make the purchase can make an enormous difference in your total cost. A buyer in one state might pay thousands of dollars less than someone purchasing an identical vehicle just across the state line. To help you understand which state has the cheapest cars and what drives these regional differences, GOBankingRates conducted a comprehensive analysis using data from Kelley Blue Book, ISeeCars, AARP, and LendingTree.

The research examined three critical cost factors: statewide sales tax rates, average vehicle prices for both new and used cars, and dealer fees charged during the transaction. By analyzing these variables across all 50 states, the study identified where consumers get the best value when buying a car.

How Sales Tax Creates Dramatic Cost Differences

One of the most significant determinants of overall car affordability in a state is the sales tax burden. While some states charge standard sales tax rates between 5-8%, others have discovered a major advantage: charging zero sales tax on vehicle purchases.

Four states have eliminated sales tax entirely on car purchases, creating substantial savings for buyers. A vehicle priced at $50,000, for instance, would incur a $4,000 tax burden in a state with 8% sales tax, but zero in these tax-free states. This single factor can swing a purchasing decision dramatically in favor of certain states.

However, the presence of lower sales taxes doesn’t guarantee overall affordability if other costs like dealer fees are exceptionally high. The true measure of a state’s car-buying value requires examining all cost components together.

The Hidden Impact of Dealer Fees on Your Final Bill

Beyond sales tax, dealer fees represent another variable cost that differs substantially by state. These fees typically range from several hundred dollars to over $2,700, depending on local market practices and state regulations.

Interestingly, some states with higher vehicle prices still rank among the cheapest places to buy a car because they maintain unusually low dealer fee structures. Conversely, states with competitive vehicle pricing can lose their advantage if dealers charge high transaction fees.

The difference between the highest and lowest dealer fee states can amount to $2,400 or more per transaction—a significant sum that deserves careful attention during the purchasing process.

Top 10 Most Affordable States for Car Purchases: 2023 Market Data

Based on comprehensive analysis of 2023 data, here are the states where consumers achieve the best value when buying a car:

1. Oregon — The clear winner for car affordability, Oregon charges 0% sales tax and has dealer fees among the lowest in the nation at $353 for both new and used vehicles. New car average: $51,299; Used car average: $28,218.

2. Montana — Buyers benefit from zero sales tax and exceptionally low dealer fees ($537), making it the runner-up despite car prices averaging $56,186 for new vehicles and $30,906 for used cars—both running 15%+ above the national average.

3. New Hampshire — The state combines zero sales tax with dealer fees of $1,372 and car prices that are 5.21% below the national average, creating strong overall value. New car average: $45,928; Used car average: $25,263.

4. Alaska — While new cars average $58,377 and used cars $32,111—more than 20% above national averages—the state’s exceptionally low dealer fees of just $315 balance out the equation effectively.

5. Delaware — As one of four no-sales-tax states, Delaware offers new cars at $47,502 and used cars at $26,129, though dealer fees of $2,486 prevent higher ranking.

6. Hawaii — Surprisingly affordable with new car prices at $46,718 (3.58% below national average), a 4.44% sales tax, and dealer fees around $2,000.

7. Virginia — Car prices align closely with the national average at $48,656 for new and $26,764 for used vehicles, supported by moderate 5.77% sales tax and below-average dealer fees.

8. Wisconsin — New cars average $49,080 and used cars $26,997, with a 5.43% sales tax. Though dealer fees are the highest among the top 10, the state still achieves strong affordability through reasonable baseline vehicle prices.

9. New Mexico — Sales tax runs high at 7.61%, but car prices only 4.79% above average and reasonable dealer fees ($1,603 for new, $1,230 for used) maintain competitiveness.

10. North Carolina — Despite a 7.00% sales tax, low dealer fees ($1,996 for new, $1,623 for used) help offset costs. New car average: $50,100; Used car average: $27,558.

What the Data Reveals About Regional Car Markets

The analysis demonstrates that the cheapest state to buy a car isn’t determined by any single factor. The most affordable purchasing environments combine multiple advantages: competitive vehicle pricing, low state sales taxes, and minimal dealer fees.

States achieving top rankings typically excel in at least two of these three categories. Oregon leads because it dominates both sales tax and dealer fees. Alaska succeeds despite high vehicle prices because of extraordinarily low transaction costs. New Hampshire balances competitive pricing with tax and fee advantages.

Understanding these dynamics helps you make informed decisions about where and when to purchase your next vehicle. Whether relocating to a new state or willing to purchase across state lines, the potential savings justify careful analysis of regional market variations.