Where to Find the Cheapest States to Buy a New Car: A Comprehensive 2023 State-by-State Analysis

When budgeting for a new vehicle purchase, the total cost extends far beyond the sticker price. While many shoppers focus on negotiating the vehicle’s selling price, an often-overlooked factor can significantly impact your bottom line: where you live. The location of your purchase can determine whether you’ll pay $45,000 or $48,000 for the same model—a difference of thousands of dollars. Understanding which states offer genuine affordability requires looking beyond surface-level pricing to examine sales taxes, dealer fees, and market conditions.

GOBankingRates conducted a comprehensive analysis using data from Kelley Blue Book, ISeeCars, AARP, and LendingTree to identify the cheapest states to buy a new car. The research examined new and used vehicle prices alongside state sales taxes and dealership charges to create a complete affordability picture. Based on August 2023 market data, certain states consistently emerged as the most budget-friendly options for car buyers.

The True Cost of Ownership: What Really Matters

Car affordability isn’t a single metric—it’s a combination of factors working in harmony. When evaluating the cheapest states to purchase a new car, three elements demand attention:

Sales tax rates vary dramatically across America, from zero to over 7.6%. In high-tax states, buyers of a $50,000 vehicle might pay thousands more simply due to state regulations. Vehicle pricing itself fluctuates based on local market demand, inventory levels, and regional economic conditions. Dealership charges are perhaps the most surprising variable, ranging from under $400 to nearly $3,000 depending on location—a factor many buyers never anticipate.

When these three elements align favorably, the result is genuine savings. A savvy buyer who purchases their new car in the right state might save between $3,000 and $8,000 compared to buying in a less favorable market.

The No-Sales-Tax Advantage: America’s Most Attractive Markets

Five states in America charge zero sales tax on vehicle purchases: Delaware, Montana, New Hampshire, and Oregon stand out as having achieved perfect affordability through this mechanism, with Oregon ranking highest nationally. These jurisdictions eliminate one of the largest variables in the purchase equation.

Oregon leads the nation with the lowest overall car ownership costs. Despite new car prices averaging $51,299, the combination of zero sales tax and dealership fees of just $353 creates an unbeatable advantage. Used cars in the state average $28,218. The extremely low dealership charges—second-lowest in the country—make Oregon the destination for cost-conscious shoppers.

Montana demonstrates how powerful tax-free status can be, even with above-average vehicle pricing of $56,186 for new cars. The $30,906 average for used vehicles becomes more attractive when paired with just $537 in dealer fees and no state sales tax. The state’s relatively low fees compensate for having the highest vehicle prices among the cheapest states overall.

New Hampshire offers both reasonable pricing and zero taxation. New car prices at $45,928 are among the nation’s lowest, while used cars average just $25,263. Dealership fees of $1,372 remain well below national norms, making New Hampshire particularly attractive for budget-conscious buyers seeking value.

Delaware rounds out the tax-free options, though higher dealer fees ($2,486) prevent it from ranking higher. New cars average $47,502 with used vehicles at $26,129—solid pricing that would rank higher if not for transaction costs.

Low-Tax States with Additional Advantages

Some states haven’t eliminated sales tax but keep rates remarkably low, creating additional opportunities for savings on your new car purchase.

Alaska occupies a unique position by charging only 1.81% sales tax. What truly distinguishes Alaska is having the nation’s lowest dealer fees at just $315 for both new and used purchases. This single factor offsets the reality that new cars average $58,377—more than 20% above national averages. For buyers in Alaska, the dealership fee advantage is game-changing.

Hawaii surprises many shoppers with new car prices averaging $46,718, actually 3.58% below the national average. At 4.44% sales tax, the state remains affordable even with $2,179 in average dealer fees. The combination makes Hawaii an overlooked gem for new car buyers.

Wisconsin provides moderate sales tax (5.43%) paired with new car pricing just 1.30% above national baseline at $49,080. Used vehicles average $26,997. Though dealer fees of $2,753 rank highest among the top ten, they remain reasonable nationally, positioning Wisconsin as a solid middle-ground option.

Virginia maintains moderate 5.77% sales tax while keeping vehicle prices nearly identical to national averages (0.42% above at $48,656). Used cars average $26,764, and dealer fees run well below national norms except for new car charges, creating overall affordability.

Southeast Markets: Trade-offs Worth Considering

The southeastern region offers mixed advantages, where lower dealer fees sometimes offset higher tax rates.

New Mexico charges 7.61% sales tax—the 16th-highest nationally—but compensates through pricing discipline. New cars average $50,770, just 4.79% above national averages, while used vehicles are priced at $27,926. Dealer fees of $1,603 for new purchases and $1,230 for used vehicles remain remarkably reasonable, making the state competitive despite tax disadvantages.

North Carolina exemplifies how low dealer fees can offset other costs. The state’s 7.00% sales tax ranks as moderately high, yet average dealer fees of $1,996 for new cars and $1,623 for used vehicles provide savings. Vehicle pricing runs 3.4% above national averages, but the fee structure helps buyers manage overall costs effectively.

Strategic Insights for the Cheapest New Car Purchases

The data reveals several strategic principles for finding the best car buying opportunities:

Dealership fees matter enormously. The difference between Oregon ($353) and Wisconsin ($2,753) creates an $2,400 gap—roughly equivalent to 5% of vehicle purchase price. This variable deserves negotiation attention.

No sales tax creates massive advantages. Even when vehicle prices run higher than average, eliminating 5-8% in state taxes creates substantial savings. This explains why Montana ranks third nationally despite 20%+ above-average pricing.

Regional pricing varies predictably. States with lower new car prices (Hawaii, New Hampshire) offer starting advantages that compound when combined with favorable tax treatments or low fees.

Below-average pricing is rare but valuable. Only Hawaii achieves below-national-average pricing among the most affordable states, suggesting that cheapest states succeed through tax and fee advantages rather than consistently discounted pricing.

Making Your Decision: Practical Guidance for Buyers

Based on this analysis of the cheapest states to buy a new car, several practical steps emerge:

If you’re located in or near Oregon, Montana, New Hampshire, or Delaware, congratulations—geographic advantage is already working in your favor. If not, consider whether purchasing out-of-state could provide sufficient savings to offset travel and logistics costs.

For those in higher-cost states, negotiating dealer fees demands fresh emphasis. Since fees represent the most controllable variable, buyers should research typical charges for their location and push back against charges exceeding regional norms.

Understanding local market conditions matters. States with stronger pricing and favorable tax situations represent buyers’ best opportunities for substantial new car purchase savings. The difference between choosing wisely and choosing carelessly could easily reach several thousand dollars—a gap worth careful research and consideration.

Data sourced from Kelley Blue Book, ISeeCars, AARP, and LendingTree, reflecting market conditions as of August 2023. State sales tax rates, vehicle pricing, and dealership charges vary by specific dealership and vehicle type. Buyers are advised to confirm current rates and pricing for their specific purchase situation.