Which States Offer the Cheapest Options for Car Buyers? A 2023 Analysis

When the average new vehicle costs reached $48,451 in August 2023, savvy shoppers began to realize that location matters significantly. Your state of residence plays a crucial role in determining your total car ownership expenses. What varies state by state includes new and used car prices, sales tax rates, and dealership transaction fees—factors that can add up to thousands of dollars in difference between neighboring states.

GOBankingRates analyzed data from multiple authoritative sources including Kelley Blue Book, ISeeCars, AARP, and LendingTree to identify which states consistently offer the cheapest prices and lowest overall purchasing costs for car buyers. The analysis examined both new and used vehicle prices, state sales taxes, and average dealer fees across all 50 states to create a comprehensive affordability ranking.

Why Your State of Residence Impacts Your Total Car Cost

The total expense of purchasing a vehicle extends beyond the sticker price. Three primary factors determine your final out-of-pocket cost: the base vehicle price, state sales tax rate, and dealership fees charged to complete the transaction. A buyer in one state might save thousands of dollars compared to purchasing the identical vehicle just across the state line, depending on these variable factors.

The Top 10 Most Affordable States to Buy a Car

10. North Carolina

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

Despite relatively high sales taxes, North Carolina offers competitive pricing because dealer fees remain low. New and used car prices run about 3.4% above the national average, making it an attractive option for budget-conscious car shoppers.

9. New Mexico

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

New Mexico has the 16th-highest sales tax in the nation, yet the cheapest state comparisons still rank it favorably. Prices hover only 4.79% above national averages with reasonable dealer fees offsetting the higher tax rate.

8. Wisconsin

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

Although Wisconsin charges the highest dealer fees within the top 10, they remain reasonable nationally. Combined with car prices just 1.30% above average and moderate sales taxes, the state maintains strong affordability.

7. Virginia

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

Virginia’s vehicle prices align closely with national averages at just 0.42% above, while dealer fees stay comfortably below typical rates. Moderate sales taxes contribute to its ranking among the cheapest states for purchases.

6. Hawaii

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

Surprisingly, Hawaii offers vehicles priced 3.58% below the national average. The combination of a 4.44% sales tax rate and four-digit dealer fees keeps it from ranking higher despite these advantages.

5. Delaware

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

Delaware ranks among just four states with zero sales tax on vehicle purchases, a significant advantage for car buyers. Although prices run approximately 2% below national average, relatively high dealer fees limit further cost reductions.

4. Alaska

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

Alaska’s vehicle prices exceed the national average by over 20%, yet the state maintains top-tier affordability through the lowest dealer fees in the entire country. This unique advantage helps balance out higher vehicle costs.

3. New Hampshire

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

New Hampshire combines zero sales tax with dealer fees well below national averages. Vehicle prices themselves rank among the lowest nationwide at 5.21% below average, making it one of the cheapest states for car purchases.

2. Montana

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

Montana buyers benefit from both zero sales tax and the third-lowest dealer fees nationally. Although vehicle prices run 15% above average, the combination of these two factors creates significant overall savings compared to other states.

1. Oregon

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

Oregon tops the list as the cheapest state to buy a car, featuring zero sales tax and the second-lowest dealer fees nationwide. This combination makes Oregon the most cost-effective destination for car buyers despite moderate vehicle prices.

Understanding What Makes a State Affordable

The cheapest state for car purchases isn’t always determined by vehicle prices alone. Sales tax policies and dealer fee structures often prove equally important in determining total ownership costs. States without sales tax on vehicle purchases—Delaware, New Hampshire, Montana, and Oregon—hold significant advantages, but other factors like low dealer fees can compensate for higher vehicle prices or sales taxes.

Methodology

This analysis examined each state across multiple factors to determine the most affordable location for purchasing new or used vehicles. Data sources included Kelley Blue Book national average vehicle values, ISeeCars state-specific pricing, AARP state sales tax information, and LendingTree dealership fees. Rankings considered the percentage difference from national averages, state sales tax rates, used car dealer fees, and new car dealer fees. All data reflects information collected through September 27, 2023.