Which State Has the Cheapest Cars? A Breakdown of Purchase Costs Across America

Finding an affordable vehicle isn’t just about comparing prices across dealerships—your state of residence plays a surprisingly significant role in determining what you’ll actually pay. When shopping for either new or used vehicles, the difference in total cost between states can easily reach thousands of dollars. If you’re wondering which state has the cheapest cars, the answer involves looking at multiple factors beyond just the sticker price. GOBankingRates analyzed data from trusted sources including Kelley Blue Book, ISeeCars, AARP, and LendingTree to identify which states offer the best overall value for vehicle purchases. The research examined purchase prices, sales tax rates, and dealership fees to create a comprehensive affordability picture.

How Sales Tax and Dealer Fees Impact Your Total Cost

When evaluating where to buy a car, most people focus primarily on the vehicle’s price tag. However, this approach overlooks two critical expenses that can dramatically affect your final bill. Sales tax rates vary substantially by state, ranging from zero in several states to over 7% in others. Additionally, dealership fees—the charges dealers add to complete your purchase—differ significantly from one state to another, sometimes varying by more than $1,000 between locations.

The August 2023 data showed that the national average new car price stood at approximately $48,451, with used vehicles averaging substantially less. Yet the actual amount you’d spend depended heavily on where you lived. Some states managed to keep overall costs low despite having relatively high vehicle prices, while others charged steep taxes and fees that added thousands to the purchase. Understanding these cost components helps explain why strategic location-based shopping could save you considerable money.

Top 10 Most Affordable States for Car Purchases: Full Rankings

Research identified the ten states where purchasing vehicles proved most economical when combining all cost factors. Oregon emerged at the top position, followed by Montana in second place and New Hampshire claiming the third spot. The availability of zero sales tax in these three states provided a substantial advantage for buyers, offsetting other expenses like dealership fees.

Delaware, Alaska, Hawaii, Virginia, Wisconsin, New Mexico, and North Carolina rounded out the complete top ten list. Each of these states demonstrated competitive pricing or low tax structures that benefited car buyers. Interestingly, the rankings revealed surprising patterns—some states with higher vehicle prices still ranked highly in overall affordability due to extremely low dealership fees or favorable tax structures.

Oregon Leads for Car Affordability: Why Zero Sales Tax Matters

Oregon tops the list as the state with arguably the cheapest cars when factoring in total ownership costs. The state charges zero sales tax on vehicle purchases, providing immediate savings compared to most other locations. Beyond this advantage, Oregon also boasts the second-lowest dealership fees in the country at just $353 for both new and used vehicles. Combined with an average new car price of $51,299 and used car average of $28,218 (as of August 2023), these factors created the most favorable overall buying environment.

Montana ranks as the second-best choice, benefiting from the same zero sales tax advantage plus the third-lowest dealership fees nationally at $537. Despite having new car prices exceeding 15% above the national average at $56,186, the tax savings and minimal dealership charges more than compensate, making it surprisingly affordable overall.

New Hampshire places third, combining zero sales tax with car prices running 5.21% below the national average. This state’s pricing advantage coupled with tax relief positions it as an excellent option for budget-conscious buyers, though dealership fees remain in the four-digit range at $1,372.

Alaska Proves the Exception: When High Prices Still Mean Savings

Alaska presents a unique case study in automotive affordability. New vehicles there average $58,377—more than 20% above the national average—making Alaska appear like an expensive place to purchase cars at first glance. However, Alaska ranks fourth overall for affordability due to an extraordinary factor: the state charges the lowest dealership fees in the entire nation at merely $315 for both new and used vehicles.

This dramatic difference in transaction costs fundamentally reshapes the affordability equation. Despite the steep vehicle prices reflecting Alaska’s geographic location and shipping costs, buyers still spend less overall compared to many other states where dealerships charge $2,000 or more in fees.

Delaware (ranking fifth) offers another interesting scenario, with zero sales tax but relatively high dealership fees at $2,486. Hawaii (sixth) surprises many with vehicle prices actually running 3.58% below the national average, combined with a low 4.44% sales tax rate. Virginia, Wisconsin, New Mexico, and North Carolina complete the top ten, each offering distinct combinations of reasonable pricing and manageable tax or fee structures.

What This Means for Your Car-Buying Strategy

The research demonstrates that where you purchase your vehicle significantly impacts your total cost. If you live in a high-tax or high-fee state, considering a trip to a neighboring state with better rates could justify the travel for major purchases. For those planning to relocate or having flexibility in their location, choosing a state known for automobile affordability represents a meaningful financial decision.

The data from August 2023 provides a solid baseline for understanding regional differences, though individual dealer negotiations and current market conditions will always influence final pricing. By understanding which state has the cheapest cars when all costs are considered—not just the vehicle price itself—you can make a more informed purchasing decision.