Where To Buy a Car on a Budget: America's 10 Cheapest States

Shopping for a vehicle can drain your wallet quickly, especially when the national average for a new car hovers around $48,000. What many buyers don’t realize is that location plays a decisive role in the final purchase price. Depending on which state you live in, you could end up paying thousands more—or significantly less—for the same vehicle. To identify the top 10 cheapest states to buy a car, this analysis draws on data from Kelley Blue Book, ISeeCars, AARP, and LendingTree, examining factors like new and used car prices, sales tax rates, and dealer fees across the nation.

Understanding What Makes Certain States Affordable

The cost of purchasing a vehicle involves multiple layers beyond the sticker price. Sales tax, dealer fees, and regional pricing variations all contribute to your total out-of-pocket expense. Some states offset high car prices with low taxes or minimal dealer fees, while others maintain consistently low prices across all categories. The interplay between these factors determines whether a state truly offers value for car buyers seeking the best deals.

No Sales Tax: The Game Changer

One of the most significant factors affecting affordability is sales tax. Four states in the nation charge zero sales tax on vehicle purchases, creating a substantial advantage for residents. Oregon leads this category with the lowest dealer fees in the country, resulting in the cheapest overall cost. New Hampshire also benefits from zero sales tax and maintains car prices at 5.21% below the national average, with dealer fees under $1,400. Montana offers another zero-tax advantage with the third-lowest dealer fees nationally, despite having car prices over 15% above average. Delaware rounds out the no-tax states, though its higher dealer fees limit its ranking despite the tax savings.

The Balance of Low Taxes and Reasonable Fees

States with modest sales taxes can still achieve top-10 affordability when paired with reasonable dealer charges. Alaska demonstrates this principle dramatically: although new and used car prices exceed the national average by more than 20%, the state boasts the nation’s lowest dealer fees at just $315. This balance allows Alaska to rank fourth nationally. Virginia maintains moderate sales taxes at 5.77% with car prices tracking near the national average, supported by below-average dealer fees. Wisconsin rounds out this category with a 5.43% sales tax, modest car pricing, and competitive dealer fees that keep it in the top tier despite being slightly elevated within the top 10.

Finding Value Where Prices Are Slightly Higher

Not every cheapest state offers rock-bottom car prices. New Mexico and North Carolina both feature car pricing 3-5% above national averages, yet their dealer fee structures and overall cost composition keep them competitive. New Mexico charges the 16th-highest sales tax in the nation at 7.61%, but reasonable dealer fees compensate. North Carolina similarly combines higher sales tax with low dealer fees to maintain affordability. Hawaii surprises many buyers with car prices actually 3.58% below the national average, supporting its position as the sixth-most affordable state despite four-digit dealer fees.

The Complete Ranking for 2023

Based on comprehensive analysis of 2023 data, the ten cheapest states to buy a car from least to most affordable are: North Carolina (7.00% sales tax, $1,996-$1,623 dealer fees), New Mexico (7.61% sales tax, $1,603-$1,230 dealer fees), Wisconsin (5.43% sales tax, $2,753-$2,069 dealer fees), Virginia (5.77% sales tax, $2,486-$1,971 dealer fees), Hawaii (4.44% sales tax, $2,179-$1,620 dealer fees), Delaware (0% sales tax, $2,486 dealer fees), Alaska (1.81% sales tax, $315 dealer fees), New Hampshire (0% sales tax, $1,372 dealer fees), Montana (0% sales tax, $537 dealer fees), and Oregon (0% sales tax, $353 dealer fees).

Making Your Decision: Key Takeaways for Smart Buyers

When planning to buy a car, consider not just the vehicle’s price but the full cost of ownership in your state. If you’re situated near a state line, the savings from relocating your purchase could be substantial. Prioritize states with zero or minimal sales tax combined with low dealer fees—this combination offers the most reliable path to affordability. Remember that while data reflects 2023 market conditions, the relative rankings and cost dynamics between states remain instructive for current shoppers evaluating where to invest in their next vehicle. The cheapest states to buy a car continue to reward those who shop strategically and understand how state regulations affect final pricing.

Data for this analysis was compiled from multiple authoritative sources including Kelley Blue Book for national car valuations, ISeeCars for state-level pricing, AARP for sales tax rates, and LendingTree for average dealership fees. All figures referenced reflect August 2023 market conditions.