Which State Is the Cheapest to Buy a Car? Here Are America's Top 10 Most Affordable Auto Markets

When shopping for a vehicle, your geographic location plays a significant role in determining what you’ll ultimately pay. The average price for a new car reached $48,451 in 2023, but depending on where you live, you might spend thousands more or less than buyers in neighboring states. If you’re wondering which state offers the cheapest opportunity to buy a car, the answer depends on a combination of factors including vehicle pricing, sales taxes, and dealership fees.

To identify the most affordable auto markets across the country, researchers analyzed data from trusted sources including Kelley Blue Book, ISeeCars, AARP, and LendingTree. The analysis examined both new and used vehicle prices alongside state-specific fees and taxes. What emerged was a clear ranking of states where purchasing a car costs significantly less than the national average.

Tax Advantages Shape Affordability

One of the most striking findings is that states with little to no sales tax dominate the list of cheapest places to buy a car. Four states impose zero sales tax on vehicle purchases, creating an enormous cost advantage for buyers. This single factor can account for thousands of dollars in savings on a typical vehicle transaction.

Sales taxes across states range dramatically, from 0% in certain markets to over 7.6% in others. When combined with the base price of a vehicle, these varying tax rates substantially impact the final out-of-pocket cost. Understanding your state’s tax structure becomes essential when evaluating true affordability.

Dealer Fees: The Hidden Variable

Beyond vehicle pricing and taxes, dealership fees represent another critical component affecting your total cost. Some states impose mandatory transaction fees while others allow dealers significant discretion in setting charges. The difference between states with high dealer fees versus those with minimal charges can reach hundreds or even thousands of dollars per transaction.

Notably, some states with higher vehicle prices still rank favorably in overall affordability because they offset costs through exceptionally low dealership fees. This demonstrates that no single factor determines value—instead, a combination of elements creates the final equation.

The Rankings: America’s 10 Most Affordable Auto Markets

Based on 2023 market data, here’s where buyers can find the cheapest deals:

#1: Oregon leads the nation in automotive affordability. With zero sales tax and the second-lowest dealership fees in the country ($353 for both new and used vehicles), Oregon delivers substantial savings despite vehicle prices running slightly above the national average at $51,299 for new cars and $28,218 for used models.

#2: Montana provides similar tax advantages with 0% sales tax. The state features exceptionally low dealer fees (just $537), ranking third-lowest nationally. Although new vehicle prices average $56,186—more than 15% above the national average—the favorable tax and fee structure makes Montana highly competitive for cost-conscious buyers.

#3: New Hampshire combines zero sales tax with reasonable dealership fees ($1,372). The real advantage emerges in vehicle pricing, where both new and used cars cost approximately 5% below the national average. New cars average $45,928 while used vehicles average $25,263.

#4: Alaska represents an intriguing case study. Despite having the highest average vehicle prices in the ranking (new cars at $58,377), Alaska achieves top-four affordability status through the nation’s lowest dealer fees at just $315. The minimal tax rate of 1.81% completes the favorable equation.

#5: Delaware joins the zero-sales-tax club, though its dealer fees are comparatively higher at $2,486. New vehicles average $47,502 while used cars average $26,129—both running approximately 2% below national benchmarks.

#6: Hawaii offers an unexpected advantage with vehicles priced 3.6% below national averages. Despite no particular tax breaks (4.44% sales tax), the lower vehicle costs and moderate dealer fees ($2,179 for new, $1,620 for used) create affordability in this island market.

#7: Virginia keeps prices nearly aligned with national averages while offering moderate sales taxes at 5.77% and below-average dealer fees. New vehicles run $48,656 and used vehicles $26,764, making Virginia accessible for mainstream buyers.

#8: Wisconsin maintains prices just 1.3% above national levels despite the highest dealer fees among the top ten ($2,753 for new vehicles). The 5.43% sales tax and overall cost structure still provide value.

#9: New Mexico charges the 16th-highest sales tax at 7.61%, yet still qualifies for the top ten through reasonable vehicle pricing (4.79% above average) and manageable dealer fees ($1,603 for new vehicles, $1,230 for used).

#10: North Carolina rounds out the list with relatively high sales taxes at 7.00%. However, low dealer fees ($1,996 for new, $1,623 for used) help compensate, keeping overall costs reasonable despite vehicle prices running 3.4% above average.

What Drives These Differences?

The variation in state-to-state costs reflects fundamentally different regulatory environments. States with generous tax policies actively encourage vehicle purchases, while others rely on these transactions as revenue sources. Dealership regulations also vary significantly—some states cap fees while others provide minimal oversight, leading to dramatic differences in transaction costs.

Vehicle pricing itself varies based on regional supply-and-demand dynamics, dealer competition density, and local market conditions. Remote or less-populated states sometimes show unexpected pricing patterns, whether higher or lower than national norms.

Making Your Decision

For buyers seriously considering relocation or border-state purchases, the differences prove substantial. Purchasing in the cheapest state versus the most expensive could save several thousand dollars when combining vehicle price, taxes, and fees. However, practical considerations like vehicle availability, timing flexibility, and warranty support should factor into any purchasing decision.

Understanding which state offers the cheapest opportunity to buy a car empowers consumers to make informed decisions and potentially negotiate more effectively with local dealers by referencing regional pricing data.