Where Cars Are Cheapest in the USA: Top 10 States for Affordable Car Buying

When shopping for a new vehicle, most people focus on the car itself, not realizing that your state of residence can significantly impact how much you’ll actually pay. With average new car prices hitting $48,451 in 2023, understanding where cars are cheapest in the USA becomes crucial for savvy buyers. Your geographic location influences not just the vehicle price, but also sales taxes and dealer fees—which can add up to thousands of dollars in differences between states.

To identify the cheapest states for car purchases, financial researchers at GOBankingRates analyzed data from multiple authoritative sources including Kelley Blue Book, ISeeCars, AARP, and LendingTree. The analysis examined new and used car prices, state sales tax rates, and average dealer fees across all 50 states as of 2023. All factors were weighted equally to determine the most affordable markets for car buyers.

How State Sales Tax and Dealer Fees Shape Your Total Cost

Before diving into the specific states where cars are cheapest, it’s important to understand what makes a state truly affordable. While vehicle prices matter, two additional factors can make or break a car purchase: sales tax and dealer fees. Some states impose sales taxes as high as 8% or more, while others charge nothing at all. Similarly, dealer fees vary dramatically—ranging from as low as $315 to over $2,700 depending on your location.

Consider the example of Alaska: despite having car prices more than 20% above the national average at $58,377, it still ranks among the most affordable states. How? The state charges minimal dealer fees of just $315 for both new and used vehicles, combined with a low 1.81% sales tax. This demonstrates that where cars are cheapest doesn’t always correlate with the lowest sticker prices.

The Top 5 States Where Cars Are Cheapest

Oregon Tops the List leads the nation in affordability thanks to having zero sales tax on car purchases and the second-lowest dealer fees in the country at just $353. While Oregon’s car prices averaged $51,299 for new vehicles and $28,218 for used ones in 2023, the absence of sales tax combined with minimal dealer fees makes it the cheapest state overall.

Montana Ranks Second by offering the powerful combination of zero sales tax and the third-lowest dealer fees nationwide at $537. Although Montana’s vehicle prices averaged $56,186 for new cars and $30,906 for used cars—more than 15% above the national average—the favorable tax and fee structure more than compensates.

New Hampshire Claims Third Place with car prices that are among the lowest in the nation, approximately 5% below the national average. The state charges no sales tax and maintains dealer fees well below the national norm at $1,372 for both new and used vehicles. New car buyers in New Hampshire typically pay around $45,928, while used car shoppers find options averaging $25,263.

Delaware Secures Fourth Position as one of just four states with zero sales tax on vehicle purchases. With car prices roughly 2% below the national average and dealer fees at $2,486, Delaware provides a solid affordability advantage—though high dealer fees prevent it from ranking higher.

Alaska Rounds Out the Top Five despite having car prices substantially above national averages. The state’s extremely low dealer fees of just $315 combined with a minimal 1.81% sales tax offset the higher sticker prices, making it one of the cheapest states to actually own a vehicle.

Mid-Range Affordable States

Beyond the top five, several other states offer reasonable car-buying conditions. Virginia provides moderate sales taxes at 5.77% with car prices nearly at national averages, while dealer fees remain below national norms. Wisconsin benefits from a low 5.43% sales tax, though dealer fees are higher at $2,753 for new vehicles. New Mexico and North Carolina round out the lower-cost tier with moderate pricing structures, though their sales taxes are higher than some alternatives.

Hawaii presents an interesting case: surprisingly, the islands offer new cars priced 3.58% below the national average at $46,718, helped by a low 4.44% sales tax, though four-digit dealer fees limit its ranking among the cheapest states.

The Methodology Behind Finding Where Cars Are Cheapest

The analysis compared each state using multiple variables: percent difference from the national average car value, state sales tax rates, and dealer fees for both new and used vehicles. Data came from August 2023 statistics, representing the most recent comprehensive snapshot of car market conditions across the nation. The ranking system considered all factors equally, meaning a state with slightly higher car prices but no sales tax could outrank a state with lower prices but higher taxes and fees combined.

Making Your Decision: Where Should You Buy?

If you’re contemplating relocation or have flexibility in where to purchase your next vehicle, understanding where cars are cheapest in the USA can yield substantial savings. Buyers relocating to Oregon, Montana, or New Hampshire could save thousands compared to high-tax, high-fee states. Even if relocation isn’t feasible, some buyers have found it worthwhile to purchase vehicles across state lines in nearby cheaper states—though you should verify that such purchases comply with your state’s regulations.

The bottom line: where cars are cheapest depends on your specific circumstances, but zero-income-tax states with low dealer fees consistently offer the best deals. By knowing which states offer the most favorable car-buying environments, you can make informed decisions that significantly reduce your vehicle ownership costs.