Which State Sells the Cheapest Cars? Here Are the Top 10 Most Affordable Purchasing Locations

When planning to buy a car, location matters significantly. The average price for a new vehicle reached $48,451 in August 2023, but what many buyers don’t realize is that the state where you make your purchase can dramatically affect your total costs. Your state of residence influences not just the vehicle price itself, but also sales taxes and dealer fees—factors that can easily add thousands to your final bill.

To identify which state sells the cheapest cars when considering all these variables together, GOBankingRates conducted a comprehensive analysis using data from Kelley Blue Book, ISeeCars, AARP, and LendingTree. The research evaluated new and used vehicle prices, state sales tax rates, and dealership fees across the nation to determine the overall cost of car ownership by location.

Understanding How State Factors Drive Car Affordability

Several variables determine which state sells the cheapest cars overall. While vehicle prices vary by market, the most significant cost differentiators are state sales tax percentages and dealership transaction fees. Some states charge substantial sales taxes that increase your purchase cost, while others have no sales tax at all. Similarly, dealer fees can range from a few hundred dollars to several thousand, dramatically shifting the total amount you’ll spend.

When analyzing car affordability by state, researchers weighted new car prices, used car prices, applicable sales taxes, and dealership fees equally. This comprehensive approach reveals which locations offer genuine savings versus those that may appear cheap in one category but expensive in another.

Top 10 States Where You Can Buy the Cheapest Cars

10. North Carolina — With a 7.00% sales tax and average new car prices around $50,100 (used: $27,558), North Carolina offers relatively competitive pricing despite moderately high taxes. Dealer fees average $1,996 for new vehicles and $1,623 for used cars, keeping overall costs manageable at roughly 3.4% above the national average.

9. New Mexico — Despite the 16th-highest sales tax rate in the nation at 7.61%, New Mexico still ranks well for affordability. Average new car prices of $50,770 and used cars at $27,926 come in just 4.79% above the national average, while dealer fees of $1,603 (new) and $1,230 (used) remain reasonable.

8. Wisconsin — This state demonstrates how dealer fees impact overall affordability. Wisconsin’s dealer fees are the highest in the top 10 at $2,753 for new cars and $2,069 for used vehicles. However, combined with only a 5.43% sales tax and new car prices just 1.30% above the national average ($49,080), Wisconsin maintains strong affordability.

7. Virginia — Car prices in Virginia align closely with national averages at just 0.42% above standard rates ($48,656 for new vehicles). The 5.77% sales tax and dealer fees well below national norms ($2,486 for new cars, $1,971 for used) make this a solid option for budget-conscious buyers.

6. Hawaii — Surprisingly, Hawaii offers some of the nation’s most competitively priced cars, running 3.58% below the national average at $46,718 for new vehicles. The 4.44% sales tax and four-digit dealer fees ($2,179 new, $1,620 used) round out a generally affordable package.

5. Delaware — As one of only four states with zero sales tax on vehicle purchases, Delaware presents significant savings potential. Despite average new car prices of $47,502 and the highest dealer fees in this ranking ($2,486), the elimination of sales tax helps the state rank in the top five for overall affordability.

4. Alaska — What appears counterintuitive—new car prices averaging $58,377, more than 20% above the national average—becomes logical when factoring in Alaska’s exceptional dealer fee structure. At just $315 for both new and used vehicles, Alaska boasts the lowest dealer fees in the entire country, balancing out the higher car prices and making it surprisingly affordable overall.

3. New Hampshire — Another state with zero sales tax, New Hampshire combines competitive car pricing with low fees. New cars average $45,928 (5.21% below national average) and used cars $25,263, with dealer fees of just $1,372. This combination positions it as one of the most affordable states for purchasing vehicles.

2. Montana — Despite average new car prices of $56,186—more than 15% above the national average—Montana ranks second for affordability thanks to its zero sales tax policy and extremely low dealer fees of just $537. This demonstrates how eliminating sales tax and minimizing transaction fees can offset higher base prices.

1. Oregon — Oregon tops the list as the state that sells the cheapest cars when all factors are considered. With zero sales tax and the second-lowest dealer fees in the nation at just $353, Oregon provides substantial savings despite average new car prices of $51,299. The combination of no sales tax and minimal transaction charges makes Oregon the most affordable state to purchase a vehicle.

Key Takeaway: Which State Sells the Cheapest Cars Depends on Your Priorities

The state that sells the cheapest cars isn’t determined by vehicle price alone. States like Oregon and Montana achieve top rankings despite higher base prices because they eliminate sales tax and maintain minimal dealer fees. Meanwhile, states like North Carolina and New Mexico offer affordable cars through a balance of factors rather than excelling in any single area.

If you’re planning a major vehicle purchase, researching your state’s specific combination of sales tax rates, typical dealer fees, and average vehicle prices could save you thousands of dollars. The data from 2023 shows that strategic location shopping truly matters when buying a car.