Finding the Cheapest States to Buy a New Car: A 2023 Analysis

Shopping for a vehicle is one of the biggest financial decisions most people make, with new car prices averaging around $48,451. Yet many buyers overlook a critical factor that can dramatically impact their final costs: where they live. Your state of residence plays a surprisingly significant role in determining how much you’ll ultimately pay for a car, with some locations offering substantially better deals than others due to variations in sales taxes, dealer fees, and regional pricing.

To identify which states offer the most economical car-buying environments, researchers analyzed data from leading automotive and financial resources including Kelley Blue Book, ISeeCars, AARP, and LendingTree. The analysis examined new and used car pricing across all states, regional dealer fees, and applicable sales tax rates to calculate true ownership costs. The findings reveal that some buyers could save thousands of dollars simply by purchasing in a different state.

States Where You Can Get the Best Deal on a New Car

The cheapest states to buy a new car aren’t always the ones with the lowest car prices. Instead, affordability emerges from a combination of low sales taxes, reasonable dealer fees, and competitive regional pricing. Some states with surprisingly high vehicle costs still rank highly for affordability because they offset this with minimal sales taxes or dramatically reduced dealership charges.

The No Sales Tax Advantage

Four states stand out immediately: Oregon, Montana, New Hampshire, and Delaware. These jurisdictions charge zero sales tax on vehicle purchases, creating an immediate advantage for buyers. Oregon takes the top spot with the lowest dealer fees in the nation at just $353 for both new and used vehicles. Montana follows closely, benefiting from both 0% sales tax and the third-lowest dealer fees nationwide at $537 per transaction. New Hampshire residents enjoy no sales tax plus below-average dealer fees of $1,372, while Delaware also offers zero sales tax, though dealer fees run slightly higher at $2,486.

States with Moderate Costs and Strategic Advantages

Beyond the zero-tax states, several other locations make purchasing significantly more affordable. Alaska demonstrates how low dealer fees can offset higher car prices—despite vehicles averaging more than 20% above the national average, the state ranks in the top four due to dealer fees of just $315. Hawaii surprisingly offers cars priced 3.58% below national averages alongside a reasonable 4.44% sales tax, making it competitive despite isolation-related supply challenges.

Virginia, Wisconsin, New Mexico, and North Carolina round out the top ten. Virginia maintains near-average car prices with moderate sales taxes of 5.77% and dealer fees well below national norms. Wisconsin has higher dealer fees at $2,753 for new vehicles, but compensates with car prices just 1.30% above average and a low 5.43% sales tax. New Mexico’s sales tax ranks 16th-highest nationally, yet the state remains affordable because vehicle prices stay only 4.79% above average with reasonable dealer fees. North Carolina offers relatively low dealer fees despite a 7.00% sales tax, with new and used car prices running about 3.4% above national figures.

How Regional Pricing Variations Add Up

The price differences between states can be substantial. A buyer purchasing in one of the most affordable states might pay thousands less for the identical vehicle compared to a neighboring state with higher taxes and fees. For example, a new car averaging $48,656 in Virginia costs roughly the same as one in North Carolina at $50,100—yet buyers in Virginia benefit from lower dealer fees. Similarly, Montana’s average new car price of $56,186 seems high until factored against the state’s zero sales tax and minimal dealer fees, making it more affordable overall than states with moderately lower base prices but higher tax burdens.

The research, conducted as of September 2023, reveals that savvy shoppers should consider not just advertised prices but the complete cost picture. Dealer fees vary dramatically by state—ranging from $315 in Alaska to $2,753 in Wisconsin for new vehicles—and can swing total purchase costs by several hundred dollars. Sales tax rates span from 0% in four states to over 7% in others, representing hundreds or thousands in additional expenses on a $45,000-$50,000 vehicle purchase.

Strategic Implications for Smart Car Buyers

Understanding which states offer the cheapest environments to buy a new car empowers consumers to make more financially informed decisions. Some buyers might find it worthwhile to purchase in a neighboring state if the savings outweigh travel or logistics costs. Others relocating for work should factor vehicle purchasing into their cost-of-living analysis. The data underscores how location-based financial variables extend beyond just vehicle availability to meaningfully impact personal finances.

For those seeking absolute affordability, the no-tax states emerge as clear winners, with Oregon and Montana offering the most compelling combination of low sales taxes and minimal dealer fees. However, the analysis shows that the cheapest state to buy a new car depends on individual circumstances—vehicle type, timing, and whether purchasing new or used all factor into the equation. By understanding regional cost variations, informed buyers can optimize one of their largest personal expenditures.