Discovering the Best State to Buy a Car: Which 10 States Offer the Most Savings?

When shopping for a vehicle, the price you pay doesn’t just depend on the car itself or the dealership—your location plays a surprisingly important role. Finding the best state to buy a car can save you thousands of dollars compared to other regions. With new vehicle prices averaging $48,451 as of August 2023, understanding which states offer the most favorable conditions for car purchases has become crucial for budget-conscious buyers.

Research from GOBankingRates, using data from Kelley Blue Book, ISeeCars, AARP, and LendingTree, reveals significant variations across states. These variations stem from three primary factors: sales tax rates, dealer fees, and the baseline prices of vehicles themselves. The good news? Some states position themselves as genuinely advantageous for anyone seeking the best state to buy a car.

Understanding the Three Key Cost Factors

When evaluating vehicle purchases across different locations, three distinct elements determine your final out-of-pocket expense. Sales tax varies dramatically—from zero in several states to over 7.5% in others. Dealer fees represent another hidden cost layer, ranging from under $400 in some locations to nearly $2,800 in others. Finally, the actual sticker price of vehicles themselves fluctuates based on regional market conditions and supply-demand dynamics.

The interplay between these factors creates surprising outcomes. A state with higher taxes might still rank favorably if it compensates with exceptionally low dealer fees or competitive vehicle pricing. Conversely, a state with modest taxation could rank lower if dealership charges are exceptionally high.

States with Zero Sales Tax: The Clear Winners

Four states stand out by eliminating sales tax entirely on vehicle purchases—a massive advantage for anyone seeking the best state to buy a car. These jurisdictions include Delaware, New Hampshire, Montana, and Oregon, each taking different approaches to compensate for foregone tax revenue through varying fee structures.

Oregon emerges as the top choice overall. Despite moderate car prices around $51,299 for new vehicles and $28,218 for used ones (as of mid-2023), the combination of zero sales tax and remarkably low dealer fees—just $353 for both new and used vehicles—makes it unbeatable. These represent the second-lowest dealer charges nationwide.

Montana offers a compelling alternative. While new car prices average $56,186 and used cars $30,906, the state’s zero sales tax combined with extremely reasonable dealer fees of $537 create genuine savings. The low dealer charges rank third-lowest nationally, offsetting above-average vehicle pricing.

New Hampshire combines zero sales tax with car prices that run 5.21% below the national average, making it exceptionally attractive. New vehicles average $45,928 and used cars $25,263, with dealer fees hovering around $1,372—well below typical ranges.

Delaware presents another zero-tax option. New car prices average $47,502 and used cars $26,129, with dealer fees at $2,486. While the fees are higher than some competitors, the eliminated sales tax still provides substantial savings.

Affordable Car Pricing: Where Deals Matter Most

Beyond the zero-tax states, several locations offer naturally lower vehicle prices that contribute to overall affordability. Hawaii surprisingly delivers cars priced 3.58% below national averages—around $46,718 for new vehicles and $25,698 for used ones. Combined with a 4.44% sales tax and four-digit dealer fees, the island state maintains competitive positioning.

Virginia features car prices just 0.42% above national averages, meaning you’re essentially paying standard rates. New vehicles average $48,656 and used cars $26,764. With moderate sales taxes at 5.77% and below-average dealer fees, Virginia ranks among the top ten affordable locations.

North Carolina shows comparable vehicle pricing at 3.4% above average, with new cars at $50,100 and used cars at $27,558. The 7% sales tax is relatively high, but low dealer fees ($1,996 for new, $1,623 for used) help maintain affordability.

Rock-Bottom Dealer Fees: The Hidden Advantage

Dealership charges represent one of the most overlooked cost components. Alaska stands out dramatically despite having new car prices 20% above the national average ($58,377) and used car prices similarly elevated ($32,111). The state’s secret weapon? Dealer fees of just $315 for both categories—the lowest in the entire nation. This exceptional advantage explains Alaska’s top-four ranking.

Wisconsin presents another story where dealer fees play a balancing role. While charges reach $2,753 for new vehicles and $2,069 for used ones—the highest in the favorable ten states—they remain reasonable nationally. Car prices just 1.30% above average and moderate 5.43% sales taxes secure Wisconsin’s position in the top eight.

New Mexico manages strong affordability despite the 16th-highest sales tax rate at 7.61%. New cars average $50,770 and used cars $27,926, running 4.79% above national averages. However, relatively reasonable dealer fees ($1,603 for new, $1,230 for used) maintain competitive positioning.

Complete Rankings: Your Ultimate Best State to Buy a Car Guide

The ten most affordable states for vehicle purchases, ranked from tenth to first:

10. North Carolina – Combines 7% sales tax with new vehicles at $50,100 and used at $27,558, offset by low dealer fees of $1,996 and $1,623 respectively.

9. New Mexico – Despite high sales tax at 7.61%, maintains affordability through reasonable dealer fees and below-5%-above-average pricing.

8. Wisconsin – Features minimal price markup (1.30% above average) with moderate taxes at 5.43%, though dealer fees are higher.

7. Virginia – Offers near-average pricing (0.42% above) with moderate 5.77% sales tax and below-average dealer charges.

6. Hawaii – Surprisingly delivers below-average pricing at 3.58% under national levels, with modest 4.44% sales tax.

5. Delaware – Provides zero sales tax advantage despite slightly elevated dealer fees ($2,486 for both categories).

4. Alaska – Overcomes 20%-above-average pricing through the nation’s lowest dealer fees at just $315.

3. New Hampshire – Combines zero sales tax with below-average pricing (5.21% lower) and reasonable dealer fees around $1,372.

2. Montana – Leverages zero sales tax and third-lowest dealer fees ($537) despite 15%-above-average car pricing.

1. Oregon – Tops the rankings with zero sales tax, second-lowest dealer fees ($353), and moderate vehicle pricing around $51,299 for new and $28,218 for used vehicles.

Making Your Decision: Practical Considerations

Choosing the best state to buy a car extends beyond simple rankings. Consider your specific circumstances: Are you purchasing new or used? How much weight should you place on sales tax versus dealer fees? Will you benefit from lower initial purchase prices or other long-term ownership costs?

For buyers prioritizing immediate savings, zero-tax states offer clear advantages. Those seeking balance between pricing and fees might find Hawaii, Virginia, or North Carolina more practical. Buyers willing to accept higher sticker prices in exchange for rock-bottom dealer fees should seriously consider Alaska or Montana.

Understanding these regional variations empowers you to make informed decisions about when and where to purchase your next vehicle, potentially saving thousands in the process.

Research conducted by GOBankingRates using data from Kelley Blue Book, ISeeCars, AARP, and LendingTree as of August 2023. All pricing, sales tax rates, and dealer fee information reflect market conditions from that period.