Where To Buy a New Car at the Lowest Price: A State-by-State Cost Analysis

Finding the right location to purchase a vehicle can save you thousands of dollars. While the national average for a new car hit $48,451 in August 2023, the actual cost you’ll pay depends significantly on where you live. State sales tax rates, dealer fees, and regional pricing all play crucial roles in determining your final expense.

What Drives Car Purchase Costs Across States

When shopping for how to buy a new car for the lowest price, three key factors matter: the base vehicle price itself, the state’s sales tax percentage, and the dealer fees charged to complete the transaction. A state with competitive car pricing but high dealer fees might still be more expensive than another state with higher prices but minimal fees. Understanding this interplay helps buyers identify genuine bargains.

Research from multiple sources including Kelley Blue Book, ISeeCars, AARP, and LendingTree reveals significant variations across all fifty states. Some states benefit from favorable tax structures, while others maintain competitive dealer practices. The most affordable states tend to excel in at least one of these categories, often dramatically.

States With Zero Sales Tax: The Biggest Advantage

Four states stand out for eliminating sales tax on vehicle purchases entirely. This advantage alone can reduce your total cost by thousands.

Oregon emerges as the top choice for budget-conscious buyers. Beyond its zero sales tax policy, the state boasts the second-lowest dealer fees in the nation at just $353. Even though new car prices average $51,299—slightly above national norms—the minimal fees make Oregon the most affordable option overall.

Montana ranks second thanks to an identical zero sales tax advantage combined with the third-lowest dealer fees at $537. Surprisingly, new cars average $56,186 here, more than 15% above the national average. Yet the combination of no sales tax and minimal fees still makes Montana highly competitive for both new and used vehicle purchases.

New Hampshire positions itself third with zero sales tax and dealer fees well below national average at $1,372. The state’s real strength lies in its car pricing—new vehicles average just $45,928, roughly 5% below the national average. This combination makes New Hampshire particularly attractive.

Delaware also charges no sales tax on automotive purchases. While the state maintains moderate dealer fees around $2,486 and new car prices near $47,502, the tax advantage helps it rank in the top five for overall affordability.

Low-Tax States With Competitive Pricing

Alaska demonstrates that high car prices don’t necessarily mean high total costs. New vehicles average $58,377—over 20% above national figures—but Alaska compensates with the nation’s lowest dealer fees at just $315. This dramatic fee advantage offsets the higher base prices, landing Alaska in the top four.

Hawaii surprises many buyers with new car prices that run 3.6% below national average at $46,718. Combined with a 4.44% sales tax rate and reasonable dealer fees, the island state maintains strong affordability despite its remote location.

Moderate-Tax States With Strong Value

Virginia offers balanced affordability through moderate 5.77% sales tax and dealer fees comfortably below national norms. New car prices track very close to the national average at $48,656, making the state an accessible option for budget buyers.

Wisconsin maintains a 5.43% sales tax rate and new car prices just 1.3% above average at $49,080. While dealer fees here are the highest among the top ten states, they remain reasonable on a national basis, keeping Wisconsin competitive.

Strategic Considerations for Buyers

When evaluating how to buy a new car for the lowest price, remember that dealer fees often present a hidden cost that catches buyers off guard. States like Oregon and Montana demonstrate that low fees can outweigh higher base prices. Conversely, even states with average pricing become expensive when dealer fees spike significantly.

New Mexico and North Carolina round out the most affordable options. New Mexico charges 7.61% sales tax but keeps prices only 4.79% above average with reasonable dealer fees. North Carolina’s 7% sales tax is offset by relatively low dealer fees and prices just 3.4% above national average.

Key Takeaway

The cheapest states for car purchases share common characteristics: either zero or low sales tax rates, competitive dealer fee structures, or car prices aligned with national averages. Oregon’s combination of tax elimination and minimal dealer fees makes it the gold standard, but Montana, New Hampshire, Delaware, and Alaska each offer compelling advantages depending on your specific circumstances.

When planning your vehicle purchase, consider relocating the transaction to a more affordable state if you’re near a border, or use this information to negotiate more aggressively with local dealers who understand they’re operating in a less competitive market.