The cheapest states to buy a car are generally those with no statewide sales tax, such as Oregon and New Hampshire. The vehicle's total cost is determined by more than its sticker price, with factors like local sales tax, documentation fees, and insurance premiums having a major impact.
Here's a breakdown of the most affordable states by key cost-saving factors:
States with No Sales Tax These states eliminate one of the largest extra costs associated with buying a car.
Oregon: Offers zero sales tax and low average documentation fees.
New Hampshire: A tax-free state ideal for avoiding large tax bills on vehicle purchases.
Montana: Famous for its no-sales-tax policy, especially for RVs and luxury cars.
Delaware: An East Coast option for purchasing vehicles entirely free of sales tax.
States with Low Overall Taxes & Fees These states offer a favorable balance of lower taxes and minimal dealer fees.
South Dakota: Features a low 3% excise tax on vehicle purchases instead of a higher sales tax.
Ohio: Combines competitive vehicle pricing with some of the lowest car insurance rates.
Virginia: Balances a moderate sales tax with reasonable insurance and dealer fees.
States to Avoid Some states are consistently more expensive due to high taxes and fees.
California: Has one of the highest sales tax rates in the country.
Florida: Notorious for having very high average dealer documentation fees.
New Jersey: Combines high taxes and fees, making car purchases more expensive.
Ultimately, finding the cheapest state requires factoring in all costs, not just the vehicle's sale price.
Your Guide to the Most Affordable States for Car Buying
Buying a car is one of the most significant financial decisions you can make, and where you choose to make that purchase can have a huge impact on your wallet. While the cost of vehicles is fairly consistent nationwide, the additional expenses—like sales taxes, registration fees, and insurance—can vary widely depending on the state.
In this detailed guide, we’ll explore the best and cheapest states to buy a car, breaking down how local factors like taxes, fees, and insurance rates affect the overall cost. Whether you're looking for a budget-friendly option or aiming to save on long-term costs, understanding the landscape of car-buying across different states can help you make an informed decision.
Top 5 Most Affordable States to Buy a Car
Looking for the biggest savings? These five states consistently offer the lowest overall costs for a new or used vehicle, thanks to low taxes, minimal fees, or a combination of both.
Oregon: The top choice for a truly tax-free purchase, as it has zero sales tax and low dealer documentation fees.
New Hampshire: A great East Coast option that also has no sales tax on vehicle purchases, leading to significant upfront savings.
Montana: Famous for its lack of sales tax, making it a go-to for buyers of high-value RVs and luxury cars.
Delaware: Another state with no sales tax, providing a strong option for buyers in the Mid-Atlantic region.
South Dakota: While it has a 3% excise tax instead of a sales tax, this rate is much lower than the national average, and it's combined with very low documentation fees.
Factors to Consider When Buying a Car
When calculating the cost of a car, the price tag is just one part of the equation. To determine the best and cheapest states to buy a vehicle, we must consider several key factors:
Sales Tax: Many states impose sales tax on car purchases, which can add hundreds or thousands of dollars to your final bill. However, some states either have no sales tax or offer significantly lower rates, which can lead to big savings.
Registration Fees: Every state requires you to register your vehicle, and the cost of doing so can vary dramatically. States with lower registration fees, especially for more expensive or larger vehicles, offer an edge for buyers looking to cut costs.
Insurance Premiums: Insurance rates also differ from state to state, influenced by factors like traffic density, state regulations, and local accident statistics. States with lower insurance premiums can significantly reduce the long-term costs of owning a vehicle.
Documentation Fees: Often overlooked, dealer documentation fees can add hundreds of dollars to your purchase. These fees cover paperwork and processing costs, but they vary widely across states, with some charging minimal fees and others tacking on substantial costs.
If you're interested in learning more about how these factors come into play when shipping a car across the country, check out our guide on cross-country car shipping.
Top States to Buy a Car with the Lowest Costs
If you’re looking for the absolute best states to save money on your next car purchase, the following states consistently rank at the top:
1. Oregon: The Top Choice for Zero Sales Tax
Sales Tax: Oregon is one of the few states that doesn’t charge any sales tax, meaning the price you see on the car is close to the price you pay. This absence of tax can save you thousands on high-value vehicles. Whether you’re buying new or used, Oregon’s tax-free policy makes it one of the cheapest states to purchase a car.
Documentation Fees: Oregon also keeps additional fees low, with doc fees averaging just around $115. This further adds to its appeal for cost-conscious car buyers.
Does Oregon charge taxes on dealership cars?
No, Oregon does not charge a general sales tax on vehicle purchases. Oregon is one of the few states in the U.S. that does not impose a general sales tax, which includes vehicle purchases. Instead, it has specific taxes related to vehicle transactions:
Vehicle Privilege Tax: This is paid by dealerships based on the sale price of vehicles sold but does not affect the consumer directly at the point of sale.
Vehicle Use Tax: If you buy a vehicle from an out-of-state dealer, you may need to pay a 0.5% vehicle use tax when registering the vehicle in Oregon if the dealer does not collect it.
Thus, while there are taxes involved, they are not the same as a traditional sales tax that you would find in many other states. Learn more about shipping your car from a dealership to make the process easier after your purchase.
2. New Hampshire
Sales Tax: Another sales tax-free state, New Hampshire is a great option for car buyers looking to avoid additional taxes. This is particularly beneficial for those purchasing luxury vehicles or other high-priced cars.
Other Fees: In addition to the tax benefits, New Hampshire has relatively low registration fees, which helps keep the overall cost of vehicle ownership down.
Find out how to avoid costly mistakes when transporting luxury cars by checking our blog on common luxury car transport mistakes.
3. Montana
Sales Tax: Montana is well-known for being a tax haven for vehicle buyers, as the state does not impose any sales tax. This makes it a popular destination for buyers looking to save on luxury or recreational vehicles.
Benefits for Out-of-State Buyers: While not all buyers may want to travel to Montana, many out-of-state buyers create LLCs in Montana to register their cars there, taking advantage of the no-tax benefits. However, buyers should be mindful of local laws regarding vehicle registration in their home state.
4. Delaware
Sales Tax: Delaware is another state that doesn’t impose sales tax on vehicle purchases, making it one of the best options on the East Coast for buying cars at a reduced price.
Overall Costs: While Delaware might not have the lowest documentation fees, its lack of sales tax and reasonable insurance premiums make it one of the more affordable states to buy a vehicle.
5. South Dakota
Excise Tax: While South Dakota charges an excise tax of 3% on vehicle purchases instead of a traditional sales tax, this is still significantly lower than the national average for car sales taxes. This makes it a cheaper state overall for car buyers.
Low Documentation Fees: South Dakota keeps its doc fees low, with an average of $115, making it an attractive option for buyers wanting to avoid additional costs at the dealership.
Honorable Mentions for Affordable Car Purchases
Beyond the top five states, a few others offer considerable savings when factoring in insurance rates, dealer fees, and tax structures.
Ohio
Low Insurance Costs: Ohio consistently ranks as one of the cheapest states for car insurance. The average annual premium in Ohio is much lower than the national average, which reduces the long-term costs of vehicle ownership. Ohio also has a competitive car market due to its large population, leading to better deals on both new and used cars.
Affordable Used Cars: Ohio’s diverse demographics lead to a healthy supply of used cars, which means buyers can often find deals on vehicles with low mileage or cars meant for short-term use.
Why Ohio is a Great State for Used Car Deals: Ohio's reputation as a top spot for affordable pre-owned vehicles is well-earned. Its large population and diverse economy mean a constant, healthy supply of trade-ins and off-lease vehicles. Unlike coastal states, Ohio's used car market is less prone to widespread rust from saltwater air or hidden flood damage, resulting in a cleaner stock of vehicles. This combination of high volume and good average condition makes it a prime hunting ground for anyone searching for a high-quality, cheap used car.
After making your purchase in Ohio, you may want to explore auto transport assurance to ensure your vehicle arrives safely at its destination.
Virginia
Reasonable Sales Tax and Fees: With a sales tax rate of 4.15%, Virginia sits comfortably in the middle of the pack when it comes to vehicle taxes. However, its relatively low insurance costs and dealer fees make it a competitive option.
Moderate Doc Fees: Virginia’s doc fees are moderate compared to other states, helping to keep the overall cost of a vehicle purchase down.
Wyoming
Low Tax on Trade-Ins: Wyoming offers a unique benefit for those trading in vehicles. The state doesn’t tax trade-ins, so buyers only pay sales tax on the new portion of the transaction. This can lead to significant savings if you’re trading in a car for a new one.
Competitive Insurance Rates: Wyoming’s insurance rates are lower than the national average, helping to reduce the overall cost of vehicle ownership in the state.
States with Low Dealer and Documentation Fees
Dealer documentation fees can range from as low as $75 in some states to over $500 in others. These fees cover the cost of processing the paperwork for your car purchase, but they can add up quickly. Here are a few states where you can expect to pay less in documentation fees:
Minnesota: With doc fees capped at $75, Minnesota offers one of the most affordable paperwork processes in the country.
Arkansas: Documentation fees in Arkansas are typically around $110, making it another low-cost state for car buyers.
South Dakota: Once again, South Dakota proves to be a budget-friendly state for car buyers, with doc fees averaging $115.
Texas: Although larger in size, Texas has managed to keep its doc fees low, averaging around $150, which helps offset the state’s higher sales tax.
States to Avoid for Car Purchases
While some states are great for finding deals on cars, others can drive up the cost due to high taxes, fees, and insurance premiums. If you’re looking to save money, you may want to avoid the following states:
California
High Sales Tax: California has one of the highest sales tax rates in the country, often exceeding 7.5%, which can significantly increase the total cost of a vehicle purchase.
Low Inventory: Due to high demand and limited supply, finding a good deal on a new car in California can be challenging. Additionally, dealer fees can further drive up the cost of car ownership in the state.
Florida
Expensive Doc Fees: Florida is notorious for having some of the highest documentation fees in the country, averaging close to $995. While the state has a large used car market, the high fees can quickly eat into any savings.
Flood-Damaged Vehicles: Florida’s used car market commonly has flood-damaged vehicles, which can pose long-term risks for buyers.
New Jersey
High Taxes and Fees: New Jersey’s sales tax and additional fees make it one of the more expensive states for buying a car. Limited new car inventory can further complicate the car-buying process, driving up prices.
Insurance Costs Across Different States
Car insurance premiums vary widely across the U.S., with some states offering significantly lower rates than others. States with low insurance premiums can reduce your total cost of ownership over time:
Iowa: Known for its low insurance costs, Iowa boasts annual premiums averaging under $720, making it one of the cheapest states for car insurance. Coupled with relatively low registration fees, Iowa is a great state for long-term vehicle affordability.
Wyoming: While Wyoming’s overall cost of ownership might be higher due to vehicle pricing and other factors, its lower-than-average insurance premiums help balance the equation, making it a viable option for buyers looking to reduce ongoing expenses.
How to Buy a Car Out of State
Buying a car in a state like Oregon or Montana is a great way to save thousands on sales tax but it raises a big question: how do you handle the logistics? It’s easy when broken down. It’s choosing a purchase strategy, understanding your home state’s registration laws and arranging for transport.
The Montana LLC Strategy: A Popular Option
You may have heard of buyers, especially of high-end RVs and luxury vehicles, using a Montana LLC to buy a car. Here’s why: Montana has no sales tax and by forming a Limited Liability Company (LLC) in the state you can register the car to that company. This is a common strategy used to legally avoid paying sales tax in a high-tax home state.
The process typically involves working with a local registered agent in Montana to set up the LLC and handle the vehicle’s registration. While this is a well established practice it’s important to understand the laws in your own state regarding vehicles owned by an out-of-state entity.
Disclaimer: This information is for educational purposes. Please consult with a legal or financial advisor regarding your specific situation.
Registering Your Out-of-State Car at Home
If you buy a car out-of-state without using an LLC you will typically pay sales tax in the state where you register the vehicle—your home state. Before you buy contact your local DMV to understand the process. You will usually need:
The vehicle’s title, signed over to you.
A bill of sale from the seller.
Proof of your out-of-state purchase.
Knowing these requirements beforehand ensures a smooth registration process when you bring your new or used car home.
The Final Step: Getting Your Car Home with Auto Transport
Once you've made the purchase, the most significant hurdle is getting the car from the dealership to your driveway. Driving it hundreds or thousands of miles adds wear and tear, costs time, and includes expenses for gas and lodging.
This is where AmeriFreight becomes the most cost-effective solution. We specialize in shipping vehicles nationwide, offering a secure, door-to-door service that ensures your new car arrives safely, saving you the hassle and expense of a cross-country drive.
Final Tips for Buying a Car in Any State
Even if you aren’t able to purchase a car in one of the cheapest states, there are still ways to save money on your next vehicle:
Look for Local Promotions: Dealerships often offer incentives and promotions that can help lower the cost of your car. Researching these deals can result in significant savings.
Consider the Total Cost: When budgeting for your next car, make sure to account for all costs, including sales tax, registration, insurance, and dealer fees. These can vary widely from state to state, and the cheapest vehicle may not always be the most affordable option when all factors are considered.
AmeriFreFreight’s nationwide shipping can help you bring your car home no matter where you buy it, ensuring a seamless experience from dealership to driveway.
Find the Best Deal and Get Your Car Shipped with AmeriFreight
Choosing the right state to buy a car can lead to significant savings, whether you’re looking to avoid hefty taxes or high documentation fees. States like Oregon, New Hampshire, and Delaware offer some of the best savings with their lack of sales tax, while others like South Dakota and Ohio balance low insurance rates with moderate fees. However, states like California, Florida, and New Jersey can quickly drive up the cost due to high taxes, fees, and limited car inventory.
By understanding where the most affordable options lie and factoring in all associated costs, you can make a smart decision about where to buy your next vehicle. And with AmeriFreight’s door-to-door shipping service, you can ensure your vehicle arrives safely and affordably, no matter where you purchase it. Get an instant quote today and take the hassle out of shipping your car.
