• Buying Guides

Best & Cheapest States to Buy a Car

By Jason Collins | May 12, 2022

There is more to your purchase than just the sticker price when buying a car.

One of the most interesting things about purchasing a car is how the overall cost can change by region or state. Other associated fees must be considered, including insurance premiums, maintenance fees, registration fees, and sales tax.

And all of them can differ from one state to another.

The best and cheapest states to buy a new or used car:

  • New Hampshire
  • Florida
  • Oregon
  • North Carolina
  • Missouri
  • Ohio
  • Wisconsin

Best State Overall: New Hampshire

The overall winner as the cheapest state to buy a car is New Hampshire. It is one of two states in the Northeast ranked as one of the best states to buy a car.

Here's why:

  • You are exempt from paying sales tax, which means you save a lot on upfront fees.

  • There are a low number of additional fees and taxes associated with the purchase of a used vehicle.

  • The registration fees are low (at most $18 per thousand of the total sales price).

  • The insurance premiums in New Hampshire are low, with an average cost of around $870 per year.

Overall, New Hampshire has the lowest average annual vehicle ownership costs, especially since the maintenance and repair costs are inexpensive.

While New Hampshire doesn't rank as the best across all categories, it's the most affordable state to purchase a car when considering all the factors.

That's excellent news for New Hampshire residents and those from surrounding states such as Vermont, Maine, and Massachusetts who have a property in the state.

The Best State for Initial Fees: Florida

Florida is the second-overall best state to buy a car. Because of that state's large population, it can provide a broader range of alternatives. Even though its sales tax and registration fees are slightly higher than most other states, the overall savings helps place Florida as one of the best states to buy a car.

Florida competes well as the cheapest state to buy a car just after New Hampshire because it offers the lowest upfront costs for buying a used car across the country. In addition, initial fees there are lower than the country's national average, which means car buyers will save some money on their new purchase.

When thinking about the state's geography, it's understandable why Florida is the best state for initial fees. Below are the two main geographical advantages:

Around 20% of Florida residents are over the age of 65. That demographic typically means that more people sell hardly used vehicles in excellent condition. People generally drive less as they age, so having one of the older populations in the U.S. means that Florida has better options for used car buyers.

In fact, according to Autolist, Florida's initial rates are typically 10% lower than the national average in the US, which means you can save some serious money. That's partly because of the aging population selling their gently used vehicles.

Florida's weather conditions are also better for used cars because most have never experienced the harsh effects of snow. In addition, used vehicles in Florida have frames and underbody components that have been rarely exposed to salt used to melt snow, so they are frequently in excellent condition with low maintenance costs.

On the other hand, California is the worst state for initial costs. That's because the state's general cost of living is exceptionally high. California ranks second-highest in the country, following closely behind Hawaii. A high sales tax and gas prices also factor in, and the annual car insurance premium will also set you back by $2,135. For comparison, New Hampshire's vehicle insurance is $870 a year.

The Best State for Unexpected Fees: Oregon

While initial costs need primary consideration, they are not the only fees related to a car purchase. There are multiple costs to consider when buying a car besides just the purchase price. But before driving away, you must pay state and local sales tax, registration and DMV fees, and dealer documentation fees. Unfortunately, these fees vary from one dealership to another to complicate matters. However, some states limit the amount dealerships can charge for documentation fees, but many don't.

If you want the cheapest state to buy a used car due to low unexpected fees, then Oregon is the best. The maximum processing fees in Oregon are only $115 if the dealership doesn't use an integrator. However, if they use an integrator, the maximum processing fees are $150.

After Oregon, the best states for fees are Alaska and New Hampshire. In these states, the costs should not exceed a few hundred dollars.

The state with the most exorbitant fees is Alabama. On average, expect to pay roughly $2,313 in total costs when purchasing a new or used vehicle in Alabama. That's 18 times more than what you would pay if you bought a car from Oregon.

However, the one advantage they offer is that Alabama has the lowest average cost of gas anywhere in the US.

Below are some more examples of the average fees in various expensive states that will make a significant dent in car buyer's pockets:

  • Arizona: $2297, 13.9% of the average sales price
  • Colorado: $2284, 13.8% of the average sales price
  • Tennessee: $2061, 12.5% of the average sales price
  • Florida: $1869, 11.3% of the average sales price

The Best States to Buy a Car:

Apart from New Hampshire and Florida, here are other good states to buy cars in:

North Carolina

  • Low car sales tax at only 3%

  • Relatively low title and registration fees

  • Number seven on the list of most affordable annual auto insurance premiums

  • Thanks to several major metropolitan areas, the maintenance fees and upkeep costs are reasonable in North Carolina

Missouri

  • Missouri's initial costs and unexpected fees, including ownership, transportation, title and registration fees, are some of the lowest in the country

  • Their gas prices are amongst some of the cheapest in the US

  • They have affordable auto insurance premiums

Ohio

  • Insurance premiums in Ohio are the third-lowest in the country

  • Gas prices and maintenance fees are also ranked nearly the lowest in the country

  • With just under 12 million residents, it's the seventh most populated state, which is excellent for shopping around

Wisconsin

  • Annual car ownership fees are the second-lowest in the U.S.

  • Insurance premiums are lower than in most states

  • Gas prices are low in Wisconsin

  • Maintenance fees are one of the most affordable in the country

States Without Car Sales Tax

Five states do not have sales tax:

  • Alaska
  • Delaware
  • Montana
  • New Hampshire
  • Oregon

Curbing as many fees associated with the car buying process lowers the amount of cash paid upfront for your new vehicle, or it will reduce your monthly payment amount on your auto loan.

A single-digit sales tax figure may not seem like a big deal; however, when purchasing a large item worth thousands of dollars, like a car, the numbers quickly add up and become a significant burden.

The state with the lowest sales tax is Colorado, which has a tax rate of 2.9%. Other states with relatively low sales tax rates are Alabama, Georgia, Hawaii, New York, and Wyoming.

Best State for Auto Insurance: Maine

In most states, auto insurance is a legal requirement and one of the most expensive recurring costs of owning a new or used vehicle. Not all states share the same regulations for auto insurance, and the insurance rates vary from one state to another.

Insurance premiums are based on the following factors:

  • Your location
  • The make and model of your vehicle.
  • Legal requirements
  • Traffic congestion
  • Economic conditions
  • Weather
  • Competition

Maine is the best state for auto insurance. This state has the lowest representative prices for auto insurance spanning a wide variety of profiles. On average, you could pay around $864 a year for car insurance coverage in Maine. That amount is hundreds less than the national average of $1,318 per year.

The ten cheapest states for auto insurance costs:

  • Maine: $864/yr average

  • New Hampshire: $870/yr average

  • Ohio: $886/yr average

  • Virginia: $991/yr average

  • Wisconsin: $998/yr average

  • Idaho: $1,010/yr average

  • North Carolina: $1,018/yr average

  • Vermont: $1,063/yr average

  • Indiana: $1,068/yr average

  • Iowa: $1,071/yr average

Michigan is the most expensive state for car insurance, with an annual average rate of $2,130. Its yearly premium is so high that the government is intervening and working on policies to lower rates.

Not too far behind Michigan as the most expensive states are Florida, Louisiana, New York, and Washington, DC.

Do Your Research

When buying a car from out of state or even in your home state, always do extensive research first if you want to get the best deal and lower the car's overall price.

Car prices can fluctuate, and specific car models may be less expensive in some states. Knowing the make and model of the car you want beforehand can open many opportunities for saving lots of money. For example, listing prices on Toyota RAV4s tend to be much cheaper in Maine and Delaware than in states where all-wheel-drive and SUVs are less plentiful.

In some states, the laws make it more expensive to own older cars that are not environmentally friendly. However, while these eco-friendly states may be the most expensive states to buy a car, they are the cheapest for hybrid and electric cars.

In particular, California and Oregon lead the way for electric vehicle rebates, with 90 offered in California and 25 in Oregon. California also provides 47 different tax incentives for full EVs, too.

Buying a car out of state may be complicated, but it is excellent if you cannot find the model you are looking for locally. Doing your research will enable you to understand the various state requirements and what costs need to be considered when bringing the new vehicle home.