Which State Has the Cheapest Cars? A Complete 2023 Guide to Affordable Auto Purchases Across America

Buying a car is one of the most significant financial decisions you’ll make, and where you live can dramatically affect how much you pay. With new vehicle prices reaching around $48,451 on average, shoppers need to be strategic. But here’s what many don’t realize: your state of residence can determine whether you spend thousands more or less to drive a vehicle off the lot. Understanding which state has the cheapest cars requires looking beyond just sticker prices—you also need to factor in sales taxes and dealer fees that vary significantly from coast to coast.

The Role of Sales Tax in Car Affordability

One of the most impactful factors determining car costs is whether your state charges sales tax on vehicle purchases. Several states have recognized this and eliminated sales tax entirely on auto purchases, creating a substantial advantage for buyers in those locations.

Oregon emerges as the most affordable state overall when all factors are considered. With zero sales tax and dealer fees of just $353 for both new and used vehicles—the second-lowest in the entire nation—Oregon provides significant savings despite car prices being slightly above the national average. Montana follows a similar pattern, offering 0% sales tax paired with exceptionally low dealer fees of $537, making it the second-most affordable option even though vehicle prices there run over 15% above average.

New Hampshire and Delaware also benefit from having no sales tax on car purchases. New Hampshire boasts some of the lowest car prices in the nation at 5.21% below average, combined with $1,372 dealer fees. Delaware offers 0% sales tax as well, though dealer fees are higher at $2,486, preventing it from climbing higher in the overall affordability rankings.

Balancing Car Prices, Dealer Fees, and Regional Factors

Beyond tax considerations, the actual cost of vehicles and what dealers charge to complete your purchase vary considerably. Alaska presents an interesting case study—while car prices there run over 20% above the national average, the state compensates with exceptionally low dealer fees of just $315, making it rank in the top four for affordability.

States with moderate or no sales tax structures also perform well. Virginia keeps costs reasonable with a 5.77% sales tax and car prices nearly aligned with national averages—just 0.42% above. Wisconsin ranks in the top eight despite having the highest dealer fees among the most affordable states, because its vehicle prices remain only 1.30% above the national average and sales tax is moderate at 5.43%.

Hawaii surprises many buyers by offering car prices 3.58% below the national average, coupled with a 4.44% sales tax. New Mexico achieves affordability even with the 16th-highest sales tax in the nation because dealer fees remain reasonable and car prices stay only 4.79% above average. North Carolina rounds out the most affordable options, where relatively low dealer fees help offset higher sales taxes.

Complete State Rankings by Affordability

For those seeking which state has the cheapest cars when weighing all factors together, the 2023 data reveals:

1. Oregon - 0% sales tax, $353 dealer fees, competitive car prices
2. Montana - 0% sales tax, $537 dealer fees, higher vehicle prices offset by tax savings
3. New Hampshire - 0% sales tax, $1,372 dealer fees, below-average car prices
4. Alaska - 1.81% sales tax, $315 dealer fees, highest car prices but lowest dealer costs
5. Delaware - 0% sales tax, $2,486 dealer fees, slightly below-average vehicle prices
6. Hawaii - 4.44% sales tax, $2,179 dealer fees, notably affordable car pricing
7. Virginia - 5.77% sales tax, $2,486 dealer fees, average-aligned pricing
8. Wisconsin - 5.43% sales tax, $2,753 dealer fees, near-average car prices
9. New Mexico - 7.61% sales tax, $1,603 dealer fees, reasonable overall costs
10. North Carolina - 7.00% sales tax, $1,996 dealer fees, moderate car prices

Key Takeaway for Smart Car Buyers

Understanding which state has the cheapest cars demonstrates that affordability isn’t determined by a single factor. States without sales tax clearly hold an advantage, but even states with sales tax can compete through lower vehicle prices or minimal dealer fees. If you’re relocating or have flexibility in where you purchase your vehicle, comparing all three components—sales tax, car prices, and dealer fees—can save you thousands of dollars. Research conducted across major data sources including Kelley Blue Book, ISeeCars, AARP, and LendingTree provides a comprehensive view of these regional differences based on 2023 market data.