What is the Cheapest State to Buy a Car?

The conclusive guide to all you need to know about getting the most bang for your buck when buying a car.  

These are the best states to purchase a car in not only for their low cost or fees but also the costs to operate the vehicle. Some states have notoriously higher gas prices compared to others. Whereas other states are great due to their weather which results in lower maintenance costs. Those living in snowy locations know that their car takes a beating dealing with winter challenges such as extreme temperature changes, salt, and ice.  

1. New Hampshire is always listed as a top state to purchase a car and for good reason. This is one of the states that do not have a sales tax. This can be a big chunk of saved cash. New Hampshire also boasts affordable insurance and repair costs. The registration fees are also low. Documentation fees are limited to a maximum of $360 here.
2. Oregon is a good state for low additional fees and no sales tax. In Oregon, the documentation fees are limited to a maximum of $150.
3. Alaska is a state with relatively low fees and no sales tax. Documentation fees are limited to a maximum of $360 here.
4. Florida can be a wonderful place to purchase a used car due to the superb weather. Used cars will have less weather-related wear and tear compared to a used car purchased in the North East or Midwest. There is also more inventory available due to a large portion of the population being wealthy and buying and selling cars more often. However, this state does have a major downside: expensive title and registration fees.
5. North Carolina has a sales tax of 3% which is on the low end compared to the rest of the nation. North Carolina also has low insurance, and title and registration fees.
6. Virginia is also a good state for lower car costs and additional fee costs.  However, repair costs are higher here. Insurance premiums are lower. Overall affordability is a lot better than in many states. However, the sales tax is 4.15%.
7. Montana has lower fees and low car insurance rates. This state is also one that does not have a sales tax. Many exotic car owners in California have plates and insurance registered in Montana to take advantage of these lower costs by having an LLC but this can be troublesome due to insurance. Montana also has the benefit of having no emissions tests which could save you hundreds.
8. Hawaii has some of the lowest costs for operating a vehicle. Less mileage and beautiful weather can mean your car doesn’t need as much maintenance. Many would think that since purchasing other items in Hawaii have the “paradise tax” that cars would be more expensive as well. However, car prices are like any other state in the US. Keep in mind, however, this state does have the highest sales tax out of the list at 4.712%.

Cheapest State to Buy a Car Video Summary:

Complexities When Buying Out of State

Although buying a car out of state to take advantage of cheaper prices may sound appealing at first, it is important to take into account some complexities that arise when purchasing a car outside of your state of residence. Be sure to do full research before fully diving into buying a car out of state to be sure that you are not surprised by any hidden expenses.

First of all, simply transporting the car back to your home state can be tricky. There are a few options when it comes to transporting your car.

1. Have your car delivered/shipped

You can have your car delivered to your home. However, this can come at a high cost. According to Move.org, for 500 miles average costs start at $780 and go all the way up to $1,600 at 2,500 miles.

2. You can drive your car back yourself

Driving your new car back yourself may seem like the cheaper option, however, you may need to get temporary registration so that the car doesn’t look like it was stolen. Normally, the dealership you purchased the car from can help with registration. If you did not buy from a dealership, the DMV can help. Also, you might want to consider the gas and maintenance costs if you will be driving far. Simply having the car shipped may actually end up being cheaper and less complicated.

Apart from worrying about transportation, there can be different standards for emissions between states. For example, California has some of the strictest policies when it comes to this. You’ll need to make sure that your car can pass emissions in your home state. According to Auto Service Costs, the system that controls emissions can cost you between $200 and $560 to fix if your car does not meet standards. States also have different inspection requirements when it comes to safety and odometer.

Lastly, insurance can be tricky. Making sure you pay attention to your insurances policies applies to whenever you purchase a car, either in-state or out. It can be worth giving your agent a call to make sure that your new purchase can be covered right away as sometimes there can be a gap. Unlike registration and licenses, you should look into getting insurance before you even purchase the new car.

Types of Fees

When buying a car, there are a few different types of fees in addition to the price of the car that can cause the price to go up. These are also important when deciding which state to purchase your vehicle in as many states have different rules and regulations and may not require some of the fees to be paid.

• Documentation Fee or Doc Fee for short: This is the fee that many dealers charge. This is simply the amount they charge to process paperwork.
• Sales Tax: Normally, sales tax ranges from 2%-8%. However, some states like Alaska, Montana, Oregon, Delaware, and New Hampshire have no sales tax. These are some of the cheapest states to buy a car for this reason. A lower or nonexistent sales tax can save you thousands on your car purchase. However, a very important point to note is that you may end up paying sales tax in your home state for the purchase.  Take a look into your state’s unique laws concerning sales tax to be sure.
• Registration and Title Fees: In order to operate your new car, you’ll need to pay to obtain the title, a license plate, and registration. This cost varies by state with some states costing much less compared to the others.
• Preparation Fee: Not all dealerships charge this fee. This is a fee to prepare your car which could include cleaning and simple maintenance like an oil change.
• Advertising Fee: Some dealers charge an advertising fee to cover any profit they lose by selling the car. This is viewed as a negotiable fee that also varies from state to state.

Buying a Car

Buying a car can be a daunting and stressful task. It can also be extremely expensive. Even though you may be sinking huge sums of cash into a new vehicle, you will be losing some of that value immediately. NerdWallet states that, “your car’s value decreases around 20%-30% by the end of the first year. From years two to six, depreciation ranges from 15% to 18% per year… As a rule of thumb, in five years, cars lose 60% or more of their initial value.”

Because cars lose so much value over the course of their ownership, it would be smart to find the cheapest options and locations for making the big purchase.

A quick tip: always try to negotiate the cost of your purchase down. A car’s price is not set in stone. This could ultimately save you more than you expect.

Also, see our post about down payments!

You may also be looking to find the best out-of-state deal for when you go to purchase your new car. Or maybe you’ll discover a money-saving fact about your own state that you never realized. Regardless of your goals, there are many aspects that come into play when looking to cut costs such as sales tax and other hidden fees.

Summary

Ultimately, although some states may have lower fees and regulations associated with them, car prices can still vary wildly between dealers within a state.  However, if you’re still searching for a great place to look for overall cheaper prices, any of the states listed without sales tax could definitely be cheaper than the ones with. New Hampshire has the most benefits at almost no additional costs compared to other states. However, Florida may have the cheapest car prices.

Buying a car out of state can have many benefits including more car type options, different sales tax, and lower additional fees. Whether you’re searching within your own state or considering buying outside, be sure to take into account all fees and find out exactly just what you may need to pay at each unique dealership.