There are multiple factors that contribute to the price of both new and used cars. One of the little-known factors is the location or state where you purchase the vehicle.
According to Kelly Blue Book (KBB), the national average price of a new vehicle as of May 2022 is $47,148. With the significant increase in the average price of new vehicles, you may be searching for a used vehicle; either way, the location of purchase matters.
The best and cheapest states to buy a new or used car:
- New Hampshire
- Florida
- Oregon
- North Carolina
- Ohio
- Wisconsin
Best State Overall: New Hampshire
New Hampshire wins the best state overall to purchase a vehicle due to low purchase prices and state sales tax exemption. New Hampshire does not levy additional fees and taxes on the purchase of a used vehicle, making it the best state for a new or used car purchase. Registering your vehicle in New Hampshire is also cost-efficient as they charge a minimal fee per thousand dollars of the total sale price.
New Hampshire does not excel in all presented categories, but when considering the overall costs of a vehicle purchase, New Hampshire rises to the top. Consumers from surrounding states, owning property in New Hampshire, such as Vermont, Maine, and Massachusetts can benefit from the multiple car-buying incentives New Hampshire offers.
The Best State for Initial Fees: Florida
With the number of fees associated with buying a car today, finding a state that offers a break on one or two of them is essential. While New Hampshire remains the best state overall for a vehicle purchase, Florida comes in at a close second. Florida’s sales tax and registration fees are slightly above average among the fifty states but where consumers save buying in Florida is on initial car buying fees.
According to Edmunds, common initial car buying fees are documentation fees, registration fees, dealer preparation fees, advertising fees, and destination fees. These common car-buying fees can quickly add up during the car-buying process, oftentimes causing consumers to pay well over the sticker price.
Geographically, Florida is a great place to purchase a used car as many used vehicles being sold in Florida have never been exposed to harsh winter or snowy conditions. Snow, ice, and ice melt can be devastating for the undercarriage of any vehicle. According to Consumer Affairs, Florida holds the highest percentage of senior citizens in the nation, generating a large used car market.
In contrast, California is the worst state for the initial costs of vehicle purchases. California remains one of the most expensive states in the nation in terms of the annual cost of living which unfortunately also applies to their initial car buying fees. A high sales tax rate of 7.25% and rising gas prices in the state, add more to the average cost of new cars and used cars sold throughout the state.
The Best State for Unexpected Fees: Oregon
Oregon offers the most stable processing fee with a cap of $150 depending on if the dealership you purchase the vehicle from uses an integrator or not. An integrator is a third party who the dealership has a contract with to complete the vehicle purchase. Following Oregon, Alaska and New Hampshire offer the second most stable processing fees in the nation. Processing fees in either state should not exceed a couple of hundred dollars.
Examples of high average fees in the nation are found in states like Arizona, which charges 13.9% of the average sales price of the vehicle, and Tennessee which charges 12.5%. High sales price fees make a significant dent in the consumer’s purchasing power, making an out-of-state vehicle purchase an attractive option.
The Best States to Buy a Car:
The following states offer unique car-buying incentives outside the outlined top two states to purchase a car, New Hampshire and Florida:
North Carolina
Consumers purchasing a vehicle in North Carolina will benefit from the state’s low title and registration fees, and low car sales tax of only 3%.
North Carolina also offers many major metropolitan areas, providing more vehicle maintenance locations. More options as a consumer mean saving money on any repairs or maintenance that needs to be done on your vehicle. North Carolina also places sixth in the most affordable state for auto insurance premiums.
Missouri
Missouri offers some of the cheapest gas prices in the United States (US) and affordable insurance costs. Where Missouri truly shines, however, is in offering car buyers some of the lowest transportation, title, and registration fees in the nation.
Missouri’s registration fee is based on taxable horsepower or vehicle weight and the Missouri state website provides information on how to determine your vehicle’s taxable horsepower.
Ohio
Car shopping is always made easier when you have multiple choices and with a population nearing 12 million, Ohio is a great state to find a new or used car.
Ohio offers a large new and used car market and offers some of the lowest gas, maintenance fees, and insurance premiums in the country. With the current strain on new and used cars, having a large market to choose from is a huge benefit.
Wisconsin
Similar to other states on our list, Wisconsin is a great state to purchase a car due to low insurance premiums, gas prices, and maintenance fees, which are some of the most affordable in the US.
Wisconsin boasts the second-lowest annual car ownership fees in the nation, saving residents a lot of money on yearly car ownership expenses. Wisconsin is a top-ranked state for original vehicle purchase and an affordable state to own a vehicle in, attracting buyers from in and around the state.
States Without Car Sales Tax:
- Alaska
- Delaware
- Montana
- New Hampshire
- Oregon
Avoiding any excess fees ultimately makes the vehicle a cheaper purchase for you in the long run. Purchasing a vehicle in a state that does not charge car sales tax will reduce your monthly payment and could save you thousands of dollars within the term of your auto loan.
The lowest sales tax on a vehicle is in Colorado, which charges a tax rate of 2.9%. Other states that offer low sales tax rates include Alabama, Georgia, Hawaii, New York, and Wyoming.
Best State for Auto Insurance: Maine
Insurance rates play a major role in the total cost of owning a vehicle every year. With the increase in the cost of living across the nation, states offering lower car insurance rates offer residents breaks in total vehicle ownership over those who do not.
For consumers with upfront cash ability, there is a little-known regulation in some states that will allow a cash deposit or bond to be posted instead of insurance.
Interestingly, Maine is the best state for auto insurance premiums but also the state with the highest bond/ deposit amount of $127,000 if you choose not to carry auto insurance.
Here's a list of the five cheapest bond/deposit option states and their bond or deposit amount.
- Massachusetts $10,000
- Mississippi $15,000
- New York $25,000
- Wyoming $25,000
- South Dakota $25,000 or $30,000 in securities
The Ten Cheapest States for Auto Insurance:
For the average consumer, who does not have the cash on hand to avoid carrying auto insurance, there are many factors that contribute to the cost of your annual auto insurance.
These factors include:
- Your state of residence
- Make and model of your vehicle
- State legal auto insurance requirements
- What type of weather is common in your state
- How many auto insurance competitors are in your area
Outside of these factors, there are states that are traditionally cheaper to carry auto insurance than others. Below is a list of the cheapest states in the country for auto insurance premiums and their average annual cost.
- Ohio $1,103
- Maine $1,116
- Idaho $1,121
- Vermont $1,158
- Oregon $1,244
- Indiana $1,256
- Hawaii $1,306
- New Hampshire $1,307
- Virginia $1,321
- Iowa $1,321
The most expensive states in terms of automotive insurance premiums are Florida, Michigan, and Louisiana. A major factor that contributes to higher auto insurance rates in Florida and Michigan is the fact that they are no-fault states.
States that have no-fault laws require each driver to file a claim with their individual insurance companies regardless of who is at fault. Louisiana’s higher auto insurance rates are due to having an above-average vehicle theft rate and a high urban population density.
Is it Better To Buy Your Next Car Out of State?
With increasing car prices you may be considering purchasing a vehicle outside of your home state. Shipping a car from outside of the state to your home state could be a money-saving solution for some consumers but for others, it could end up costing more. It is extremely important that as a consumer you do extensive research before buying a vehicle from out of state.
If you are seeking a certain year, make, and model of an old classic car, you can expect to have to arrange for an out-of-state purchase. For the average consumer wanting to save money on their vehicle purchase, however, the amount of money saved may not be worth the hassle.
A car offering a lower MSRP in a different state may save you upfront costs but you have to factor in transportation, sales tax, and possible out-of-state registration fees. Depending on your home state, you may have to also pay to get the vehicle to pass local inspections and emissions tests.
Buying a car out of state can be complicated but at times can also be rewarding. Do all the research you can online and visit your local DMV for any clarification you need.
