What Are the Best States to Buy a Car?

When buying a new vehicle, one thing to keep in mind is that the location you’re buying it in can impact how much you pay. According to our research, the best states to buy a car are Mississippi and Ohio. Also, states like Delaware and New Hampshire are known for their lack of sales tax, while Wyoming and North Dakota offer low insurance premiums. 

To eliminate the guesswork, we compiled all the buyer advantages you can expect in the cheapest states to buy a car.

Buying a Car Out of State: State-Specific Factors to Consider

Knowing how to buy a car out of state on the cheap means looking beyond sticker prices. There are other factors affecting the total cost, making some states more economical than others. So, let’s break down these critical elements.

Tax Rates

States with lower or no sales tax can really save you money. Here’s a table summarizing sales tax rates for car purchases across all states:

Sales Tax Rate	States
0%	Alaska, Delaware, Montana, New Hampshire, Oregon
2%	Alabama
2.9%	Colorado
3%	North Carolina
3.3%	Oklahoma
4%	Georgia, Hawaii, New Mexico, New York, South Dakota, Wyoming
4.2%	Missouri, Virginia
4.5%	Louisiana
5%	Iowa, Mississippi, North Dakota, South Carolina, Wisconsin
5.5%	Maine, Nebraska
5.6%	Arizona
5.8%	Ohio
6%	Florida, Idaho, Kentucky, Maryland, Michigan, Pennsylvania, Vermont, West Virginia
6.3%	Illinois, Massachusetts, Texas
6.4%	Connecticut
6.5%	Arkansas, Kansas, Minnesota
6.6%	Georgia, New Jersey
6.8%	Washington
6.9%	Nevada
7%	Indiana, Rhode Island, Tennessee, Utah
7.3%	California
7.5%	Kansas

How to Avoid Sales Tax When Buying a Car Out of State?

To legally minimize or avoid sales tax when buying a car out of state, ensure you understand how your home state’s tax rules apply, since you typically owe tax where you register the vehicle. Some states have no sales tax, but generally require proof of residency or a legitimate business presence—such as an LLC with real operations—to register the car. 

You may also qualify for temporary exemptions (e.g., military, student, or farm vehicles) or reciprocity agreements that credit taxes already paid. You’d need to provide proper documentation (bills of sale, permits, etc), and if uncertain, consult a tax professional or attorney to ensure state law compliance.

Vehicle Registration Fees

Car registration fees are often based on the vehicle’s value, weight, or age. Vehicle registration fees across the United States exhibit a broad spectrum. 

Rates can be upwards of $300 in California due to charges like license fees, smog fees, and county-specific fees. Other states with notably high fees include Oregon and Florida.

Conversely, states like Missouri, Tennessee, and North Carolina maintain lower fees, around $18, $26, and $36. By choosing states with more affordable registration fees, buyers can maximize spending.

Dealer Fees and Regulations

Dealer fees, also known as documentation fees, are extra charges added to the base price of the vehicle. These fees cover the costs of processing paperwork and handling administrative tasks and can sometimes include destination charges for delivering the vehicle to the dealership.

Across the United States, dealer fees typically range from $200 to $400. There are, however, notable exceptions. California has one of the cheapest dealer documentation fees, averaging between $80 and $100. This is largely due to state regulations that cap these fees. On the opposite end of the spectrum, Florida imposes some of the highest dealer fees, with averages soaring up to $800.

Lemon Laws 

While not a way to save money on a car, Lemon Laws are state-specific regulations that protect consumers from purchasing defective vehicles. They can be a real lifesaver if your car ends up having problems.

These laws can also vary by extent of protection; some states may offer more robust lemon laws than others. 

All states have Lemon Laws covering new vehicles. However, only California, Connecticut, Massachusetts, New York, Michigan, Illinois, and Pennsylvania have Lemon Laws for used vehicles as well.

For more information about Lemon Laws in your area, check your State Attorney General’s Office website. 

Vehicle Inspection Requirements

Some states require comprehensive inspections before allowing you to purchase a vehicle. The inspections are done for safety and to ensure the car meets emissions standards. 

The states that do not require inspections include Alabama, Alaska, Arkansas, Florida, Iowa, Kansas, Kentucky, Michigan, Minnesota, Montana, Nebraska, North Dakota, Oklahoma, South Carolina, South Dakota, Wyoming, Tennessee, and Washington.

For the ones that do require one, here’s a general overview of the inspections and how much they could potentially cost:

State	Inspection Requirement	Cost (Average Ranges)
Arizona	Emission inspections required in metropolitan areas (e.g., Phoenix and Tuscon)	$12-$20
California	Biennial emissions (smog) inspections mandatory for most vehicles	$30-$70
Colorado	Emissions inspections required in the Denver Metro Area and North Front Range	$25-$40
Connecticut	Biennial emissions inspections required	$20
Delaware	Mandatory annual safety emissions and inspections	Included in registration
Georgia	Emissions inspections required in 13 metro Atlanta counties	$10-$25
Hawaii	Annual safety inspection mandatory	$19.19
Idaho	Emissions inspections required in Ada and Canyon counties	Free
Illinois	Emissions inspections required in Chicago and Easy St. Louis metro areas	Free (state-operated)
Indiana	Emissions inspections required in Lake and Porter counties	Free
Louisiana	Annual safety inspection statewide; emissions testing in five parishes	Safety: $10 Emissions: $18
Maine	Annual safety inspection statewide; emissions testing in Cumberland County	$12.50
Maryland	Mandatory safety inspection upon sale/transfer; biennial emissions inspections	Safety: $60-$100 Emissions: $14
Massachusetts	Annual safety and emissions inspection	$35
Mississippi	Annual safety inspection	$5
Missouri	Biennial safety inspection; emissions testing in the St. Louis metro area	Safety: $12Emissions: $24
Nevada	Emissions inspections mandatory in Las Vegas and Reno areas	$21-$30
New Hampshire	Annual safety and emissions inspections	$20-$50
New Jersey	Biennial emissions inspection	Free at state facilities
New Mexico	Emissions inspections mandatory in Bernalillo County (Albuquerque)	$15-$25
New York	Annual safety and emissions inspection	$21-$37
North Carolina	Annual safety inspection statewide; emissions testing in 22 counties	Safety: $13.60 Emissions: $30
Ohio	Emissions inspections required in Cleveland/Akron metro areas	Free
Oregon	Emissions inspections in Portland and Medford areas	$21
Pennsylvania	Annual safety and emissions inspections	$35-$75
Rhode Island	Biennial safety and emissions inspections required	$55
Texas	Annual safety inspection statewide; emissions testing in metropolitan areas like Dallas and Houston	Safety: $7-$40 Emissions: $11.50
Utah	Emissions inspections required in five counties; safety inspections for certain vehicles	Emissions: $20-$30 Safety $10-$20
Vermont	Annual safety and emissions inspections	$35-$50
Virginia	Annual safety inspection statewide; emissions testing in Northern Virginia	Safety: $20 Emissions: $28
West Virginia	Annual safety inspection	$14
Wisconsin	Emissions inspections in southeastern counties mandatory	Free

Availability of Reputable Dealerships

A reputable dealership is distinguished by its commitment to transparency, customer satisfaction, and upfront pricing (no hidden fees). Such dealerships are accredited by industry organizations like the Better Business Bureau (BBB), reflecting their commitment to ethical business.

Reputable dealerships often offer comprehensive services, including choosing a budget, warranties, and robust after-sales support. Additionally, these dealerships provide an inventory of vehicles that meet high safety and quality standards.

Warranty Regulations

Warranty regulations can come into play when seeking the best states to buy a car. These regulations govern manufacturers’ promises regarding vehicle repair and maintenance.

These regulations outline the terms and conditions under which warranties are offered, including the duration of coverage, the scope of repairs, and the rights of consumers when malfunctions arise.

As explained earlier, all states have Lemon Laws that protect consumers purchasing new vehicles by providing options for replacement or refund if the vehicle has significant defects not repaired after reasonable attempts.

Some states go further, requiring sellers of used vehicles to provide written warranties covering major components like engine, transmission, and electrical systems for a minimum period or mileage.

Some states go above and beyond by offering enhanced consumer protections, including:

• Requiring manufacturers and sellers to honor all written warranties while prohibiting deceptive warranty practices.
• Extending warranty coverage or imposing penalties on manufacturers and dealerships that fail to fulfill their warranty obligations.
• Mandating additional safeguards, such as full disclosure of warranty terms and increasing the number of repair attempts required before offering refunds or replacements.

Specifically, California, New York, Massachusetts, and Connecticut lead the way in ensuring consumers have strong recourse if warranty obligations are not met. These states set a high standard for warranty protection nationwide.

Insurance Rates

Insurance premiums vary widely across the United States due to population density, local driving conditions, and the prevalence of accidents or vehicle thefts. On average, annual car insurance premiums range from approximately $1,100 to $2,000. 

States with higher premiums, such as Michigan (around $2,610 annually for full coverage), often have unique insurance systems or elevated risk factors. Michigan’s no-fault insurance laws, which require unlimited personal injury protection (PIP), significantly contribute to its high rates. Additionally, factors like a higher number of uninsured drivers and costly claims drive premiums upward.

In contrast, states like Hawaii (approximately $1,517 annually for full coverage) and others such as Arkansas, Idaho, Kentucky, Maine, Mississippi, Montana, Nebraska, New Hampshire, North Dakota, Ohio, South Dakota, Vermont, West Virginia, and Wyoming enjoy comparatively lower premiums. These states benefit from lower population densities, fewer accidents, and more affordable vehicle repair costs, which help keep insurance rates down.

What Is the Best State to Buy a Car?

You might have figured it out by now, but finding the best state to buy a car is a multi-step process. Make sure to keep in mind:

• Initial costs 
• Taxes 
• Unexpected costs 
• Insurance rates
• Whether the car is new or used

First, you need to evaluate these factors individually. Do they fit your budget? Are they comprehensive enough? Is there a state near you that offers more favorable terms? 

Let’s examine these factors by themselves before adding them together.

Initial Costs 

New car prices depend on market demand, dealership competition, and regional economic conditions. For context, the national average for a new car in the U.S. is about $48,000, a number that reflects a mix of economy models and luxury vehicles.

States like California and New York typically have higher initial costs, driven by large populations and regional demand for premium vehicles. These factors push average prices above the national average.

In contrast, states like Mississippi and Ohio often see lower initial costs, averaging closer to $28,000 for new cars. Less competitive markets and simpler consumer preferences in these areas help keep prices down.

Tax Fees 

Tax fees encompass sales tax, registration fees, and other state-specific expenses. And when it comes to taxes, some states are more burdensome than others. As of 2024, the national average for vehicle tax fees is around 6%.

For instance, California and Illinois have some of the highest sales tax rates on vehicle purchases, averaging around 8.25% and 6.25%, respectively. These rates can add thousands of dollars to your overall costs. On the other hand, Oregon and Montana boast no state sales tax at all.

Unexpected Costs and Fees 

Beyond the initial price and tax fees, unexpected costs are an unfortunate factor in vehicle purchasing. But what exactly do these costs entail? Let’s take a look:

Unexpected Costs:

• Costs associated with registering your vehicle with the state, including license plates and renewal fees 
• Charges for obtaining the official document proving ownership of the vehicle.
• Fees charged by dealerships for processing paperwork related to the sale.
• Destination fees, advertising fees, and preparation fees.
• Fees for safety and emissions testing.
• If you’re getting financial assistance, there might be charges for processing the vehicle loan.
• Annual fees required to keep the vehicle legally licensed in the state.
• Optional extras such as paint protection, window tinting, and other aftermarket products.

On a national level, unexpected costs typically reach around $600 for new vehicles. Texas and New Jersey tend to have the highest fees, ranging from $500 to $1,000. 

South Dakota and Wyoming are known as some of the cheapest states to buy a vehicle, as unexpected fees rarely go over $300.

Cheapest States to Buy a Car

Mississippi and Ohio stand out with average prices of $28,000 to $30,000. These states also come with lower insurance premiums of around $1,100, and unexpected fees typically stay below $300.

States to Avoid Buying a Car From

California and New York are the priciest states in terms of initial and ongoing costs. 

Best States to Buy a Used Car

If new cars do not fit into your budget, you might look into purchasing a used one. But what is the difference?

New cars come with the latest features, manufacturer warranties, and the assurance of being in pristine condition. On the other hand, used cars offer cost savings, slower depreciation, and a wider variety of models within a given budget.

While used cars may come with higher maintenance risks and shorter warranty periods, careful selection may mitigate those concerns. So, when looking into the best state to buy a used car, keep the following factors in mind:

State	Average Used Car Price (USD)	Sales Tax Rate (%)
Alabama	$34,206	9.289
Alaska	$40,462	1.821
Arizona	$34,413	8.379
Arkansas	$36,343	9.448
California	$35,759	8.851
Colorado	$35,269	7.807
Connecticut	$32,991	6.350
Delaware	$32,924	0.000
Florida	$34,519	7.002
Georgia	$36,016	7.384
Hawaii	$32,381	4.500
Idaho	$37,092	6.026
Illinois	$35,217	8.855
Indiana	$32,936	7.000
Iowa	$35,750	6.941
Kansas	$35,323	8.654
Kentucky	$34,176	6.000
Louisiana	$35,893	9.563
Maine	$33,758	5.500
Maryland	$33,377	6.000
Massachusetts	$33,232	6.250
Michigan	$33,597	6.000
Minnesota	$33,758	8.038
Mississippi	$34,130	7.062
Missouri	$33,596	8.385
Montana	$38,943	0.000
Nebraska	$35,064	6.968
Nevada	$34,859	8.236
New Hampshire	$31,833	0.000
New Jersey	$33,936	6.601
New Mexico	$35,189	7.617
New York	$33,246	8.532
North Carolina	$34,725	6.996
North Dakota	$37,773	7.041
Ohio	$32,267	7.238
Oklahoma	$35,509	8.989
Oregon	$35,556	0.000
Pennsylvania	$33,097	6.341
Rhode Island	$32,789	7.000
South Carolina	$35,015	7.499
South Dakota	$37,192	6.111
Tennessee	$34,658	9.548
Texas	$35,061	8.200
Utah	$34,580	7.249
Vermont	$31,445	6.359
Virginia	$33,724	5.771
Washington	$36,119	9.378
West Virginia	$33,761	6.567
Wisconsin	$34,018	5.696
Wyoming	$41,405	5.441

After analyzing factors such as initial costs, tax fees, miscellaneous fees, and insurance rates, Mississippi and Ohio clearly emerge as the best states to buy a car — both new and used. In contrast, California and New York are among the worst states to buy a car due to high initial costs and competitive markets. 

So, by shopping for a car in Mississippi or Ohio, buyers will be making the economical choice for themselves and their families.