What is the Best State to Buy a Car?


The price of buying a car isn’t just about the number on the model’s sticker. Instead, buyers also are responsible for other fees and taxes, too. These costs bump the out-the-door price, and where the buyer lives could impact this final cost, too.

Sales tax might be rolled into financing or it might need to be paid separately; this tax could cost thousands. Documentation fees are costs associated with the paperwork for the car purchase, and some states have higher fees than others. Considering these extra costs, what is the best state to buy a car?

States without Sales Tax for Car Purchases

Many states charge sales tax related to the purchase of a vehicle; the price of this tax varies and some and local taxes might be added into that tax, too. The best states to buy a car might be the states that don’t impose a sales tax on a car purchase.

There are only five states without this tax:

  • Alaska
  • Delaware
  • Montana
  • New Hampshire
  • Oregon

Those who live in other states might wish to research how sales tax is calculated in their state. This can help buyers be prepared for the cost of the tax.

While some buyers might roll the tax into the loan, this might mean that the sales tax accrues interest. Perhaps the best option to pay the sales tax is simply to save up and pay it in full. Unfortunately, though, some buyers might not have the money to do this.

Again, depending on the price of the car and the tax rate, the total tax could be quite expensive. Some buyers might not have the choice to roll it into the loan; in this case, they will need to be prepared to pay their tax in full.

What state has the highest sales tax related to a car purchase? According to Policy Genius, Nevada is the state with the highest tax rate for cars (8.25 percent).

What is the Best State to Buy a Car

Doc Fees: The Price of Paper

Another fee that adds to the out-the-door price is the documentation fee (doc fee). What is this fee? A doc fee is the price the dealership charges for handling the paperwork associated with the purchase and sale of the car.

Unfortunately, these fees vary per state. Some states have a ceiling for the price of the doc fee, but other states don’t have a limit. The state with the most expensive doc fees is Florida, where the doc fee could rise to nearly $1,000. California might be the cheapest state for doc fees; the doc fee in California is capped at $80.

According to Car and Driver, California charges 7.5 percent for sales tax. While buyers might get a good deal on the doc fee, the sales tax might add a decent amount of cost to the out-the-door price.

Title and Registration

Also adding to the cost of the vehicle are the costs associated with titling and registering the vehicle. Again, these fees will vary by state. Car and Driver explains, though, that California can charge up to $500 for a registration fee.

Some states base the price of registration by weight, others by horsepower and some just charge one rate. For example, in Georgia this fee is only $20.

Car owners will need to title and register their car; they should research the costs in their state and ensure they are prepared for the fees.

The Price of Vehicles From State to State

Car buyers looking for a new or used car might wonder if prices vary from state to state. While the tax rates and other fees will be different, the price of vehicles also could be slightly different in different states.

Availability of models could lead to higher prices. Some dealerships could have lower inventory than others.

In addition, some car models might be more popular in some states than others. Buyers might have difficulty finding certain models. Maybe prices might be higher, too.

However, the only way to understand if a car model is cheaper in another state is to research the model. Buyers can search for a specific vehicle model and expand the geographic scope into another state. Some car buying sites let users extend the geographic scope to a 1,000-mile radius.

If prices are lower in another state, should buyers travel across state lines to make their purchase? For many buyers, this might not be the most practical option. Buying out of state also could be a bit more complicated, and some buyers just might not want to deal with the extra hassle.

The Best States to Buy a Used Car According to Autolist

Buyers who are determined to find the best states to purchase a car might consult Autolist. The site rounded up a list of the best (or cheapest) states for buying a used car. The five best states to purchase a used vehicle are:

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

New Hampshire was noted as the best state for buying a used car, according to Autolist. New Hampshire doesn’t have sales tax associated with the purchase, the state has affordable registration fees, insurance costs are lower and there are not a lot of other fees (when purchasing a used model).

Yes, Florida also made the list. Although the state can have expensive doc fees, the state might offer more selection than other states.

What is the Best State to Buy a Car

The Worst State to Buy a Car

Now is an odd time for car buyers. The Fed has bumped interest rates and this could mean higher rates for car loans. In addition, the chip shortage has impacted the supply of some new cars, and high demand also has led to higher costs for used cars, too.

The average purchase price for a new car is now more than $48K and the average used car price is more than $28K. For buyers who are strapped for cash, these numbers could seem a little intimidating.

Some states don’t give car buyers a break for prices or for taxes. What is the worst state for buying a car? MotorBiscuit named California as the worst state to buy a car. Unfortunately, the tax rate combined with the cost of fuel makes it an expensive place to own a car.

Finding the Best Prices in Any State

Buyers might begin their new or used car search based on their budget parameters. A car payment should fit comfortably in the budget, and Nerdwallet recommends allocating less than 10 percent of take-home pay for the car payment.

Car buyers who don’t have many expenses, though, could decide to spend more on a car. Other buyers might be strapped with a student loan, high rent payments or other debt and might have less to allocate for their car budget.

In addition to understanding the budget, buyers also need to think about how much they will plan to allocate for a down payment. Nerdwallet recommends allocating 10 percent of the purchase price of a used car for a down payment and 20 percent of the price of a new car for a down payment.

New cars are impacted by depreciation early on during ownership. In fact, driving the car out of the dealership could lower the value of a new car by nine to 11 percent. After five years, the average car will have depreciated slightly more than 33 percent.

A decent down payment helps offset the impact of inflation on a new car and can help to ensure that the car isn’t underwater in value (this means the loan balance exceeds the value of the car). Buyers might look at their budget to understand how much they can allocate for their down payment, and they also shouldn’t forget about any taxes associated with their purchase.

When buyers understand how much they can afford for their payment, they can begin to search for new or used models that fit into their budget. A budget for a monthly payment doesn’t help buyers as they are looking at the full price of cars, though; Nerdwallet let’s car shoppers use a reverse auto loan calculator to translate the monthly payment into the price of the car.

Finding the best car for the budget could take some time. Buyers should understand the type of vehicle that fits their needs. Do they have a large family and need a car with three rows of seats? Is the vehicle going to be used for a long commute? The best commuting cars might be hybrids or fuel-efficient standard cars.

Car buyers also could just focus on finding all the models that fit their price range. They can visit the websites of local dealerships and use search tools to find cars that are affordable. In addition, sites like Kelley Blue Book also let buyers search the prices at different local dealerships.

Used cars can be priced higher or lower based on age, make/model, mileage and condition. Cars that are incredibly low-priced could have high mileage or other issues. When shopping for used cars, buyers can request the Carfax to understand the number of previous owners and any issues, too.

What is the best state for buying a car? Some states have lower doc fees, others don’t charge taxes related to the sale of the vehicle. However, buyers can research the costs in their state to understand how the fees, taxes and other costs will impact their out-the-door price.

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