Car prices and overall costs depend on a variety of factors such as taxes, registration fees, dealer fees and location. No matter how skilled you are at negotiating, car costs can still vary significantly by state.
Unfortunately, many drivers never consider these factors when purchasing a car, especially if they have lived in the same state their entire lives. Taxes are also applied based on where you live rather than where you buy a car. Here’s everything you need to know about the best state to buy a car.
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Best state for initial cost
The initial cost of a vehicle should always be one of your primary considerations when buying a car. If you’re looking for the lowest initial cost, no state can beat Florida. When it comes to used car sales, Florida tends to be the cheapest prices.
Florida’s low initial vehicle costs are due to a variety of factors. First, Florida has one of the largest populations of older people. As they start driving less, many people sell their cars, giving you more options to get a great price on a used vehicle.
Additionally, most vehicles in Florida remain in good condition due to the climate. In snowy northern climates, roads are salted to melt the snow. As cars drive through the salt, the salt itself can cause damage. Although it takes years for this damage to be significant, it is usually present when the average person is ready to sell. Florida cars often have no salt damage to speak of.
Best statement for unexpected fees
There are all kinds of fees you have to pay when you buy a vehicle. These fees are separate from the initial cost and can even vary from dealer to dealer within the same state. On average, Oregon has the lowest unexpected car fees. In fact, they usually won’t run you more than $130 total when you buy a car.
To put that price into perspective, we can look at the second-best state for unexpected fees, which is a tie between Alaska and New Hampshire. Windfall fees there do not exceed $360 on average, which is still extremely affordable compared to many other states.
Worst state for initial cost
The worst case for initial car cost is California, due to factors such as the high cost of living, which has been growing steadily for years. California also has a relatively high sales tax rate (7.25%), expensive auto repairs, and high gas prices, making car ownership expensive for many residents.
If you live in California and want a great deal on a car, choosing a used model will be your best bet. Data shows that the average cost of a used vehicle statewide is about the same as the average price in California.
Worst state for unexpected fees
If you want to avoid unexpected fees, you won’t have much luck in Alabama. The unexpected fees in this state is significantly higher than in much of the country. The total unexpected fees average out to about $2,313. That’s nearly 18 times what you’d pay in Oregon, and 14 percent of the average sales price of a vehicle.
There are some other states that also have fees of around $2,000 dollars. These states are as follows:
- Arizona: $2,297, 13.9 percent of the average sale price
- Colorado: $2,284, 13.8 percent of the average sale price
- Tennessee: $2,061, 12.5 percent of the average sale price
- Florida: $1,869, 11.3 percent of the average sale price
States Without Sales Tax
Avoid sales tax can be incredibly beneficial to your car purchase, but it’s only possible in some states. Alaska, Montana, Oregon, Delaware and New Hampshire have no statewide sales tax. You’ll note that these states also generally correspond to the states with the lowest unexpected fees.
Best State for Car Insurance
Car insurance is a legal requirement in most countries, so it is important to consider these costs when purchasing a vehicle. Not all states are created equal when it comes to insurance rates. In reality, Michigan is so notorious for its high insurance costs that the government is working on policies to lower it where the free market has failed.
To find the cheapest insurance, there is no better place to be than Maineand it’s not just because you probability of hitting a deer is low. For a policy that offers decent coverage, you only need to pay an annual premium of around $696. North Dakota and Iowa also offer affordable insurance, with the same amount of coverage costing less than $720 annually. To put that in perspective, the national average is about $1,070 a year for full coverage.
Overall best state to buy a car
While the best state will vary based on any given driver’s personal needs, there is a clear overall winner when looking for the most affordable state to buy a car in. The grand champion is New Hampshire. It’s not the best in any particular category, but it’s generally the most affordable when you consider all the factors.
New Hampshire does not require a sales tax on vehicles, so the cost is removed entirely. In addition, registration fees are remarkably low. Given the cost of insurance, cost of living and the number of used cars on the market there, it can be relatively easy to find an affordable car that you’ll be happy to drive.
This is good news for New Hampshire drivers and anyone planning to move there soon. However, remember that these costs are determined by your state of residence, not where you buy your vehicle, so keep this in mind when buying a new vehicle.
Finance & Insurance Editor
Elizabeth Rivelli is a freelance writer with over three years of experience covering personal finance and insurance. She has extensive knowledge of various lines of insurance, including auto insurance and property insurance. Her byline has appeared in dozens of online finance publications, such as The Balance, Investopedia, Reviews.com, Forbes and Bankrate.