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Cheapest State to Buy A Car: Your All-in-one Guide for Out-of-State Vehicle Purchase

The average costs of new and used cars are rising in the United States, so it totally makes sense to find ways to save money on your purchase. One excellent way to keep your costs low is finding the cheapest state to buy a car.

However, before we reveal the cheapest state to buy a car, you should know about some factors and fees other than the car’s Manufacturer Suggested Retail Price (MSRP).

Cheapest State to Buy A Car to Save Money on Your Purchase

cheapest state to buy a car

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Things To Keep in Mind When Buying A Cheap Out-of-state Car

1. Sales tax:

The government usually collects sales tax in the state where you register your vehicle, not from where you purchase it. However, some states, like New Hampshire, Oregon, Montana, Delaware, and Alaska, do not charge sales tax. It means you can save a lot on the upfront fees.

On the other hand, Tennessee (9.55%); Louisiana (9.52%); Arkansas (9.51%); Washington (9.23%), and Alabama (9.22%) are notorious for the highest combined sales tax, according to the Tax Foundation.

2. Registration:

You will require a temporary registration if you love driving your car back home before registering. Dealers usually assist you with registration papers.

If you have procured it from a private seller, you will require to apply for temporary registration yourself. When registering with DMV in your home state, you will need a Vehicle Identification Number (VIN) or a verification form to prove that you have lawfully purchased it.

3. Dealer Documentation Fees:

The dealer documentation fee is another expense you must bear as a car buyer other than the sales tax. Dealerships charge it as their administrative fee, and it is primarily non-negotiable.

Some states in America limit dealerships to only charge a certain amount, but most others give showrooms the liberty to charge anything. For instance, Alaska does not pose any limit on dealer documentation charges and asks the dealership to include this fee in the final vehicle price.

Here are the states with the smallest average documentation charges:

  • California: $55
  • Oregon: $61
  • New York: $74
  • Minnesota: $75
  • South Dakota: $93

4. Emission standards:

Since each state has distinct emissions rules, cars that meet one state’s minimum criteria may not pass in another. For example, California has established a strict emission standard through the California air resources board, and numerous other states have adhered to it.

Please make sure the car you wish to buy is also California certified, meaning it was built to fulfill California smog laws. It may seem strict, but many vehicles only follow federal emission regulations in the other 49 states.

5. Driving a Vehicle To Your Home State:

If you intend to drive the car back to the home state, you have to obtain temporary registration, as we mentioned previously. Alternatively, you can ship it, but it will be costlier.

6. Car insurance:

Vehicle insurance is compulsory, and you should factor it into your budget before the purchase. Your cheapest state to buy a car could be costlier in the insurance premium. Insurance rate varies according to:

  • Your location
  • The make and model of the car
  • Legal requisites
  • Traffic jamming
  • Economic circumstances
  • Weather
  • Competition

If you seek the cheapest state to buy a car with regard to car insurance, Maine offers the lowest rate with about $864 per year of insurance coverage. Remember, the national average for insurance policies is $1,318 per year.

Here are ten states that offer the most affordable auto insurance:

  1. Maine: $864/yr average
  2. New Hampshire: $870/yr average
  3. Ohio: $886/yr average
  4. Virginia: $991/yr average
  5. Wisconsin: $998/yr average
  6. Idaho: $1,010/yr average
  7. North Carolina: $1,018/yr average
  8. Vermont: $1,063/yr average
  9. Indiana: $1,068/yr average
  10. Iowa: $1,071/yr average

Alternatively, if you buy a vehicle in Michigan, you have to pay the highest insurance premium with an annual average rate of $2,130. The authorities are devising policies to cut the insurance rates in Michigan. Following Michigan in the most expensive states for car insurance are Florida, Louisiana, New York, and Washington, DC.

After you consider and calculate the sales tax rate, documentation fee, emission laws, and car insurance premiums, see if it is worth moving to another state to purchase a new set of wheels.

Cheapest States To Buy A Car Used

You may fancy buying a secondhand car to save money on car purchases in this cash-strapped economy. However, unfortunately, even used vehicle prices are rising. A survey by CarandDriver reveals the average secondhand car prices are 35% more today compared to the start of 2021.

Here are the best states with the average lowest price according to car sales data (February to July 2022) from iseecars.com.

  1. Indiana: $21,961 (11.1% less than the national average price)
  2. Ohio: $22,244
  3. Connecticut: $22,528
  4. Virginia: $22,618
  5. Kentucky: $22,995

Worst States to Purchase Used Wheels Out Of State:

These states have the greatest average costs for secondhand vehicles:

  • Idaho: $26,662
  • Alaska $29,656 (20% more than the national average)
  • Montana: $27,123
  • Arkansas: $27,123
  • Wyoming: $29,419

States With The Least Dealer Documentation Cost:

Even though you have agreed to a final price with the dealer, you may need to pay more, such as dealer documentation fees. These fees help cover the dealership’s administrative cost of selling a vehicle. We have already mentioned above the states with the most nominal documentation fee. These include:

  • Oregon
  • California
  • New York
  • Minnesota
  • South Dakota

Cheapest State To Buy A Car In Terms of Initial Fees

Florida ranks second best state for buying an affordable vehicle. Because of its large and diverse population, it can provide plenty of alternatives. Even though its sales tax and registration charges are a bit higher compared to most other regions, the total savings place Florida as one of the top states to purchase a vehicle.

Florida also ranks as the cheapest state to buy a car just after New Hemisphere since it provides the lowest upfront prices for purchasing secondhand vehicles across the country.

It is an astounding fact that Florida’s initial prices are, on average, 10% lower than the national average. It means you can buy your new set of wheels at a much lower price, partly due to the aging people here selling their moderately used vehicles.

Florida is a sunshine state, so the weather here is suitable for secondhand vehicles. Cars never have to endure snowy conditions, so the underbody and frames remain in excellent condition. It is why the maintenance cost of Florida cars is low.

What Is The Cheapest State To Buy A Car – Overall

New Hampshire is the best and the cheapest state to buy a car. Here are the reasons why:

  • You’re excused from paying sales tax, which means serious savings on upfront fees.
  • Fewer extra costs and taxes associated with buying a used out-of-state car.
  • The registration is low (max $18 per thousand of the complete sales cost)
  • Low insurance premiums at around $870 per year.

The Other Cheapest States to Buy a Car:

Aside from New Hampshire and Florida, other affordable states for car buying are:

North Carolina:

  • Vehicle sales tax rates at just 3%
  • Reasonably low title and registration charges
  • Seven lowest in the annual auto insurance premiums
  • The maintenance expenses are quite realistic in North Carolina.

Missouri:

  • Missouri’s initial expenses and unpredicted charges, comprising ownership, transportation title, and registration dues, are among the least in the USA.
  • The fuel prices are among the lowest in the county.
  • The insurance rates are also reasonable.

Ohio:

  • Insurance rates stand at the third-lowest in America.
  • Fuel and maintenance charges are significantly lower than the other states.
  • With a population of just below 12 million, the state offers lots of vehicles.

Wisconsin:

  • The yearly vehicle ownership charges are the second lowest in the country.
  • Insurance payments are some of the lowest.
  • Maintenance charges are also very reasonable.

Now that you know the cheapest state to buy a car, here are some handy tips for buying a car from another state.

Handy Tips For Purchasing a Cheap out-of-state Vehicle

  • Ensure to examine the vehicle and test drive it before finalizing the deal.
  • If you are going to buy your vehicle online, make sure to buy from a firm that has a buyer remorse policy.
  • If you are keen to buy from a private seller, ask them if you can get it inspected by a company or a mechanic.
  • Remember, car prices vary, and a specific model in one state could be less or more costly in another state due to various factors. If you know your car requirements very well, you can find the cheapest state to buy a car through some research.
  • When creating your car budget, factor in long-term maintenance and other expenses.

Do your Research

Purchasing a vehicle out of state requires proper research; otherwise, you may end up paying more than your home state. Consider the sales tax, documentation fee, registration charges, emission standards, the cost to drive the car home, and last but not least, the insurance policy.
Other than that, you should know that certain vehicles are costly in one state and less expensive in others. Therefore, it is wise first to decide the make and model you want to purchase and then find the states that offer them at a reasonable price.

Some states have strict rules for gas guzzlers, and some offer discounts on eco-friendly and electric cars. Extensive research in advance would help a long way in procuring your dream car within your budget.



Jasper

Jasper has been an enthusiast of the automotive and IT industries since the age of 16. He independently writes on the auto industry's recent happenings.


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