The Best States to Buy a Car to Save Money

Buying a new car is a big deal. Not only do you need to think about what model and year you want to buy, but you’ll also need to think about the overall cost of purchasing that new vehicle. If you need to save money without totally emptying your bank account, you might think you need to spend a lot of time researching.

Thankfully, you don’t. We’ve already compiled the guide to the best states to buy a car in to save some money. Certain states are better places to look for a new car due to their low prices, low fees, and a variety of other reasons. Similarly, there are plenty of states you should avoid if you want to save money when purchasing a new car since they come saddled with extra fees or high costs.

Let’s break down which states you should focus on in your search for a new car.

What Determines if a State is Great for Buying a Cheap Car? 

Of course, there are lots of factors that determine whether a particular state will be a good spot to find a cheap (and decent overall) car. You don’t want to just get a hunk of junk – you want a reliable vehicle, but you also don’t want to pay too much out of pocket.

Let’s break down the factors you should check out one by one.

Initial Costs

Start with the initial cost. As opposed to general market factors, the state you buy a car in can actually impact your down payment or initial overall cost for purchase. There are lots of factors that can influence the initial prices for cars in a given state.

For example, cars purchased in Florida have an initial price typically about 10% cheaper than comparative or even identical models in other states. This is because of things like:

  • The majority of Florida’s population is aging, meaning more people are giving up their cars. The more supply there is, the less demand, so cars are becoming progressively cheaper
  • Furthermore, lots of people move to Florida and purchase luxurious or high-end cars along the way as they retire. This means that they give up their older cars for really low prices

Basically, Florida represents an ideal buyer’s market.

It pays to do a lot of research into different states when looking to buy a car to save money in the long run. The initial cost you pay will be the biggest part of your purchase, even counting all the ancillary fees and expenses that come alongside purchasing a new vehicle.

Car Fees

You’ll next want to check out any unexpected or sudden fees. Certain states have laws that, in a nutshell, require you to pay extra processing or organizational fees for no good reason.

For example, buying a car in Alabama will usually result in you paying over $2000 extra in “surprise” fees even on top of the initial asking price. This counts for both new and used vehicles.

On the flip side, Oregon has really low extra fees. You may need to pay a processing fee of around $115 depending on whether or not your car dealership doesn’t use an integrator, or $150 if they do use an integrator.

Similarly, Alaska and New Hampshire are great places to buy a car in terms of their low fees. You may only need to pay a few hundred dollars extra compared to the whopping $2300 expected from Alabama residents.

Fortunately, you can usually do some research and determine whether or not a given state has tons of extra fees by looking at that state’s DMV website or by checking auto listings at used car websites with stock in the area.

Emissions Standards

Many states now implement emissions standards for vehicles purchased or manufactured within their territories. For example, California is notorious for its very stringent regulations concerning smog and general car emissions. Any new car sold in the state has to be “California Certified”.

This can, of course, result in even more additional costs that add to the total bottom line when purchasing a new vehicle.

Fortunately, most cars meet existing federal emissions rules across the other 49 states. Thus, this extra cost is really only something to consider if you plan to purchase a car in California or plan to move to California with your new car sometime in the near future.

Sales Tax

Most transactions are saddled with sales tax in the majority of states. However, some states don’t have sales tax whatsoever. Any car purchase you make in these states will, therefore, be comparatively cheaper.

New Hampshire, Montana, Oregon, Alaska, and Delaware don’t have any sales tax to worry about. You’ll also notice that both Alaska and New Hampshire are great choices since they have low unexpected fees in general.

Therefore, any of these states could also be a good pick if you want to save money when buying a car.

Car Insurance

Just like business insurance, car insurance is critical. Rates can vary from state to state, even within the same auto insurance provider. Since car insurance is required in most states, it’s not something you can easily get away from.

For instance, Michigan has particularly high auto insurance costs for a variety of reasons. In contrast, Maine is known to be a state with very low auto insurance costs (probably because car accidents are rare in Maine compared to a state like Michigan). To put this in perspective, most Maine drivers only pay annual auto insurance premiums of around $850.

Other states, such as Idaho and Ohio, will charge drivers around $1000 annually for their auto insurance premiums.

Do some research on this point and ask your auto insurance provider what insurance would cost for a new vehicle. Keep in mind that nationwide average insurance premiums hover around $1300 a year.

Travel Time

There’s one last thing to consider before purchasing a car: travel time. If you purchase a car in a faraway state, like Alaska, you’ll have to eventually transport the vehicle in order to take advantage of it. This can add up to quite a bit of extra cash depending on where you live and how you transport the vehicle.

For the Alaska example, you’ll either have to fly or drive there yourself and then drive the vehicle back in person or ship the vehicle to a closer location. Either way, expect to pay another few hundred (if not thousands) of dollars in shipping fees or gasoline and hotel expenses alone depending on how far you’re going.

Because of this unavoidable aspect, it may be wise to try to buy another car that’s reasonably close to where you live even if it’s in a state that has slightly higher unexpected fees or insurance premiums.

The Best State To Buy a Car In To Save Money

With all this said, what’s the best state in which to buy a car if you want to save money on average? 

According to several resources, New Hampshire may be the best choice overall, even though it isn’t the cheapest in any one particular factor.

For instance, it doesn’t have the cheapest overall fees. But it does have very low fees on average. Furthermore, it doesn’t charge any sales tax, so that’s one less expense you need to worry about. Registration fees are typically low, and auto insurance premiums are also low in general.

Plus, the initial cost for a New Hampshire vehicle shouldn’t be too high, especially relative to other states like California, which have really high initial costs, fees, and other charges. You also won’t have to ship any new car from New Hampshire to another location, as you would if you purchased a car from Alaska or Hawaii.

Other great states to consider include:

  • Oregon
  • Florida
  • Idaho
  • Ohio
  • Maine

States to Avoid When Buying a Car if You Want to Save Money

It will definitely save you money to avoid certain states when looking to buy a new car. The most important state to avoid by far is California, which has really high average initial costs for most of its new and used vehicles, plus high expenses and other fees (some of which relate to its emissions standards).

You may also want to avoid states such as Alabama, which have tons of extra fees.

Summary

Overall, you have lots of great choices if you want to buy a car and save money at the same time. Again, we’d recommend looking into New Hampshire if you can manage it or if you live nearby, but there are alternative choices if you’re looking for something a little geographically closer.

Looking for more resources? Check out Seek Capital’s blog for more helpful financial best practices and info!

 

Sources

https://www.epa.gov/regulations-emissions-vehicles-and-engines

https://www.nerdwallet.com/blog/insurance/cheapest-car-insurance-in-maine-me/

https://ww2.arb.ca.gov/frequently-asked-questions?f%5B0%5D=topics%3A143

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