When it comes to purchasing a new or used car, the state you’re in can make a significant difference in terms of taxes, fees, and available inventory. We’ll take a look at the best and worst states to buy a car in 2023, focusing on factors like sales tax, insurance costs, documentation fees, and overall car supply. Let’s dive in and see how your state stacks up.
Best States to Buy a Car
First, let’s explore the states that offer the most advantages when it comes to car buying. States like Alaska, Montana, Oregon, Delaware, and New Hampshire stand out due to their lack of statewide sales tax, as well as generally low unexpected fees. Iowa is also noteworthy for its affordable insurance rates, averaging less than $720 annually.
These are the most and least expensive cars to insure.
Several other states have low statewide sales tax rates. These states have a sales tax between 2% and 5%: Alabama (2%), Colorado (2.9%), Hawaii (4%), Louisiana (4%), Missouri (4.23%), New Mexico (4%), New York (4%), North Carolina (3%), Oklahoma (3.25%), South Dakota (4%), and Virginia (4.15%). Depending on the price of the car you’re looking at, these lower sales tax rates could save you several hundred dollars or more.
Dealerships charge a documentation fee, or “doc fee,” to cover the cost of preparing and filing a sales contract. Many states don’t regulate doc fees, and the amount varies from state to state. These states have the lowest doc fees in 2023, and as a result, are better states to buy a car in: Minnesota ($75), Arkansas ($110), Oregon ($115), South Dakota ($115), Iowa ($135), Texas ($150), Washington ($150), Indiana ($150). California is also on the list with a very low average doc fee of $85, but the high sales tax and low supply of new cars keeps it far off of the list of best states to buy a car in.
Car Dealer Doc Fee by State – 2023
Worst States to Buy a Car
Now, let’s take a look at the states you might want to avoid when purchasing a vehicle. Florida, California, and several southern states have the lowest supply of new cars, making it difficult to find the right vehicle. High-cost states like Alabama, Arizona, California, and Tennessee can also be problematic due to additional fees that can average around $2,000.
Documentation fees can be particularly high in Alabama, Virginia, and North Carolina, with fees ranging from $485 to $599. Florida stands out as one of the worst states for new car purchases, with no cap on doc fees (averaging $995) and limited new car inventory.
In spring 2023, these are the regions with the lowest supply of new cars, according to data from Cox Automotive:
- Miami – Fort Lauderdale
- Orlando – Daytona Beach
- Los Angeles
However, Florida’s abundant used car market can make it a better choice for used car buyers, thanks to the state’s older population and the steady influx of used vehicles. On the other hand, flood cars are a much bigger risk in Florida’s used car market.
Buy Your Car With Expert Insights
When it comes to purchasing a car, the state you’re in can make a considerable difference. By being aware of factors like sales tax, insurance costs, documentation fees, and available inventory, you can make a more informed decision when searching for your next vehicle.
To learn more about car ownership costs and other important factors, explore our CarEdge Data and CarEdge Coach. Our team of car buying pros is here to help guide you through the car buying process. Check out these success stories of how much the CarEdge Community is saving. Happy car hunting!