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 2025, 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 in 2025
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.
Worst States to Buy a Car in 2025
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 2025, these are the states with the lowest supply of new cars, according to data from CarEdge:
- Georgia
- Florida
- California
- New Jersey
- Texas
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.
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I’m in Florida. If I buy a car out of state will that dealer withhold the sales tax because I am taking the car to FL where I have to pay tax anyway? How does one register a car if bought in a different state?
https://floridarevenue.com/taxes/tips/Documents/TIP_23A01-26.pdf
You only pay the tax where your titling its a miss conception that your are charged in both states. Atleast that the way it is in illinois . You pay the sales tax to your state unless you state tax recipical
I would add that Oklahoma actually ends up being about 4.5%-4.6% tax rate on the purchase price REGARDLESS if you trade a vehicle or not. It is based 100% on the full actual purchase price of the vehicle period (not what you paid after trade any trade). i.e. $46,000 negotiated price x 4.6% = $2,070 in taxes. Get $40,000 in value on that deal. Taxes are STILL $2,070. Super frustrating to not get credit for your trade.
Good to know tax and law by Dave in Oklahoma! Best to go to KS or TX to buy new or used car maybe? Register & tag in Oklahoma?
If I live in Alabama and buy a used car in Florida, does the 6% sales tax I pay in Florida apply to the 2% Alabama use tax? Or what does that process look like? Are there additional fees I will pay in Florida that would not be assessed if purchased the same used car in Alabama? Will I owe Alabama additional fees for buying the car in another state? Thanks for your help!