Location matters – most lucrative spots to buy a used car in the US

The price of the car depends on a variety of factors. But if you are buying a car in the US and do not want to overpay, you must first pay attention to the place of sale.

The car is an expensive purchase. It’s no joke - according to Kelly Blue Book, the average cost of a new car in 2022 hit a record $47,000. Therefore, before you cut once, you need to measure thrice. Here is what you need to know about car prices in the US in order to make the right decision.

Why are the prices so prohibitive?

The price of new cars is based on the Manufacturer's Suggested Retail Price (MSRP) which is set by the manufacturer. However, the MSRP is not set in stone but simply serves as a starting point for negotiations. In the past, car buyers would often pay less than what the manufacturer recommended. Now the situation has changed. Two years after the start of the Covid-19 pandemic and with the onset of other processes destabilizing the global economy (the war in Ukraine, the tense situation around Taiwan), car prices continue to rise. Supply chain disruptions led to stock shortages. In practice, this means that consumers may end up paying more than what’s on the MSRP tag.

One of the surest ways to avoid overpaying is to buy a used car.

The best states to buy used cars

Buying a used car will save you money but even used car prices are not that steady. According to CarAndDriver.com, an average used car is about 35% more expensive today than it was in early 2021.

However, price increase rate has slowed down in the summer of 2022 with some markets being cheaper than others; if you're looking to save money on the original cost of a used car, you might want to consider searching across states. And naturally you must take into account the possible shipping costs and if the car remains in the States – the registration fees.

Here are the five states with the lowest average used car price based on sales from February to July 2021 according to iSeeCars.com:

1. Indiana - $21,961 (11.1% below the national average)

2. Ohio - $22,244

3. Connecticut - $22,528

4. Virginia - $22,618

5. Kentucky - $22,995

Worst states to buy a used car

Alternatively, the five states with the highest average used car prices are:

1. Alaska - $29,656 (20% above the national average)

2. Wyoming - $29,419

3. Montana - $27,303

4. Arkansas - $27,123

5. Idaho - $26,662

States with the lowest car fees

Even after you have agreed on the final price of the car with the dealer, you can not avoid additional fees. The dealer documentation fee which helps cover the dealership's administrative costs of selling a car is usually non-negotiable.

Some states have limits on dealer’s doc fees but most do not. For example, Alaska does not have a cap on the dealer's fee but requires it to be included in the final price of the car.

Currently, the states with the lowest average dealer’s doc fees are as follows:

• California - $55

• Oregon - $61

• New York - $74

• Minnesota - $75

• South Dakota - $93

States without sales tax

State sales taxes can also significantly affect the final cost of a car. For example, if you buy a new car for $45,000 in California where the combined state sales tax and the average local sales tax is 8.68%, you could end up spending an additional $3,906 on taxes alone.

The state sales tax, however, is only part of the equation. There are 38 states that levy a local sales tax in addition to the state tax. In some cases, local sales tax rates are proportional to the state tax. But it can be the other way around - the state sales tax can be high while the local sales tax is low, ultimately resulting in a more balanced and manageable total tax rate.

Let’s take a look at the five states with the highest combined sales tax rates, according to Tax Foundation:

• Tennessee – 9.55% 

• Louisiana – 9.52% 

• Arkansas – 9.51% 

• Washington – 9.23% 

• Alabama - 9,22%

Note that although California has the highest sales tax, the local rates there are low and that is why the state is not on the list.

States that have no statewide sales taxes whatsoever:

• Alaska. This allows towns to levy local sales taxes

• Delaware

• Montana

• New Hampshire

• Oregon

States with the lowest average combined rates:

• Alaska - 1.76%

• Hawaii – 4.44%

• Wyoming – 5.33%

• Wisconsin – 5.43%

• Maine – 5.50%

From the tax standpoint, these are some of the cheapest states to buy a car. The bad news is that taxes are calculated based on where the vehicle is registered, not purchased. Be sure to take this into account.

As you can see, some states can be cheaper for certain car related expenses and more expensive for others. For instance, Alaska has some of the lowest sales taxes but the highest used car prices and dealer fees.

That is why it's important to do your due diligence before buying a car.

In general, however, the difference in car prices in different states is not that drastic. Buying a car in a state with lower prices can help you save money right away. But in the long run, you will end up spending as much or even more than you bargained for due to other expenses such as sales taxes, registration fees (not relevant if the car is to be exported from the US), transportation costs.

The most lucrative option of buying a car in America is through an intermediary company such as Columbus. Firstly, it will allow you to purchase a car at an auction at a special dealer price and save on the auction commission. Secondly, it will ensure delivery at the best price thanks to the Columbus’ permanent collaboration with an American carrier. And thirdly, the shipping will be done using the shortest route since the company works with 12 ports in different parts of the United States. Turnkey delivery is also a great option - in this case, you will be relieved of all the problems related to finding, inspecting and transporting the car.