Which States Will Cost You Thousands More in Car Sales Tax? A State-by-State Breakdown

When buying a vehicle, most people focus on the sticker price and monthly loan payments. But there’s a hidden cost that can add significant dollars to your purchase: state sales tax. Depending on where you register your car, you could pay anywhere from zero to over $4,000 in taxes on the same $48,510 vehicle purchase.

Understanding the Tax Landscape

Five states—New Hampshire, Oregon, Montana, Alaska, and Delaware—charge no sales tax at all, making them attractive destinations for buyers seeking the lowest car tax state status. Meanwhile, residents in Oklahoma, North Carolina, Colorado, and Alabama enjoy relatively modest tax burdens under 3.5%, and Hawaii, New Mexico, New York, and South Dakota keep rates around 4%.

However, if you’re considering purchasing a car in a no-tax state to avoid fees, think again. Regardless of where you buy, you’ll owe taxes in the state where you register the vehicle. This fundamental rule means shopping across state lines offers limited savings.

The 10 Most Expensive States for Vehicle Purchases

Based on an average April 2024 transaction price of $48,510, here are the states with the highest car sales tax burden:

Top 3 Most Expensive:

Nevada leads the nation with an 8.25% sales tax rate, translating to $4,002.08 on an average car purchase. The state’s high fuel costs compound vehicle ownership expenses, making it the priciest place to buy a car besides California.

Kansas ranks second at 7.50% ($3,638.25), despite having otherwise moderate insurance and maintenance costs. The elevated sales tax alone pushes Kansas into the top 10 most expensive states for car ownership nationwide.

California comes third with a 7.25% rate ($3,516.98). Combined with the nation’s highest gas prices and some of America’s costliest insurance premiums and repair services, Golden State residents face the most expensive vehicle ownership experience overall.

The Remaining High-Tax States:

Illinois ties California at 7.25% ($3,516.98), while Indiana, Rhode Island, and Tennessee all charge 7.0% ($3,395.70). Utah follows at 6.85% ($3,322.93), New Jersey at 6.63% ($3,216.21), and Georgia rounds out the list at 6.60% ($3,201.66).

What This Means for Buyers

The difference between purchasing in a lowest car tax state versus Nevada amounts to over $4,000 on a single transaction. When factored across multiple vehicle purchases over a lifetime, state tax rates represent a substantial consideration in automotive budgeting.

Beyond sales tax, buyers should evaluate total ownership costs including insurance premiums, fuel prices, and maintenance expenses—factors that vary significantly by state and can dwarf the sales tax difference over time.