Alaska Has the Worst Used Car Prices in the U.S. But Also 0% Sales Tax

Used car prices have risen across the country due to carryover problems caused by the COVID-19 pandemic. Automakers are also still troubled by supply chain issues, and drivers are holding off on buying cars because of inflation. It’s a problem no matter where you live, but some states have been affected more severely than others.

In terms of cost, Alaska is currently one of the worst places to buy a used car. However, many Alaska citizens do have the advantage of avoiding sales tax on vehicle purchases. Let’s take a closer look at the Alaska car market right now.

A used car lot where people go to when they are in need of buying a used car.
Used car dealership | Matthew Hatcher via Getty Images

The cost of used cars in Alaska

According to iSeeCars data, the average used car in Alaska costs $29,656. Less than six months ago, Anchorage Daily News reported that the average used car in the state was only $23,000. 

Before the pandemic, you could reportedly get a used car in Alaska for only $15,000 on average. Depending on the trim and mileage of the car, it might be even more expensive. 

For example, one Alaskan dealership was selling a 2018 Ford Taurus with 20,000+ miles for nearly $36,000. Even a Honda CR-V with 85,000 miles on the odometer sold for $27,000 due to the popularity of the model. A Jeep Cherokee is now almost $8,000 more expensive compared to its used price in 2019 (per iSeeCars).

Forbes says that you’ll pay 20% above the national average used car price if you buy one in Alaska. Indiana currently has the cheapest used cars, with an average one priced at $21,961. Connecticut, Kentucky, Ohio, and Virginia all offer used cars in the $22,000 margin.

Which states require sales tax on cars?

In many states, sales tax is tacked onto several purchases to help fund other initiatives in your local community. That includes funds for public infrastructure projects or school departments. Alaska’s sales tax is currently fixed at 0% (in most areas) for used cars.

The same applies to trade-ins and any cars purchased from private buyers. While most Alaskan citizens don’t have to pay sales tax, you may still have to pay local taxes on used car purchases. 

These instances are few and far between, but Homer residents are expected to pay 7.85% in sales tax.  Additionally, you can still be charged sales tax if you buy a new car in Alaska.

You can usually get the tax waived if you’re disabled, a senior, or a current member of the U.S. Military. Members of the Alaskan Tribal council or representatives of charity organizations are also excluded from paying sales tax.

FindTheBestCarPrice.com says that only four other U.S. states don’t impose sales tax. You can buy used cars in Montana, Delaware, Oregon, and New Hampshire without worrying about the extra fee. New York currently imposes the highest sales tax of 12.7%, and Connecticut isn’t far behind at 12.6%.

Why are used car prices so high in Alaska?

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Population density is likely a huge factor in Alaska’s used car prices. There isn’t much competition between used car dealerships in Alaska. Smaller towns mean that dealers are essentially competing against themselves in some areas. This allows them keep prices high.

Another factor could be the rising cost of transportation. This means shipping any cars to Alaska is much more expensive than it used to be.

Whatever the true reasons behind the astronomical prices, car buyers in Alaska need to make sure to stay patient and wait for the right deal to come along.