Advice for car shoppers in slumping economy

by Center for Personal Finance editors

SANTA MONICA, Calif. (8/27/08)--Responding to $4 per gallon gasoline prices, consumers are revved up about hybrids. But their craving to drive these eco- and gas-friendly vehicles may not be the best panacea for the problems at the pump (Edmunds.com Aug. 19).

While most hybrids boast excellent fuel efficiency, the prices are higher than for other vehicles, which can create a lengthy period for your gas savings to "pay back" that initial price. In fact, when long-term ownership costs—such as financing, insurance, fuel, taxes, maintenance, and repairs—are considered, the popular Prius hybrid model ranked No. 34 in Edmunds' True Cost to Own ranking system.

When buying a vehicle, step back and consider the big picture. While a hybrid may be the best vehicle for some, don't overlook a traditional compact car or even a used SUV.

Consider these tips in the current car-buying market:

• Shop for fuel economy and low price. Check out fueleconomy.gov. Then visit kbb.com for current auto prices from Kelley Blue Book's "New Car Blue Book Value." Choose a few that get at least 30 mpg and cost less than sticker price. Ask local dealers to beat that quote, and you may end up with a lower price than the Blue Book Value.

• Avoid used vehicles that are in higher demand. Expect to pay a premium for the popular models. A Ford Focus, for example, sells for less than 60% of the manufacturer's price, while a higher demand compact Honda Civic goes for 70% to 90% of manufacturer's price. Instead search for cars with high reliability ratings from J.D. Power & Associates at jdpower.com.

• Search for reduced sticker prices on SUVs or crossovers. If you're a low-mileage driver, this may be a good option. While these aren't gas-sippers, you may be able to get as much as 15% off the manufacturer's suggested retail price (MSRP) and also land great financing or rebates. Check with the credit union first to compare financing options.

If a hybrid is definitely what you're after, be prepared for a waiting list and a hefty refundable deposit as down payment, especially for the two most popular brands—the Prius and the Civic Hybrid (CNNMoney.com Aug. 8). Be flexible about special options and features. Consider a lesser-known hybrid with slightly fewer miles per gallon, such as the Chevy Malibu or Nissan Altima, which may be a lot easier to get your hands on.

For more information, read "Going Greener With Your Next Car," and "Will a Hybrid Car Save You Money?" in Home & Family Resource Center.


Printed Friday, January 9, 2009

  Home & Family Finance® Resource Center
  Copyright © 2009 - Credit Union National Association, Inc.