How to choose a car

Used car or new

If you a choosing between a new or used car, here are few things to consider:
A new car will cost you more, even with the zero percent financing. I have calculated it many times for many people, and the bottom line, you will pay more for a new car, whether you buy it or lease it. Of course, if you can afford it, buying a new car is a lot more easier and more fun. Once you enter any dealership, the sales people know many ways to make you leave the lot in a shiny new car. I know several people who ended up with a new car after visiting a dealership for some other reason. On the downside, the lengthy contracts usually associated with new cars are difficult to get out of if your situation changes.

A good well-maintained 3-4 year old car with good reliability rating typically costs about 60-70% of the original price and it can easily last you for another 3-4 years. Of course, it takes time to find a used car in good condition, and you may need to have it thoroughly inspected prior purchase to make sure it doesn't have hidden problems. Another thing, if you buying a used car, the financing rate is usually higher than zero percent. Still, if you try to calculate all associated costs, with insurance, maintenance, and so on, a used car will be cheaper than a new car of the same class. A used car is easier to pay off and once you paid it off, if you want to sell it, you can sell it.

Depreciation

Some cars hold value well, others depreciate very quickly. If you want to keep your car for only a few years and then trade it, consider a model that will not drop in value too quickly over your ownership period. I'll give you a real-life example:

A person A buys a new $40K SUV. In four years, as the situation changes, he decides to trade it for a minivan. When he visits a dealer, he finds out that his 4-year old SUV only worth close to $13,000 while he still ows a lot more for it. Turns out, his SUV has depreciated $40,000 - 13,000 = $27,000 over four years, or it has cost him $6,750 a year in lost value.

A person B buys a small new car for $17K. In four years she trades this car for a new one and she gets $8,500 for her trade-in. The result: her car depreciated $17,000 - $8,500 = $8,500 over four years, or it has cost only $2,125 a year in lost value.

To have a rough idea how much a car will worth in, say, four years from now, look up the current trade-in value of a four-year old car of the same model. You can find U.S. trade-in values at NadaGuides or KBB.
To find trade-in values in Canada, check CanadianBlackBook.com - follow Black Book Value menu

Safety ratings

There is no perfectly safe car, but certain models can protect you better in case of a crash. Some vehicles may offer safety features like Anti-lock brakes, Traction Control and Vehicle Stability Control that may help you to avoid an accident in the first place. You can compare crash test ratings and find other car safety related information online at:
SaferCar.gov - crash-test and rollover ratings for specific models by the NHTSA

IIHS - the Insurance Institute for Highway Safety. You can compare frontal offset and side impact crash test results as well as Injury, Collision & Theft Losses and Fatality rates for different cars.

Reliability ratings

The reliability is one of the most important factors to consider if you want to buy a used car. Not all cars are the same. Some cars are proven to be very reliable, others are known for constant problems. Since it is a used car, the original warranty coverage is probably over, so you want the vehicle that is more reliable and will less likely have problems. There is a number of resources where you can check reliability ratings of different cars:

MSN Autos - follow the link "Used cars".

J.D. Power and Associates - they offer new and used car ratings.

Consumer Reports - this is a well known magazine with excellent data, including reliability, but paid subscription is required to access a website. Of course, you can check the magazine in your local library.

However, be aware, even most reliable model car won't last long if not maintained properly.

Fuel economy

With these unpredictable gas prices it's definitely better to choose a more fuel-efficient vehicle, as it will help you to save money at the pump. Do you know that the difference in annual fuel costs between two different vehicles could be as high as $1500 - $2000?
Fuel-efficient cars are usually more environmentally friendly and pollute less.
In addition, in some localities, there might be some tax incentives for those who buy fuel-efficient cars and penalties for those who drive gas guzzlers. You may want to check if any of these will apply in your state or province.
Here are few links where you can compare fuel economy and pollution ratings of different cars and trucks:

For US: FuelEconomy.gov

For Canada: The Office of Energy Efficiency.

Also, check our lists:

- Top ten used cars/SUVs with good gas mileage

- Best used small cars with good fuel economy

- Best Used 4 cylinder SUVs

Environmental impact

All cars with an internal combustion engine produce some amount of emissions as by-products of burning fuel in the engine, or from evaporation of the fuel itself. Modern cars produce a lot less harmful emissions than those from 60s or 70s. However, considering how many cars are on the road today, they are still a major source of air pollution. Different cars have different impacts on the environment - you can compare environmental scores of different cars at EPA's Green Vehicle Guide.

Cost of insurance

The cost of insurance varies a lot depending on the make, year, model and even the color of the car, as well as driver's experience and many other factors. I definitely recommended to get insurance quotes before buying a car.
Follow the link Online Auto insurance quotes.