Expert Advice

Learn everything you need to know to buy, own, and sell a car. No one knows the ins and outs of the car buying and ownership experience like our Editors. Check out their valuable advice on these topics:

Shopping Tips

Knowing what you want-or need-before you start making the rounds at dealerships can save both time and money. It's human nature to go looking for a practical family vehicle like a minivan, but be distracted in the showroom by a flashy sport sedan that costs more. Whatever the model, if emotion drives you to an impulsive purchase, you are likely to pay more and suffer regret later.

Automotive sales have been sluggish this year, with new-car sales up only 3 percent so far versus last year's figures according to Automotive News. Truck sales, however, are down 11.1 percent so far in 2006. Total vehicle sales at dealerships fell 2 percent in 2005 according to the National Automotive Dealer Association. Still, with so many brands and types of vehicles to choose from, consumers have more possibilities than ever so automakers have to fight for every sale.

Record-high incentives certainly help move the metal. Not only are automakers offering traditional incentives in the form of cute-rate financing and/or cash rebates, they're getting creative and luring customers with employee pricing programs and free gas cards. Many manufacturers are expected to continue offering tempting incentives on some or all of their models during the months ahead.

Getting Started
To get the right vehicle at the best price, it's more important than ever to do your homework before starting to shop. Begin with the basics.

Decide how much you can afford and how much you are willing to pay before you shop for a vehicle. If, like most consumers, you have to borrow money, shop for a loan before you shop for a vehicle. Consult the Monthly Payment Table to calculate what you'll have to pay each month. The Table lists how much you'd have to pay for each $1000 borrowed, based on the interest rate and term of the loan. For instance, if you borrow $10,000 for 4 years at 8 percent interest, your monthly payments would be $24.41 times 10, or $244.10. Borrowing that same amount at 8 percent for 3 years would raise the monthly payments to $313.40 ($31.34 times 10).

Keep in mind, too, that you'll probably need a down payment of about 20 percent (in the example above, about $2000), unless your trade-in is worth that much. The total of your loan, down payment, trade-in, and any factory rebate will have to cover the price of the car, as well as fees and sales tax. Your bank or credit union can discuss loan options and help you set a realistic price range that fits your means and budget. (See "Shop for Financing")

Buying a new car is a financial stretch for many consumers and out of reach for quite a few. Many have turned to used cars and others to leasing, hoping to avoid a hefty down payment and lower their monthly payment. (See "Lease or Buy-Which Is Better?")

As greater numbers of consumers wind up in bankruptcy or with insurmountable credit problems, even buying a used car becomes difficult. Credit-challenged customers are consigned to the rank of subprime buyers, who are obligated to pay interest rates far higher than the norm--assuming they can get credit at all.

More Facts Result in a Better Choice
Before visiting a dealership at all, gather as much additional information as you possibly can on the vehicles in your price range. Consumer Guide's Car & Truck Test offers prices, evaluations, and other valuable data for virtually all makes and models. Additionally, automakers' brochures and Internet sites can offer other pertinent details, such as exterior-color and interior-trim availability.

It's always a good idea to visit an auto show, if one is held in your area, because they present a rare opportunity to compare many makes and models side by side. If possible, rent or borrow the particular vehicle you're considering, so you can take an extended test drive.

Perhaps the right car for you is a truck. SUVs, minivans, and pickups are considered "light trucks," which account for more than half of new-vehicle sales. However, some of these vehicles are tall and/or long, so make sure the one you want will fit in your garage. In addition, shorter riders may have trouble entering and exiting tall trucks. Look over the specifications for the vehicle that interests you, and compare it to similar models.

Most trucks and SUVs offer four-wheel-drive systems, as do some cars and minivans. To help determine what kind of 4WD system is right for you, consult our four-wheel-drive report.

Whichever type of vehicle you choose, select a model with options that suit your needs, not just your desires.

Optional Equipment Choices
Some features may come as stand-alone options only. Or they may be included as part of higher trim levels and/or bundled with other items in specially discounted packages. Generally, it's best to choose the trim level that includes most or all of the features you desire, instead of equipping the base model with individual, costly options. On the other hand, if you wind up with added features you may not otherwise want, taking the higher trim level can be a lesser value.

Not all features may be available with all trim levels in a given vehicle line, and some features may only be ordered as part of an option package.

Be a Smart Shopper
Informed shoppers have an edge when negotiating price. To get the best deal, plan your moves and take your time.

• Know what you want, but be flexible. Narrow your list to two or three models that best suit your needs and pocketbook.
• Total the list and invoice prices for the models you're considering, including any options or option packages that you want, and add the delivery charge to both columns. If a manufacturer's rebate is advertised for a vehicle, deduct it from both the list and invoice totals. Your "target total" is the invoice price, though the final transaction will nearly always end up somewhere between the two figures. The final price will depend upon your knowledge of the vehicle, your ability to negotiate, and the salesperson's resolve.
• Research your present vehicle's fair-market trade-in value ahead of time by checking published guides or consulting a local lending institution. A vehicle's trade-in value is expressed as its "wholesale" value (as opposed to the "retail" value, which would be a dealer's asking price if the car were placed on a lot). Some dealerships can provide access to trade-in values at Black Book Online, a web-based service from the Black Book, which is one of the price guides most often used by dealers.
• You might want to "shop" your car or truck to a few dealerships' used-car departments. Ask each manager what the dealer would pay for your vehicle in an outright sale, and get the bids in writing. Keep in mind, however, that you can usually get more money for your car if you sell it yourself to a private party. Also, if a dealership isn't particularly interested in the vehicle that you have, the price offered is sure to be low.
• Shop competing dealers to compare prices on the same vehicle, with the same or similar features. You're not likely to get the dealer's "best" price for a vehicle just by asking (you'll usually have to dicker to obtain it). Still, this can give you an idea of how willing the dealer is to negotiate. Never put a deposit on a car just to get a price quote.
• Don't allow the salesperson to "steer" you toward a more expensive vehicle or a version that includes features you don't want.
• Ask if the dealer has the vehicle in stock, exactly as you want it equipped. If not, ask if they can obtain one from a dealer in another area. Don't give the impression that you're "in love" with a particular vehicle, though. A well-trained salesperson can use your emotions to gain the upper hand in price negotiations.
• Size up supply and demand for the car you want. A good deal on a slow-selling model might be below dealer invoice price, while a popular car can still command full suggested retail price or even more. Dealer inventories often tell the story. If you see large numbers of a certain model on the lot, it's probably not a hot seller.
• If you have a trade-in, don't acknowledge this fact until you've secured a firm selling price on the new vehicle from a salesperson. This way, he or she won't be able to "inflate" the trade-in value by manipulating the selling price of the new vehicle. (Such "adjustments" can sometimes work to your advantage if you need a larger down payment to qualify for financing, but you need to be on your guard).
• Never give your trade-in's keys to the salesperson. Your old car could wind up being held hostage while he or she pressures you to sign a sales contract on the spot.
• Test-drive the exact car you've decided upon-before you buy. Think you want manual shift and a sport suspension? A 15-minute test drive might convince you to go with an automatic transmission and a softer suspension that produces a smoother ride.

Rebates and Incentives
Rebates and incentives are legitimate money-savers, and are likely to be available on plenty of models this year.

These incentives are placed on certain models for a specified period of time. They come three ways:

• Cash rebates direct to the customer.
• Low interest rates on loans (including zero-percent financing).
• Cash incentives to the dealer to sell a particular car.

In each case, the manufacturer--not the dealer--is the source of this "generosity." Rebates are intended to spur sales of specific models that are already on dealers' lots, so they won't apply to a car you have "built to order." In fact, not many people order vehicles anymore, and many dealers aren't eager to complicate their lives by getting into custom-ordered models.

Cash rebates are often advertised. These consist of a check made out from the automaker to the buyer, and they can usually be applied to your down payment. As an alternative, you might qualify for a low-interest loan. Rates typically range from 0.9 to 7.9 percent APR (annual percentage rate), but they can be as low as zero-percent for shorter-term loans.

Only the best credit risks qualify for the lowest rates. If you have weak credit, or little credit history, the rate you'll be offered will be higher--often a lot higher.

Do the math to determine which is best: the low-interest loan or the cash in hand. Cash might sound good, but in some cases you could save more money in the long term with the low-interest loan.

Dealer incentives are trickier to learn about, but they're reported in trade magazines, such as Automotive News, and by some newspapers. We also publish them on-line in our new-car reports. Basically, a manufacturer is offering dealers specific amounts of cash to sell certain cars. Unless you want one of those particular models, these incentives won't apply to your purchase.

Remember that incentives come from the manufacturer, not the dealer. Don't allow a salesperson to use them as a means of "giving you a deal" on the final sale price.

Dealing with Dealers
Even if there are no rebates or incentives on a car, the dealer could probably sell it at invoice cost and still make a profit. It works like this: Many manufacturers refund to dealers a small percentage of the invoice price, such as 2 or 3 percent. These "holdbacks" are distributed to dealers as a lump sum several times a year.

Some dealers still cling to traditional hard-sell methods. Others take a kinder, gentler approach. If a specific dealer or salesperson makes you uncomfortable, look elsewhere. Buying a car should be a pleasant experience, so find a dealer that makes it one. Plenty of dealers these days are concerned about generating satisfied customers who may come back again later for another purchase.

Even at dealerships where the atmosphere is congenial, the salesperson's job is to make as much money as possible on each sale. Your quest as a consumer is to get the lowest possible price on the car you want. You need to find a happy medium between getting a good deal and allowing the salesperson a reasonable profit. Dealers are businesses, after all. If they don't make profits, they won't be around long.

When you're at the dealership, keep these tips in mind:

• Dealers can make up to twice as much by selling financing, insurance, and add-ons than they make selling the vehicle itself. Popular moneymakers include rustproofing, paint sealant, "protection packages," anti-theft setups, powerful audio systems, and extended-service contracts. Dealers typically pay little for these and mark them up sharply. You can usually buy them elsewhere for less money--provided you need them at all, which is often not the case.
• For a good deal, find a good dealer. Price is important, but it shouldn't be your only consideration. A dealership with a reputation for providing good service and giving customers the benefit of the doubt may deserve to charge more.
• Ask friends and neighbors about their experiences with dealers. Your local Better Business Bureau can provide a Reliability Report, stating whether complaints have been filed against a specific dealership. Look for a pattern of complaints or for signs that problems remain unresolved. You don't want to do business with a poorly run dealership.
• Notice how you're greeted when you arrive at a dealership, and whether the same salesperson stays with a customer through the entire transaction. Some pass customers off to a "closer" who specializes in high-pressure tactics.
• Beware of dealers who slap a second price sticker onto every car, listing high-profit extras you may not want.
• Look for salespeople who exhibit real product knowledge, don't just rattle off a set speech, and are neither pushy nor overly friendly. If you feel bulldozed or intimidated, shop elsewhere. You should expect--and get--professional treatment.
• Some salespeople still treat female customers in a condescending manner. If you come across one, walk away and shop elsewhere.
• Check out the service department of the dealership. Ask some people who are having their cars serviced if they've been happy with their buying experience and treatment after the sale.
• Special-ordering the exact car and equipment you desire is usually possible only on domestic models. Dealers can search other dealers for the model you want and can sometimes install options once the car arrives. However, they seldom can--or will--order from the factory.
• Dealers might add a separate charge for advertising. Challenge this extra fee.

Negotiating Step-by-Step
Once you're ready to negotiate in earnest with a salesperson, you'll probably be brought to a "closing room" off of the sales floor. If there's a choice, though, ask to stay in one of the cubicles in the showroom. Staying out in the open is generally less intimidating when you face an intense salesperson.

Start by making the first offer, which should be at or a little above the vehicle's invoice price, as stated earlier. Tell the salesperson how you arrived at this price. Explain that if he or she can meet it or come close, you'll close the deal on the spot.

Typically, the salesperson will respond with a counteroffer that will be slightly less than the vehicle's retail price. Next, raise your initial offer by incremental amounts of, say, one or two hundred dollars at a time. With each new figure, the salesperson will likely lower his or her price in the same manner.

At some point, the salesperson may leave to "present your offer to the sales manager" (though he may not actually do so). He or she will probably return with another bid. If it's close to your last offer, try standing firm; but if it's considerably higher, continue the negotiating process.

If the salesperson goes to "see the manager" a second time, his or her next counteroffer will probably be the dealership's lowest price on that day for that model. At this point, decide whether to accept the offer, leave and try another dealer, or keep negotiating.

Once you've reached an agreeable offer, bring up the subject of your trade-in and negotiate that price separately.

Getting the absolute lowest figure isn't always worth the aggravation, and can lead to hostility that may be troublesome later. If you show a little willingness to accept a close offer, you may be treated more courteously when you have to return to the dealership. That's human nature. Paying a few dollars more than rock-bottom isn't a tragedy when you're talking about a purchase that runs to many thousands of dollars.

Modern Ways To Shop
Do you hate to haggle? Here's how to minimize--or even skip--that sometimes-uncomfortable part of the new-car buying process. Alternative choices range from auto brokers and buyers' agents to buying clubs and online services. They operate differently, but these options usually offer a low-price, no-haggle approach to obtaining a new car or truck.

An auto broker works with a network of dealers to shop on behalf of the buyer for the best price on a new vehicle. A broker looks for a vehicle that comes closest to your color and equipment requirements while netting that dealership's lowest-price offer, which may be within a few hundred dollars of a car or truck's invoice price. A broker will also inform the buyer of any factory rebates or other promotions. Most brokers can assist with financing, trade-ins, and paperwork; and facilitate the final payment. Once the deal is finalized, the car can usually be picked up at the selling dealership or, for an extra fee, the broker will have it drop-shipped to a local dealer or even driven right to your front door. Note, however, that some states ban auto brokers.

Buying services work similarly to auto brokers, selling certain vehicles at deep discounts. Some operate through credit unions; others are affiliated with warehouse-club chains like Sam's Club and Costco. Many clubs will locate a participating dealer in your area that has the vehicle you're looking for and is willing to sell it to you at a predetermined price.

Buyers' agents generally charge a flat fee to the shopper, but get no reimbursement from dealers or other organizations. They simply act on your behalf, using their own resources and negotiating skills to get the vehicle you want at the lowest possible price.

Shoppers are Surfing the Web for Top Deals
Technology has already transformed the car buying process. Most of today's new-car buyers spend at least part of the shopping process on the computer, taking trips to "virtual showrooms" and gleaning valuable information from a variety of Internet sites.

Nearly every automaker has a Web site brimming with product information. Some entertain and inform. Many sites let you "build" your vehicle of choice, get retail prices, apply for a loan, and make an appointment with a dealership. Others are little more than online sales brochures.

More than 94 percent of the nation's 21,640 new-car dealers have a Web site, according to the National Automobile Dealers Association. On most, consumers can browse new- and used-vehicle inventories.

Generally, online buying sites enter into financial agreements with a number of auto dealers around the country that pay a fee to be a part of the service. Web sites transmit purchase requests to their participating dealers who respond with prices for that particular model. This means that if you use an alternate buying service, you'll probably still need to go to a dealership for a test drive, to complete the transaction (which may include the usual sales pitch for rustproofing, service contracts, option packages, and other add-ons), and to take delivery.

Some people do purchase vehicles directly over the Internet, without setting foot in a dealership, but they're comparative rarities. Analysts don't foresee this trend growing substantially--especially since a test-drive is essential. If you've already driven the type of car that interests you, however, it is possible to arrange all details of a deal without ever leaving the computer.

Web shopping is convenient, but research shows the price you receive over the Internet may not be the lowest available. Shop around--online and/or in person--to get the best deal.

Remember, much of the preliminary work of buying a new car can be done online, but there is no replacement for spending time walking dealer lots. While a resource like the Internet or a book like those published by Consumer Guide can prepare you for shopping, they are not substitutes for touching and driving a vehicle you are considering.

Federal Taxes and Incentives
Uncle Sam has ways of encouraging you to save fuel. A federal gas-guzzler tax is levied on cars that average less than 21.5 mpg in combined city/highway driving based on the EPA's fuel economy estimates. The worst guzzlers, those that average less than 12.5 mpg, are assessed $7700. This tax does not apply to light trucks, including SUVs and vans.

On the other hand, buyers of "hybrid-powered" vehicles are eligible for a federal tax credit of up to $3400. This credit is new for the 2006 tax year and depends on a variety of factors like when you purchased your hybrid, how much fuel it uses, and how much fuel it saves within the vehicle class.

Before You Sign the Contract
Buying a new set of wheels is a big event. Rushing to complete the deal may be tempting, but it invites a dealer to take advantage of you. Make sure you understand every charge you're being assessed.

Before you sign anything, read the entire contract. Be certain you understand exactly what you're buying. The salesperson will likely pressure you to sign the legally binding contract on the spot. You may be in a hurry because you're eager to drive off in your new car, but once you sign that document, it's difficult, if not impossible, to get it changed. A little time spent reading now can save you a sizable amount of money later.

If in doubt, take the contract home. Go over it at your own pace, and contact the dealer if you have any questions. If a dealer doesn't want you to take the contract home, get a written purchase agreement that spells out all the details. Once you're satisfied with that agreement, it can be written into a contract. If a dealer won't provide either, it's probably best to walk away from the deal.

Here's what a contract should spell out:

• Sale price: The amount you've agreed to pay for the car and optional equipment, plus any dealer-installed accessories.
• Down payment: How much you have to pay immediately, either in cash or combined with a trade-in and/or rebate.
• Trade-in value: The amount of money you're getting for your old car or truck, to be applied to the new-vehicle purchase.
• Destination charge: Sometimes called freight, this is the cost of shipping the car to the dealer. Every vehicle has a specific, non-negotiable destination charge.
• Sales tax: Check with your state or local government to determine how tax is assessed in your area. Most states levy sales tax on the full purchase price of the new vehicle. In some states, sales tax is calculated on the net price after trade-in value has been deducted.
• Total cost: Be sure the all-important "bottom line" is filled in, so you know your total price including options, accessories, destination charge, dealer prep, and taxes. If a dealer leaves this portion of the contract blank, you can end up paying more than you had expected.
• Loans: Federal regulations require lenders to disclose all charges. Be sure you know how much you're borrowing, the interest rate, your monthly payment, the length of the loan (in months), and the total amount you will pay over the life of the loan.
• Don't be swayed by low monthly payments if they result in paying a higher total price than is warranted. Too many shoppers think of little beyond the monthly payment, and are easy prey for salespeople who adjust figures to fit that requirement, but which wind up with a far greater total price paid by the end of the contract term.

Is a Pre-Owned Vehicle Best for You?
One way to avoid the high cost of a new car or truck is to buy a used model instead. Almost 20 million used vehicles were sold at new-car dealerships during 2005 according to the National Automobile Dealers Association. Millions more vehicles changed hands in private transactions and at independent used-car dealers.

Buying a secondhand vehicle always carries some risk, and only some of them include a warranty. To counteract that concern, almost all automakers have certification programs that operate through their dealers. Programs vary, but only vehicles up to a certain age with less than a specified number of miles on the odometer are certifiable. Each is given a thorough inspection at the dealership, according to manufacturer directives. Additional warranty coverage is included. Certified used cars cost more, but many consumers are willing to pay extra for the added peace of mind they provide.

The Bottom Line
No matter what type of vehicle you are planning on buying, take the time to compare ownership costs. Consider factors such as insurance premiums, resale values, and fuel economy--including whether the vehicle requires costlier premium gasoline. Compare financing rates from local lenders to find the best deals on new-car loans. The difference in such costs can add hundreds--even thousands--of dollars to your final purchase price in the long run.

Window Stickers

You can find out a lot about a particular vehicle, both new and used, just by "window shopping."

Alll new cars sold in the U.S. must have posted on a side window what is often called a "Monroney sticker" (named for the congressman who introduced the legislation). This law does not apply to light trucks, including passenger vans and most sport-utility vehicles, but most car companies and dealers voluntarily put price stickers on trucks.

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The Monroney sticker must show:

• The manufacturer's suggested retail price (MSRP) for the vehicle and all of its factory-installed options.
• A destination charge for shipping from the final assembly point or port of importation to your local dealership, which is added to the MSRP to produce a Total Price.
• EPA fuel economy estimates.
• Parts Content Information.
• Additional information generally is supplied, including lists of standard and optional equipment.

Many dealers add a second window sticker that lists accessories installed at the dealership, and/or other charges. Everything on this added sticker should be considered "optional" and arguable. More than likely, these items are overpriced as well as nonessential. If you don't want a particular item -- for instance, pinstriping or paint sealant -- don't pay for it. If the dealer insists that it is already on the car, you can still refuse to pay.

These add-on stickers typically include high-profit (and unnecessary) rustproofing and protection packages. Some denote charges like M.V.A., A.D.P., or other cryptic abbreviations. These are nearly always smoke screens for dealer-invented profit-generators. M.V.A. stands for "Market Value Adjustment," and A.D.P. is "Additional Dealer Profit." Both sound official, but they're created by dealers to squeeze more money out of you.

Some dealers dream up dandy new names for old add-on charges, such as "Currency Valuation Fee" and "Import Tariff." It is in your best interest to avoid dealers that engage in these unsavory practices.

Used cars at a dealership must have a completely different window sticker posted. The Used Car Rule, exercised by the Federal Trade Commission, requires that a Buyers Guide be easily visible from outside the car. In addition to basic vehicle information, the Buyers Guide must show:

• Whether the vehicle is offered "as is" or with a warranty.
• Warranty details, if included with the vehicle.
• What percentage of the repair costs a dealer will pay under warranty. In most used-car warranties, the dealer and owner split the cost of repairs according to a predetermined percentage.

The Buyers Guide also tells consumers that oral promises are difficult to enforce, recommends that all promises should be written, and suggests that the car be inspected by an independent mechanic before purchase. On the reverse side of the Buyers Guide is a list of defects that a used vehicle might have.

Lease or Buy

Some of the sweetest lease deals offered in past years have dried up-especially since automakers began offering zero-percent and low-rate financing to entice buyers. Even so, leasing remains an attractive alternative to buying a new vehicle for many motorists. Half of luxury cars are still leased, as are more than 20 percent of vehicles in general.

For most consumers, leasing a new vehicle every two or three years would be more expensive than buying one and keeping it after the final payment. Others are quite content to lease, even if it doesn't necessarily save money.

Leasing has two principal benefits:

• You drive a newer vehicle, which is always under warranty and seldom needs more than routine maintenance, such as oil changes.
• You can often get a larger, more luxurious, better-equipped car by leasing than you could as a straight purchase.

Having a better understanding of this alternative to buying should make it easier to decide whether leasing makes sense for you.

What You Should Know
The basic allure of leasing is that you don't have to pay for or finance the entire cost of a vehicle. You're simply paying for the use of that vehicle for a specific period, often two or three years but leases can run as long as five or six years. It's not exactly renting, but the principle is similar.

Evaluating a lease is a matter of basic arithmetic. You need to consider four factors:

• Total initial payment, including Capital Cost Reduction (down payment) and any extra fees.
• Amount of each monthly payment.
• Number of months in lease terms.
• Possible additional charges at end of lease.

With a lease, your monthly payment is based on the difference between the vehicle's transaction price (its "capitalized cost") and what it's estimated to be worth at the end of the lease term (the "residual value). This difference is financed at a particular rate of interest (which may be called a "lease rate," "lease charge," or "money factor").

Typically, your down payment and monthly charges will be lower with a leased vehicle than one purchased outright. That's why you can usually obtain a better vehicle for the same cash outlay.

You might need nothing more to secure a lease than the first month's payment and a security deposit, which is usually equal to one monthly payment. Details vary sharply, though. Many lease deals require a substantial down payment and possibly additional charges as well.
Nothing affects lease terms more than your credit score. The alluring terms seen on TV commercials are available only to customers with a top-notch credit history. So-so credit means a bigger down payment and/or higher monthly payments. Poor credit generally means no lease at all.

In any case, when the lease period is up, you simply return the vehicle to a dealer without having to worry about a trade-in or selling it to a private party. Provided that the vehicle is returned in good condition, you owe nothing more; but you own nothing, either.
Most leases give you the option of purchasing the vehicle at the end of the contract at a predetermined price. If you really like the car, that's a possibility. However, this is often more expensive over time than buying it outright.

Leasing is most beneficial to those who claim their car or truck as a business expense. Nearly all leasing expenses attributed to business purposes can be deducted. If you can deduct vehicle costs for business, consult a tax advisor to find out which is better for you.

Nothing is perfect, and leasing does have pitfalls. Unlike an outright purchase, you'll have no equity in the vehicle at the end of the payment period. This virtually guarantees that you'll be buying or leasing another vehicle once the lease is up. For consumers who are content with leasing, of course, that's a benefit rather than an obstacle.

Also, leases come with strict mileage limitations, usually 12,000 to 15,000 miles per year. If you exceed the total allowed miles by the time you return the vehicle, you'll be assessed a penalty-which could be as stiff as 25 cents per mile. However, if you know or suspect that you'll be putting on additional miles, you can usually purchase extra miles in advance at a discounted rate.

If you tend to be hard on your vehicles, purchasing is probably a better way to go. Why? Leased vehicles must be returned in excellent condition, without dents, deep scratches, window cracks, or torn upholstery, and with all accessories in working order. Otherwise, you'll be assessed "excessive wear and tear" fees at the end of the lease period, and these can be steep.

If you're uncertain about your financial future, leasing might not be right for you, either. Once you enter into a lease, it's binding for the entire length of the agreement. Terminating the agreement is nearly always difficult and expensive. If you decide you want to get out of a lease in order to lease another vehicle, you might be able to have the first lease "bought out" as part of the deal. If you simply want out, you will probably be assessed a prohibitively hefty termination fee.

Keep in mind that when you lease a vehicle, just as when you buy one, its cost is negotiable. The lower the total price, the lower your lease payments will be.

To keep costs down, choose a model that has a higher resale value. Consult a used-car pricing guide to see how well a vehicle's value has held up historically, or ask the loan department of your bank or a leasing company to compare new vehicles' residual values.

Many libraries carry the Residual Percentage Guide issued monthly by Automotive Lease Guide. Charts estimate how much each vehicle will be worth after specified periods of months, as a percentage of the car's original selling price. This gives a clear picture of which vehicles hold their value best and are therefore prime candidates for leasing. Avoid those with low residual value, because lease terms are certain to be more costly.

If a manufacturer is trying to promote a specific model, its lease terms might be even more favorable. A few years back, manufacturers were subventing leases, absorbing part of the cost by setting artificially high residual values in an attempt to get more vehicles into shoppers' hands.

This tactic resulted in substantial financial losses, so automakers nowadays are more wary about residuals and subvention of this sort is less common. However, advertising campaigns often stress the lowest-cost lease deals, some of which are based on tempting interest rates.

Read the Fine Print
Federal regulations require certain facts to be disclosed on lease agreements, including the capitalized cost, interest rate, up-front fees and taxes, any credit provided for used-car trade-ins, the vehicle's residual value and the amount to be depreciated. Most leases contain an acquisition fee, which typically ranges from $250 to $450, and a disposition fee, which likely adds another $300 or $400. A contract may also include a purchase-option fee that allows you to buy the vehicle at the end of the lease, for a predetermined price.

Look for a detailed description in the contract of what constitutes "excessive wear and tear," and some indication of what you could be charged for this at the end of the term.

If it's not already included in the lease package, you will be offered "gap insurance" (guaranteed asset protection). This covers the remainder of your lease payments if your leased car is stolen or totaled in a wreck. Even if it's not required, some lessees feel more comfortable if they have a "gap" policy in effect.

Most leases prohibit customizing vehicles with aftermarket accessories such as vinyl tops, exterior trim, and even trailer hitches. Ask before you install such items.

The consumer typically pays for sales tax, annual vehicle registration fees and taxes, maintenance and insurance. All of this should be spelled out in the contract, but find out which portions will be included in your monthly payments and which ones you'll have to pay separately. Some states and municipalities permit dealers to charge specific extra fees, which may not be negotiable. All others can be challenged.

Where to Look
Just as it pays to shop when you're buying, also shop around for a lease. Make a few dealers compete for your business. One dealer might waive the down payment or cut the monthly payment to win your business. Others won't budge.

Make sure you compare costs for identical vehicles. A lease with low monthly payments and a hefty down payment might cost more overall than one with higher monthly payments but no money down. Do the math, and consider the total amount that you'll be paying-both now and over the lease term.

Naturally, new-car dealers are a logical place to start your shopping, but there are alternatives. Leasing agents or brokers that lease several brands might beat the deal from the new-car franchise down the street. Some banks and credit unions also offer consumer leases.
If you lease from a dealer who uses an in-house finance company like Ford Credit or GMAC, at the end of the lease you generally can leave the car with any dealer who sells the same brand. This may not be the case if you lease from an agent or broker, or if a dealer uses an independent leasing company. Be sure to ask, just to be prepared.

Is Leasing Making a Comeback?
More than one-third of vehicles were leased in the late 1990s. Lease penetration ran close to 30 percent several years ago, said Tom Kontos, vice-president of industry relations and analytical service at the ADESA wholesale auction chain. Early in this decade, low-interest and zero-interest financing helped steer more customers away from leasing and into purchasing. "As interest rates start to rise," Kontos said, "people will start to look seriously at leasing."

Leasing "doesn't look like it's going to go back to what it was in the '90s," said Art Spinella, president of CNW Marketing, a research organization. Early in 2004, consumers were leasing only 19 percent of vehicles. By summer, lease penetration reached 21.5 percent. All manufacturers are "trying to edge back into leasing," Spinella said, "to feed the certified programs" with used cars several years down the line.

In the past few years, according to Spinella, the prime candidates for leasing have been luxury and near-luxury models, including luxury SUVs. Lately, however, leasing is "starting to drift back into the mainstream." Dealers like leasing because the customer loyalty rate is three times as strong with lessees.

Definitions of Lease Terms

Acquisition Fee: A charge for processing a lease. Even though this seems like a nonessential fee, it may not be negotiable.

Capitalization cost (cap cost): The total price of the vehicle, which the lessor uses to calculate the amount that the customer will be paying. This is equivalent to the purchase price of a vehicle that's sold.

Cap Cost Reduction: Equivalent to a down payment on a purchased vehicle, this is the amount that you pay when signing the lease, in addition to any separate fees that are assessed. When you pay a larger sum initially, monthly payments will be lower. A smaller cap cost reduction means a higher monthly payment. The value of your trade-in (if any) can be applied as part of this amount.

Closed-End Lease: A lease that fixed the vehicle's residual value initially, stating it in the contract. Most vehicle leases are closed-end, which means the customer won't owe an additional sum at the end of the term if the car turns out to be worth less than anticipated.

Dealer Participation: An amount that the dealer contributes to lower the total price of the vehicle, in an attempt to secure the customer's business. Any dealer contribution is applied to the cap cost reduction.

Depreciation: The amount by which a vehicle loses its value over a specified period of time, which is the difference between its original price and its residual value later. No specific figure for depreciation appears in lease contracts, but it's taken into account in setting residual values.

Disposition Fee: An amount to be paid at the end of the lease term, to cover costs of preparing the returned vehicle for sale.

Early Termination Fee: A penalty assessed if you choose to end the contract earlier. Lessors justify this because depreciation is highest in the early portion of a vehicle's life, so a prematurely terminated lease cuts heavily into their earnings. The penalty is likely to be hefty.

End-of-Lease Purchase Price: An agreed-upon price that you will pay when the lease is up, if you choose to keep the vehicle.

Excess Mileage Charge: A per-mile amount charged if you drive the vehicle more than the stated maximum, which is typically 12,000 to 15,000 miles per year. A charge of 15 cents per additional mile is typical, but it could get be higher. If you expect to drive farther than the contract allows, you can usually negotiate a lower figure for the excess miles.

Excess Wear-and-Tear: If the vehicle is returned in good condition, there should be no extra charge. A certain amount of wear-and-tear is permitted, but significant body damage or evidence of improper maintenance will trigger additional sums to be paid for necessary repairs.

Gap Insurance: In most cases, your regular auto insurance covers the leased vehicle. If the vehicle is totally wrecked, however, it could be worth less than an insurer will pay. Gap insurance covers the difference between the cash value of the vehicle and what you still owe on the lease contract. Some leases include this is in the contract.

Lease Term: A period of months during which you have use of the vehicle and will pay agreed-upon monthly payments. Lease terms of 24 and 36 months are most common, but 12-month leases and 60-month contracts can be obtained.

Lessee: The person who leases a vehicle from a dealer or other organization.

Lessor: The dealer or other organization that leases a vehicle to a customer.

Money Factor: You probably won't hear or see this term, but it's the cost of money, equivalent to an interest rate.

Monthly Payment: Amount that you are required to pay to the lessor or its agent every month, through the lease term.

Purchase Option: The right to buy the vehicle that you've leased, at the end of the lease term, for a stated price.

Residual value: A prediction of what a vehicle is likely to be worth as it ages, usually expressed as a percentage of its original price. Residual values may be supplied for vehicles that are 24, 36, or 48 months old.

Security Deposit: A deposit, usually refundable, required before the lease contract takes effect.

Subvented Lease: A lease with favorable terms, due to a manufacturer's decision to absorb a portion of the cost. The manufacturer "subsidizes" part of the total price, by use of a special incentive-a low interest rate, higher-than-normal residual value, or a discount provided by the manufacturer.

Safety

Safety is now a priority with most new-car buyers, but it still doesn't command everyone's full attention. Neither the auto industry nor the federal government can drag its feet anymore when it becomes apparent that consumers face unnecessary risks in their vehicles.

Thanks to sophisticated engineering and extensive safety testing (combined with better roads, increased seatbelt and infant car-seat use, reduced speed limits, and stricter drunk-driving laws), the number of auto-related fatalities has dropped dramatically in recent decades. Even so, the numbers remain frightfully high.

An estimated 42,800 Americans perished in highway vehicle accidents during 2004, according to the National Highway Traffic Safety Administration (NHTSA), which was a slight decline over 2002. This translates to 1.48 fatalities per 100 million miles traveled in cars or light-duty trucks - a historic low rate. By comparison, 3.3 people died for every 100 million miles traveled in 1977.

Still, motor-vehicle crashes continue to be the major cause of unintentional injuries for Americans of all ages, and are the leading cause of death for those age 4 to 33.

Active and Passive Safety Measures
All vehicles have become better engineered to protect occupants in a crash, and help motorists avoid them in the first place. Engineers call these innovations passive and active safety features, respectively.

More than 100 separate components in a typical vehicle contribute to its overall safety, and most new-car buyers seem willing to spend extra money to help protect their loved ones. In a 2004 survey of nearly 15,000 consumers by Harris Interactive, 60 percent said they would like to have rollover protection on their next vehicle. Respondents also favored stability control and pre-crash sensing systems.

Fortunately, even the least-expensive vehicles now offer safety features like antilock brakes and side-impact airbags, which were only available on luxury cars a decade ago. Sadly, though, there are some automakers removing certain safety items, such as ABS, from the standard-equipment lists of some of their less-expensive vehicles.

Today's cars and trucks are designed and built to help passengers survive a wide range of types and severities of collisions. "Crumple zones" at the front and rear of a vehicle are engineered to absorb and redirect crash forces. Hoods are engineered to collapse so occupants won't be forced through the windshield. Doors are designed to remain intact and overlap upon impact so passengers will be able to exit the vehicle. Doors also have more secure hinges and latches so they won't spring open to eject passengers. Heavier firewalls and specially designed engine mounts help send components down and under the passenger area, so they won't come crashing into the front seat. Windshields are specially laminated to help prevent not only injuries from shattering glass, but ejection from the vehicle in a collision.

Stronger passenger compartments, reinforced by race-carlike "safety cage" structures, offer cocoonlike protection to help keep the occupant area intact in an accident. Padded, energy-absorbing materials and other interior elements further help reduce injuries. Head restraints, now being added to rear as well as front seats, help prevent whiplash. Some automakers, led by Volvo, Saab, and General Motors, have introduced head restraints that move slightly under certain crash conditions to help further reduce neck injuries.

Still, the laws of physics dictate that a larger and heavier car will provide its passengers with better protection in a crash. But it's not always practical or desirable to simply select the largest car or truck on a dealer's lot.

Seat Belts are Your Primary Protection
New technology has improved occupant safety dramatically. Yet, properly used seatbelts are still the first, and best, line of protection.

Occupant restraints-primarily seatbelts and supplementary airbags-are designed to protect against the effects of an accident's so-called "second collision." The "first collision" occurs when a vehicle crashes into an object. The second one happens about one-fiftieth of a second later, when unrestrained occupants, still moving forward at the vehicle's original speed, smash into the steering wheel, dashboard and/or windshield. Experts say buckling the three-point lap-and-shoulder harness is the most effective safeguard against the effects of the second collision. They are also the best protection against ejection from a vehicle. Three-fourths of those ejected from vehicles in a collision die from their injuries.

All states but one (New Hampshire), and the District of Columbia, mandate seatbelt use. NHTSA reports that seatbelt use is at an all-time high, with 80 percent of motorists buckling up, compared to only 58 percent in 1994-the first year in which the agency began keeping statistics. Seatbelts are credited with preventing some 12,000 motor-vehicle deaths per year. NHTSA estimates that the increase in belt usage between 2001 and 2004, from 73 to 80 percent, saved 3,400 lives.

Every occupant needs to be buckled, not just those in the front seats. Unrestrained rear-seat passengers are tossed around like rag dolls during a collision or rollover, exposing themselves and front-seat occupants to injury.

Lap and shoulder belts must be worn somewhat snugly to be most effective. Not only will they offer greater protection in a collision, but they can help keep you squarely in the seat during hard-cornering maneuvers. Many vehicles include "pretensioners" that automatically pull the belts tight in a collision.

Belts can bother shorter people and children when they rest on the side of the neck or across the face, but that's no excuse for not wearing them. To help ease this problem, NHTSA requires all vehicles to include upper anchor positions for front-seat shoulder belts that are height-adjustable, allowing a more comfortable "fit." Some vehicles also provide height adjustments for outboard rear shoulder belts. Others include "comfort guides" that route a belt to a more comfortable position.

Airbags Become Safer and Smarter
Once little more than quick-inflating pillows of gas, today's "smart airbags" react to passenger weight and impact conditions to deploy accordingly.

Frontal airbags for the driver and passenger have been required by law in all new cars and light trucks since 1999. If sensors detect rapid deceleration, as in a frontal crash, a fabric cushion, installed in either the steering-wheel hub or the passenger's side of the dashboard inflates in about one-twentieth of a second. The cushion helps absorb the crash energy and prevent the occupant from hitting the dashboard and/or windshield. After deployment, airbags deflate quickly to allow the driver to regain control of the car if it's still moving.

Airbags have been credited with saving an estimated 10,789 lives through the first quarter of 2003, according to NHTSA. Some luxury cars now have as many as 10 airbags spread around the front, rear, and side of their interiors. Though they add to a car's overall crashworthiness, both manufacturers and safety advocates are quick to point out that airbags are designed to augment, not replace, seatbelt use. According to the National Safety Council, the combination of seatbelts and airbags is 81 percent effective in preventing serious head injuries compared with a 60 percent effective rate for belts alone.

Because of incidents in which early airbags caused fatal injuries in crashes, especially to shorter occupants, unbelted riders, and children, current frontal airbags deploy with considerably less force. Still, as NHTSA-mandated warning stickers in all new vehicles point out, front-passenger airbags can cause fatal injuries in a crash to infants riding in rear-facing child seats.

While the obvious solution is to secure the child in the back seat, what if you don't have one? To that end, most pickup trucks and two-seat sport coupes now include an ignition key-activated shutoff switch for the passenger-side airbag.

So-called "smart" frontal airbags on many vehicles can deploy at different degrees of force, depending on the severity of the crash and the weight of the occupant. Most vehicles now have suppression systems that prevent airbags from deploying if sensors detect a child in the front passenger seat. Such airbags will soon be required in all vehicles, on a phased-in basis that began in 2004.

Some cars and trucks offer adjustable accelerator and brake pedals that can be moved closer or farther away from the driver. Adjustable pedals are particularly useful for shorter people, who otherwise must sit close enough to the airbag for it to cause injuries in a collision.

Side-Impact and Side-Curtain Airbags
Most crashes don't occur head-on into another vehicle or a fixed object. Side-impact crashes account for almost 30 percent of collisions, and are the second-leading cause of death and injury to vehicle occupants. As a result, the government mandates that all new cars come equipped with some form of side-impact protection. This is generally accomplished by adding a metal beam and extra foam padding inside the door.

Going a step further, an increasing number of models now offer side-impact airbags for front passengers. These are either mounted on the doors or located within the front-passenger seats. A few costly luxury cars include them for rear-seat passengers as well. NHTSA warns that children who ride in a seat protected by a side-impact airbag may be at risk of serious or fatal injuries if the child's head, neck, or chest is in close proximity to the deploying airbag.

Many vehicles now include head-protection airbags, either in addition to or instead of door- or seat-mounted side airbags. Configured in either a curtain or tubular design, they generally extend from near the bottom of a car's windshield pillar, all the way to the roof just above the rear door on each side of the vehicle. Several Ford vehicles offer an optional airbag canopy system that not only protects passengers in side impacts, but rollover incidents as well.

ABS and other Active Safety Features
To help prevent drivers from having to rely wholly on seatbelts and airbags to save their lives, a wide range of crash avoidance equipment is found on the typical passenger vehicle. This can range from features like daytime running lamps and automatic-dimming rearview mirrors that help improve visibility, to improved braking and suspension components designed to let the driver safely steer clear of trouble.

Originally developed in Germany in 1936 for aircraft use, but made widely available on passenger cars since the late 1980s, antilock braking systems (ABS) prevent a vehicle's wheels from locking up under hard braking, especially on slick road surfaces.

ABS works by engaging and disengaging the brakes rapidly whenever sophisticated computer-controlled sensors detect wheel slippage. This is similar to the time-honored technique of pumping the brake pedal to avoid skidding, but the system can perform this task far faster and more precisely than is humanly possible. Keep your foot down on the brake pedal and don't let up until the vehicle is stopped. If you pump or let up on the brakes, you'll essentially defeat the system's effectiveness.

Available on nearly all cars and trucks sold in the U.S., ABS is well worth the extra expense when offered as optional equipment. In addition to helping a car stop in a straight line, ABS helps the driver keep control of the vehicle when steering around road hazards in extreme situations while applying the brakes.

• Traction Control: This uses a car's ABS sensors to detect wheel slippage during acceleration and help the driver maintain control. It's standard or optional on a growing number of vehicles, and often bundled with ABS. Traction control is especially worthwhile on rear-wheel-drive cars and trucks, which tend to lose traction more easily on slippery surfaces.

Some traction-control systems work by automatically applying the antilock brakes to a slipping wheel (or wheels) to improve low-speed traction on a slippery surface. Others use a combination of selective braking and engine intervention to maintain traction and stability.

• Stability Control: Certain vehicles from almost every manufacturer may be equipped with electronic stability control (ESC), which is also known by various names depending on the automaker. In 2003, more than 7 percent of vehicles had some form of ESC. A NHTSA study, released in 2004, compared vehicles with ESC to earlier models when it was unavailable. The addition of stability control reduced single-vehicle crashes, including rollovers, by 35 percent. The reduction was nearly twice as great for SUVs.

ESC controls both lateral and longitudinal stability, which can prevent a car from "fishtailing" and correct extreme under- or oversteer in cornering situations. Sensors keep track of vehicle speed, steering angle, brake pressure, lateral acceleration (how "hard" the vehicle is cornering), and yaw (the vehicle's rotation around its vertical axis). The system essentially recognizes whether or not the vehicle is operating according to the driver's intent, and takes action to avoid loss of control.

• Brake Assist: Many antilock braking systems now include emergency brake assist. Sensors detect a panic-braking situation. Since most drivers do not apply the brake hard enough under such conditions, the system automatically applies more pressure to reduce stopping distance.

Keeping Children Safe
Safe conditions for adults can be dangerous ones for kids. Children under age 13 belong in the back seat and need to be securely buckled. Most kids under the age of nine should ride in a child safety seat or booster seat.

As stated, passenger-side airbags are hazardous to children 12 and younger who are riding in the front seat-even if they are belted. These children are too small and fragile to be so close to a deploying airbag, which inflates at up to 200 miles per hour.

The risks are greatest for infants. Safety officials warn that a rear-facing child seat should never be used in the front seat of a vehicle with a passenger-side airbag unless the bag can be disabled.

Of the 231 deaths attributed to airbags as of mid-2003, 144 were children. Putting children under 13 in the rear seat reduces the risk of injury in the most common type of accident-a frontal collision-because they will be further from the impact.

All 50 states and the District of Columbia require infants and toddlers to be in a child safety seat. However, many laws apply to children up to three or four years of age, and the cutoff ages vary widely. A few state laws apply specifically to children weighing 40 pounds or less.

Bigger children can ride in back without a special seat if the shoulder belt fits. If the belt rubs their neck or face, try a booster seat. Child seats can reduce the death risk by 70 percent if correctly installed, yet NHTSA says as many as four out of five are improperly used.

A LATCH (Lower Anchors and Tethers for Children) universal child-seat attachment system, required by NHTSA in most new vehicles, makes it easier to install the seats properly. Previously, child-seat manufacturers devised their own mounting systems, some of which proved problematic for users. Forward-facing child seats must come with a tether strap that secures the back of the seat to the vehicle for better head protection.

The first step is to secure the seat so that it won't move excessively in a collision. Then, properly secure the child with the belts attached to the seat. Consult the instructions from both the child-seat maker and the vehicle manufacturer to make sure you're installing the seat correctly. The owner's manual for new vehicles usually has ample information.

Built-in child safety seats are a factory option on some vehicles, mainly minivans. This handy feature is integrated into the seatback and folds out when needed. Some automakers offer approved child seats as accessories.

Crash Tests
All vehicles sold in the U.S. are required to pass a basic crash test, but it's conducted by the car companies on their own vehicles, not by the federal government. Separately, as part of the New Car Assessment Program, the government does conduct a 35-mph crash test, but only on several dozen vehicles per year.

Here's how the programs operate:

• 30-mph Basic Crash: Until recently, every car and light truck had to pass a 30-mph test, using both belted and unbelted dummies of adult males. In the belted test, a vehicle crashes head-on into a fixed barrier and sensors transmit signals to electronic monitoring devices.

Automakers have been permitted to simulate this crash with a "sled test." Dummies are placed in a mock vehicle mounted on a sled, which travels a short distance on rails and comes to a sudden stop. This rapid deceleration simulates the forces generated in a 30-mph crash, but is not as severe. The sled test enables manufacturers to use less-powerful airbags while still meeting federal safety requirements.

• New 25-mph Basic Crash: New rules have been phased in, starting with the 2004 model year and finishing in 2005, to eliminate both the 30-mph crash test using unbelted dummies and the "sled test." They are being replaced by a 25-mph unbelted test, which automakers claimed they could meet using depowered airbags that will still provide ample protection. The government also has added an offset frontal crash test into a movable barrier.
• NHTSA 35-mph Crash: This test is head-on into a concrete barrier, conducted on selected production vehicles by the National Highway Traffic Safety Administration (NHTSA). Scores for other vehicles, tested in previous model years and not significantly changed in design, are presumed to remain valid. Belted dummies are monitored for forces against their head, chest, and upper legs.

Each tested vehicle gets a rating of one to five stars, with the highest number of stars indicating the best protection against head and chest injury in a head-on collision. Results are released to the public periodically as a "consumer information program" and are popularly known as "government crash tests."

NHTSA does not advise consumers to use its 35-mph crash results to choose one car over another or to judge if a vehicle is safe or unsafe. The tests are intended only to compare vehicles of similar size and weight, within about 500 pounds.

The 35-mph test has been criticized for not reflecting real-world collisions because:

• Test results often do not correlate with death and injury rates compiled by the insurance industry and even NHTSA itself.
• Actual crashes are rarely head-on into flat barriers that involve the full width of the car. More often, frontal collisions occur at an angle. NHTSA's new rule includes offset testing.
• Dummies have represented an average-size male. A larger or smaller person might produce different results. NHTSA has addressed this concern with a new family of dummies that includes women and children.

The federal government also conducts side-impact tests at 34 mph. All cars must pass this test, either with or without side airbags.

Real-World Statistics
Crash statistics can help a buyer make an informed decision, but you need to read "between the lines" to get a valid appraisal. Smaller cars and trucks may score well in government crash tests, for instance, but real-world fatality rates show that large, heavy vehicles offer better occupant protection than smaller, lighter ones.

A research and lobbying group supported by the insurance industry, the Insurance Institute for Highway Safety (IIHS), has found that death rates generally decline as the size and weight of vehicles increases. Size, however, isn't everything. The Highway Loss Data Institute, a branch of IIHS, ranks cars by the number of injury claims filed. Some small cars have fewer injury claims than some midsize cars, though in general large vehicles have fewer injury claims than small ones.

Who's Behind the Wheel?
Death rates and injury claims are influenced not only by the size and type of vehicle, but by who drives them and how they are driven.

• Large, expensive cars are most often driven by older, more-experienced drivers. Minivans are usually driven by adults with children. Both groups have fewer accidents than the population as a whole.
• Small cars and small SUVs, on the other hand, are used primarily by younger, less-experienced drivers, who tend to have more accidents involving death or injury. In a 2004 study, the University of Michigan Transportation Research Institute found that in single-vehicle crashes, SUVs driven by a person under 25 rolled over 37 percent of the time. For all SUV drivers, however, 30 percent resulted in a rollover.

To further complicate the situation, crash-test results don't always correlate with insurance-company ratings, which are based on their own statistical claims histories for fatalities and injuries for each make and model. State Farm Insurance Co.'s rating system determines which vehicles are assessed higher or lower premiums for medical payments/injury protection coverage. Some vehicles have received 5-star ratings in NHTSA's frontal crash tests, but were given the lowest safety discounts by State Farm. Conversely, a few vehicles are granted high safety discounts, but only garnered three or four stars in the agency's crash-test ratings.

Information on vehicle death rates, insurance claims for injuries and collisions, and other safety-related data is available from the IIHS Information Hotline 1-703-247-1500.

Consumers can also write to:
Insurance Institute for  Highway Safety
1005 N. Glebe Road
Arlington, VA 22201
Web site: http://www.hwysafety.org

Light Trucks and Safety
As trucks become more popular, they account for a larger portion of motor-vehicle deaths. Trucks grew from 34 percent of sales in 1989 to 55.5 percent in 2004. Fatalities in passenger cars dropped from more than 25,000 in 1989 to 19,460 in 2003. But the number of deaths in light trucks (including sport-utilities, pickups and vans) climbed from about 8500 annually to 12,444. Nevertheless, NHTSA and the insurance industry say death rates are higher in small SUVs than all other vehicle classes.

Since the 1999 model year, federal regulations have required light trucks to meet the same major safety requirements as cars, including dual front airbags and identical side-impact standards. The only vehicles exempt are heavy-duty SUVs, pickups, and vans with gross-vehicle weights of more than 8500 pounds.

One growing concern over the size disparity between large SUVs and smaller cars has prompted automakers to redesign the bumpers on the latest SUVs. They're now mounted closer to the pavement or a secondary lower bumper is added to prevent the larger vehicle from climbing up onto a smaller one in a collision.

Rollovers Command Attention
By far the deadliest risk facing truck occupants is an accident in which the vehicle rolls over. According to NHTSA, more than 280,000 rollover accidents are reported each year, which claim more than 10,000 lives annually. Utility vehicles rolled over in 35.7 percent of fatal crashes during 2003, while only 15.8 percent of passenger cars that resulted in fatalities experience a rollover. When used to transport a heavy load or carry a full complement of passengers, SUVs are even more top-heavy, experts say, and thus are more likely to roll over.

Rollovers are directly related to a vehicle's stability in turns. That stability is influenced by the relationship between the center of gravity and the track width (distance between the left and right wheels). A high center of gravity and narrow track can make a vehicle unstable in fast turns or sharp changes of direction-increasing the odds that it will tip over once it begins to skid sideways. The problem is most pronounced in 4-wheel-drive pickup trucks and sport-utility vehicles, which have higher ground clearance for off-road driving.

Most fatal 4WD rollovers are single-vehicle accidents that occur on weekend nights. The drivers are most frequently males under 25, and alcohol is usually involved. In three out of four fatal rollovers, the victims were ejected from the vehicle, indicating they weren't wearing a seatbelt.

Neither cars nor trucks are subject to a federal rollover standard, though pressure for such a requirement has been building. To help predict which vehicles might have a greater likelihood to overturn in single-vehicle accidents, NHTSA introduced a rollover rating system in 2001. Reported on a five-star system, the rollover ratings are based on an engineering analysis of each vehicle's center of gravity and the width between the front tires. The results are compared with police accident reports for confirmation. In its rating system, five stars equals a rollover risk of less than 10 percent, while one star indicates a greater than 40-percent rollover risk.

Safety Recalls
Before purchasing any vehicle, it pays to check NHTSA's web site to find out if that model has been recalled; and if so, why. Not all recalls are equally serious, but a pattern or series of recalls suggests that it might be wise to shop for a different vehicle.

Auto Safety Hotline
The National Highway Traffic Safety Administration (NHTSA) and the Department of Transportation (DOT) operate a toll-free Auto Safety Hotline for information on government crash tests, safety recalls, and other safety-related questions. Consumers can also call this number to report safety problems with their vehicles and to request literature on child safety, seat belts and airbags, antilock brakes, and other topics. An answering system is available during nonbusiness hours.

NHTSA/DOT Auto Safety Hotline
1-888-327-4236

NHTSA maintains an inspection locator as part of its Web site to help parents find safety-seat inspection locations. The locator includes a list of organizations that offer seat inspections, searchable by zip code or state. DaimlerChrysler sponsors a toll-free hotline (1-866-SEATCHECK) that taps into NHTSA's online service.

Consumers can also write to:
National Highway Traffic Safety Administration
400 7th Street, SW
Washington, DC 20590

Web site: www.nhtsa.dot.gov

Financing

Financing your new or used vehicle purchase? It's wise to establish how much you can afford to pay per month-before you start shopping. This will help dictate the price range of the cars to consider. But don't lose sight of the total price while attempting to keep the monthly payments low.
 
Shopping For Your Loan Can Save Plenty of Dollars.
Even though cars are more affordable than they used to be, prices are still high. In 2004, the average new vehicle sold for $28,050, according to the National Automobile Dealers Association (NADA), and the average used vehicle at franchised dealerships cost nearly half that much.

Cars sold between individuals and by independent used-car lots tend to be cheaper. The National Independent Automobile Dealers Association (NIADA), which represents dealers who specialize in used cars, found that the average vehicle retailed for $7,632.

Negotiating a good price on a car is just the beginning. Shop for financing (and insurance) with the same dedication and you can save plenty-provided that you qualify for some of the tempting low rates that can be found. If your credit record is impaired, you're likely to wind up paying a higher rate than you might have hoped.

Remember, the interest you pay will reflect the risk that the dealer-or more likely, the financial institution that actually makes the loan-is taking. Only the best credit risks qualify for the zero-percent or low-rate financing that's advertised on TV, offered by a manufacturer's financing arm. For buyers with less stellar credit, annual percentage rates can reach 20 percent, especially for used cars, and the Better Business Bureau hears of figures far higher.

Remember that most banks will require at least 20 to 25 percent down on a new- or used-car loan. Most likely, they will have a maximum amount (called Loan Value or Finance Value) that they'll let you borrow for a certain year and model of car. Finance Value is typically about 25 percent less than the normal retail value of the car, so this is a helpful way to tell if the seller is asking a reasonable price.

In 2004, the average new-car interest rate at finance companies increased to 5 percent, according to the NADA--a result ofstrong incentives late in the year. Banks charged an average of 6.6 percent.

Bankrate.com reported at the end of 2004 that the average new-vehicle rate was 5.9 percent for a 3-year loan and 6.25 percent for a 5-year term. Three-year loans on a used vehicle averaged 6.9 percent.

Many, if not most, people who don't qualify for the super-low rates can get a better deal by avoiding any dealer's financing and obtaining a loan through a bank or credit union (though most lenders have been easing away from risky loans). And remember, when buying from a private party, you have to arrange your own financing.

Prime and Subprime Financing
The best interest rates go to the customer with a steady job, permanent address, and good credit history. If your credit rating is poor, a new car is probably out of the question and a used-car dealer who specializes in high-risk financing may be your only choice. This may also be your only recourse if you haven't used credit much, and therefore have a minimal payment history.

If you are in this situation, what you want to avoid is going "upside down," which means you owe more on your car than it's worth.

Buy Here-Pay Here financing is a growing trend, especially for lower-priced used cars. Dealers may even have a separate lot for them. It's a convenience for low-income shoppers, but almost certain to be accompanied by a high interest rate. For shoppers who must have transportation but lack good credit, this could be the only choice.

Quite a few dealers and their financial agents offer subprime (sometimes called nonprime) financing, having sensed the profit to be made. Still, many other dealers are reluctant to extend any credit to risky customers-a category that's ever-expanding as layoffs and cutbacks continue to assault the workforce.

This is a period of "risky endeavors," said Peter Brandow, CEO of Brandow Companies, speaking at the 8th Annual Non-Prime Automotive Finance Conference. Dealers are seeing "desperate people in our stores," Brandow said.

High-risk buyers generally must come up with a higher down payment, too, so the dealer is assured of getting part of his investment. In fact, the down payment on a lower-end used vehicle might cover the full amount the dealer has in the car; any payments beyond that point could be sheer profit.

Subprime has been growing due to sizable increases in the number of personal bankruptcies, and a growing number of consumers with troubled credit. Lenders are seeing fewer "prime" shoppers these days. Late payments, delinquencies and repossessions increased in 2003, according to a survey of non-prime lenders.

A few years ago, subprime lenders loosened their standards somewhat, in an attempt to write more automobile loans. Then, when the economy began to falter, they found themselves holding a lot of loan contracts that weren't being paid. As a result, credit is tighter now, which means credit-challenged shoppers will have a harder time than ever finding a reasonable interest rate-assuming they can get a loan at all on a vehicle.
 
In 2003-2004, allegations surfaced claiming that dealers were pocketing unconscionable sums for arranging loans for their customers. Financial institutions commonly pay dealers a percentage of the total amount financed, or a flat fee per loan. Dealers then charge a "markup" over the car's selling price to their customers, which can amount to thousands of dollars.

Courts have not yet determined the overall legality of theses charges. The National Automobile Dealers Association encourages its member to disclose the fact that interest rates are negotiable, and state that a dealership may profit from a loan markup.

What's Your Credit Score?
Even if you make financing arrangements at a dealership, that doesn't mean the dealer will hang onto that agreement. New-car dealers may use a manufacturer's captive finance company. Used-car dealers typically sell your "paper" to a separate financial institution. Some financial organizations specialize in higher-risk loans. Others won't take "paper" from an applicant with a low credit score.

In 2003, according to the National Independent Automobile Dealers Association, less than 20 percent of used-car sales by independent dealers ranked as "A" paper, worthy of low interest rates. More than 36 percent were "C" paper, and nearly 24 percent were rated a high-interest "D."

Dealers and other retailers rely firmly on those credit scores, which are calculated by organizations that specialize in keeping track of credit applicants. The best known is Fair Isaac Corp., a California firm that rates individual credit reports to produce a FICO score that ranges between 300 and 850 points. The higher your credit score, the lower the financing rate you're likely to be offered. Most people fall into the 600-800 range, but if your score is on the low end of the scale, you'll be lucky to get an offer at all. And when you do, it's certain to be for a high interest rate.

Credit scores make use of information from credit reports to predict a person's likelihood to pay his or her bills on time. Many factors are considered, including any record of delinquencies, defaults, or bankruptcy. Self-employed people are suspect, for example, because their income is difficult to verify. First-time buyers are in a difficult position because their record is likely to be minimal. Bankrate.com can tell you how to obtain your own credit score, and provides additional information on automobile financing.

Let's hope you don't find any of these items on your credit report at some point:

• Charge-off: a portion of a debt that the lender determines will never be paid.
• Default: a statement on a credit report that the individual has not paid a debt, which usually results from a series of delinquencies.
• Delinquency: failure to make a payment on time, typically stated in the number of days it's behind (30, 60, etc.).
• Judgment: a legal decision stating an amount that a person must pay to cover a debt.
• Repossession: confiscation of a vehicle by or for the lender, after a pattern of delinquencies suggests that further payment will not be made.

Before You Sign. . .
The Better Business Bureau has warned of companies that offer advance-fee loans, targeting shoppers with credit problems. You have to pay a fee before a loan is obtained. All too often, a loan is never granted, and the company disappears. Steer clear of any loans where you pay the interest up front. After several years of paying, you could still owe the entire principal of your loan.

Avoid any lender that tacks processing fees or other extra charges onto the basic loan. Inspect all finance agreements carefully. Understand every figure, and make certain all calculations are correct. If figures don't come easily to you, bring along a friend to examine all documents.
 
Here's what to look for on the form:

• Sale price: the amount you've agreed to pay for the vehicle.
• Down payment: the amount you've agreed to pay before taking delivery. The higher the down payment, the lower the loan amount and payments.
• Trade-in value: the amount the dealer is giving you for your old car. This could cover most or all of the down payment. Trade-ins leave plenty of room for tricky maneuvers, so be sure you know exactly how much you're getting.
• Loan amount: the number of dollars you're borrowing to make the purchase.
• Annual Percentage Rate (APR): the percentage of the borrowed amount charged as interest each year. Unless you can qualify for a single-digit rate, you'll be paying plenty of interest. If the rate exceeds 15 percent or so, think twice before signing.
• Monthly payment: the amount you'll have to come up with each month. Know exactly how and when each payment must be made.
• Payment period: the number of months you'll be making those seemingly endless payments.
  Total car cost: the sum of the monthly payments (including interest) and the down payment. This is how much the car will actually cost you, and it can be dramatically higher than the sale price alone.

Short-Term Loans Cost Less
The longer the loan period, the lower the monthly payments-but the more you'll end up paying for the car in the long run. Ordinarily, however, longer loans demand higher interest rates, but there are exceptions.

Periods longer than 3-4 years used to be hard to find without paying an exorbitant interest rate, and were likely to be available only for more expensive vehicles. In recent yeas, though, there's been a trend toward long-term loans for new vehicles: 72-month and even 84-month. The average new-automobile loan period at finance companies was 61.4 months in 2003.

Monthly payments and total amount paid for a $7500 loan at 6.9 percent annual percentage rate (APR), for various loan periods:

No. of Months	Monthly Payments	Total Payments	Portion that is Interest
12	$661.11	$7933.32	$433.32
18	452.16	8138.88	638.88
24	347.82	8347.68	847.68
30	285.33	8559.90	2059.90
36	243.77	8775.72	1275.72
42	214.16	8993.92	1493.92
48	192.03	9217.34	1717.34
54	174.87	9422.98	1942.98
60	161.20	9672.00	2172.00

What Counts is the Total You Pay
The price of your used car includes more than the figure you settle upon with the seller. The true cost is the amount you will have paid over the life of the loan taken to finance the car. That total depends upon the size of your down payment (including trade-in value), the interest rate, and the number of months taken to pay off the loan. Try to make the largest down payment you can afford, and shop for the lowest interest rate. Unscrupulous dealers or finance companies have charged 50 percent. In the example below, a loan at that rate means you'd be paying about as much for financing as for the car itself. Double-check the contract to make sure you know the rate you're agreeing to pay.

Monthly payments and total amount paid for a $7500 loan at various interest rates (APR), for a 36-month loan period:

Interest Rate	Monthly Payment	Total Owed	Portion that is Interest
8.9%	$238.15	$8573.40	$1073.40
9.9%	241.64	8699.40	1199.40
11.0%	245.54	8839.44	1339.44
12.5%	250.9	9032.40	1532.40
14.0%	256.33	9227.88	1727.88
16.0%	263.68	9492.48	1992.48
18.0%	271.14	9761.04	2261.04
20.0%	278.73	10,034.28	22534.28
25.0%	298.20	10,735.20	3235.20
30.0%	318.39	11,462.04	3962.04

Loan Repayment Schedule
This amortization table can help you determine monthly payments on a given loan amount. If, for instance, you plan to borrow $5000 at 7 percent interest for three years, multiply $30.88 (the monthly payment for each $1000 of loan amount on a 3-year loan) by five ($5000 total). Your monthly payment on that $5000 loan would therefore be $154.40.

Remember, you'd probably need to have at least $1250 (25 percent of the loan amount) as a down payment. The total of your down payment and your loan will have to cover the cost of the car as well as any applicable sales tax and fees.

Monthly payment per $1000 of loan value:

Interest Rate	2-year	3-year	4-year	5-year
0%	$41.67	$27.78	$20.83	$16.67
1%	42.10	28.21	21.26	17.09
2%	42.54	28.64	21.70	17.53
3%	42.98	29.08	22.13	17.97
4%	43.42	29.52	22.58	18.42
5%	43.87	29.97	32.03	18.87
6%	44.32	30.42	23.49	19.33
7%	44.77	30.88	23.95	19.80
8%	45.23	31.34	24.41	20.28
9%	45.68	31.80	24.89	20.76
10%	46.15	32.27	25.37	21.25
11%	46.61	32.74	25.85	21.75

Insurance

How much you pay for auto insurance depends on several factors, including your age and marital status, where you live, and what you drive. You can't do anything about your age, and few people will move just to lower their insurance premium. You can, however, choose a vehicle that costs less to insure.

Types of Coverage
Even though you're buying a single policy covering a specific vehicle, a number of components make up the final cost:

• Bodily Injury liability: Covers injury and/or death claims against you, and legal costs, if your car injures or kills someone.
• Property Damage liability: Covers claims for property that your car damages in an accident. Because liability coverage protects the other party, it is required in all but three states.
• Medical Payments: Pays for injuries to yourself and to occupants of your car. This is optional in some states. In "no-fault" states, personal injury protection replaces medical payments as part of the basic coverage.
• Uninsured Motorist protection: Covers injuries caused to you or the occupants of your car by uninsured or hit-and-run drivers. "Under-insured" coverage also is available, to cover claims you may make against a driver who has inadequate insurance. In some states, as many as 30 percent of drivers are uninsured.
• Collision coverage: Covers damage to your car up to its book value. Collision coverage carries a deductible, which is the amount per claim you have to pay before the insurance takes effect. The lower the deductible, the higher the premium. While it is legally optional, a lending institution or leasing company usually requires collision coverage.
• Comprehensive (physical damage): Covers damage to your car from theft, vandalism, fire, wind, flood, and other nonaccident causes. Comprehensive also carries a deductible.

Why Some Cars Cost More To Insure
You might want a sports car or a fancy SUV, but your insurance company may charge you more to protect you while driving it.

Insurance premiums are based partly on the price of the vehicle, which affects the replacement cost if it is stolen or "totaled" in an accident. How expensive the vehicle is to repair-including parts and labor-can also affect the cost. In addition, surcharges may apply to vehicles that are frequently stolen or involved in accidents.

Industry-wide information on injury claims, collision repair costs, and theft rates by vehicle model is available from the Highway Loss Data Institute (HLDI), 1005 North Glebe Road, Arlington, VA 22201 (http://www.carsafety.org/). HLDI is affiliated with the Insurance Institute for Highway Safety (IIHS).

According to HLDI, the lowest injury claims are from large vehicles--cars, pickup trucks, and sport-utility vehicles. Small 2- and 4-door cars have the highest injury claims. Small cars also are among the highest in collision costs, along with sports cars.

If you have your heart set on a sporty vehicle, you'll probably pay dearly. Insuring a high-performance car can easily cost two or three times the insurance amount for an ordinary model.

Sport-utility vehicles, the hottest market segment, often have higher insurance rates than mid- and full-size cars, but some SUV models are relatively cheap to insure. SUVs are "hot" for other reasons: They are among the most frequently stolen vehicles, and they are more expensive than most cars. Cadillac's Escalade is currently the most popular model sought by thieves, but it's followed by the Nissan Maxima sedan. SUVs also can cost more to fix after an accident if the 4-wheel-drive system is damaged.

However, insurance companies set rates based on their own experience. If Company A has more collision and theft claims for a particular vehicle than Company B, then A will charge more for the same coverage. It all boils down to a company's actual experience with a particular vehicle or category of drivers. That is why it pays to shop around for insurance.

Who You Are and Where You Live
Factors that you can least control may have the greatest impact on your insurance costs. Your age, gender, and driving record are key factors that affect your insurance premium.

Single males under the age of 25 pay the highest rates. Statistics show they are involved in the most accidents, so insurance companies charge young men higher premiums than women of the same age. Married men, who statistically have fewer accidents, pay less than single men. A handful of states do not allow rates based on sex or age, but that prohibition has tended to result in higher rates for women, not lower rates for men.

If you are convicted of moving traffic violations or of causing an accident, your premiums will likely go up, no matter what your age. Drivers with clean records-no tickets, no accidents-pay the lowest rates.

Where you live also plays a big role in how much you pay. Urban areas, with their greater population densities and heavier traffic, get higher rates than rural areas. According to the Insurance Information Institute, the average insurance expenditure in mainly urban New Jersey-traditionally the most expensive state-in 2002 was more than double that of North Dakota, a rural state with the lowest average premiums. High costs in states such as Florida, Massachusetts and New York are attributed to growth in fraud and theft.

In most states, too, insurers set rates by zip codes. If you live in a major city like Chicago or Los Angeles, you will probably pay more than if you lived in a nearby suburb.

How Much Do You Need?
While it is dangerous to be underinsured, having too much insurance can be an expensive mistake as well. Without insurance, your property is put at risk in an accident that is your fault. The minimum amount of insurance required in your state is seldom enough.

State law may require as little liability coverage as $15,000 per person, $30,000 per accident, and $5000 property damage. About half of the states require $25,000 per person and $50,000 per accident. Half of them require $10,000 in property damage coverage.
If you can afford it, buy more than the minimum. After all, $10,000 for property damage may not be enough if you hit a $100,000 Mercedes-Benz.

The more assets and income you have, the more insurance you need. Most insurers recommend liability coverage of at least $100,000 per person, $300,000 per accident, and $50,000 property damage if you have assets to protect, such as a house. Some insurers also recommend a $1 million "personal liability umbrella" policy issued in conjunction with homeowner's coverage. State Farm reports that such coverage averages $270 a year, but the amount varies significantly depending on location and other factors. An "umbrella" policy could protect a family from financial ruin in a major lawsuit.

Like buying a car, there is no single best solution when it comes to buying insurance. Rates vary widely. Surveys suggest that you could pay anywhere from $500 to $2000 annually for the same coverage from different companies. Shop for insurance by consulting two or three of the largest insurers, such as State Farm and Allstate. Then, contact one or two independent agents who can quote premiums from more than one company. In addition, there are direct-marketing companies, such as GEICO and Progressive, which do business over the phone rather than through agents and offer some of the lowest rates. Ask for an itemized list of coverages and costs.

"We're price-competitive," said spokesperson Dick Luedke of State Farm, whose rates dropped somewhat during 2004. But with so many factors involved in setting rates, it's wise to check several prospects.

In 2004, the average price of auto insurance nationwide was $871, according to the Insurance Information Institute. They expected that the cost of auto insurance would rise by 3.5 percent in 2004, which would be the smallest increase in four years.

Don't forget the Internet. Many companies now offer online quotes, and insurance shopping on the Web allows you to compare rates from multiple providers in the comfort of your own home.

How to Cut Your Insurance Premiums
Buy a vehicle that qualifies for a discount or at least doesn't carry a surcharge. Ask your insurance agent about the cost of insuring vehicles you are interested in before you make your purchase decision.

Most companies give a break to those who drive less than 7500 miles a year. If you take public transportation instead of driving to work, your premium will go down. Out of the question? Try carpooling.

Make sure you get all the discounts you are entitled to. You might qualify if your vehicle has an alarm, for example. Discounts used to be given for such safety features as airbags, but they're fading away as those items become more commonplace. Discounts might also be available if you insure your vehicles and your home with the same company. People who pass a defensive-driving course or don't smoke or drink often get discounts.

Review the status of all the drivers in your family with your agent. Most discounts apply only to one portion of the policy, so don't expect dramatic savings.

Increase your deductible for collision and comprehensive. Switching from a $100 deductible to $1000 can reduce the collision portion of your premium by 30 percent, said State Farm's Luedke. You'll still be covered for catastrophes, but you foot the bill for fender-benders. Also, think twice about filing small claims with your insurance: Why risk a premium increase?

Shop around. Instead of just renewing, study the fine print of your policy to see if its terms--or your situation--have changed. Another company might have better rates, but you won't know unless you shop. Most insurers give rates over the phone and many via online computer services, making it easy to compare premiums.

Drop collision coverage on older cars. Claims are limited to "book" value, so you're not likely to get much anyway if you car is more than seven years old. A good rule of thumb is to drop collision when the annual premium reaches 10 percent of your car's value.

Be a good driver. Avoid accidents and traffic violations and you will be rewarded with good-driver discounts. Bad driving is expensive. The "safer you can be" on the road, Luedke said, "the lower your premiums."

Drop coverage for such extras as towing costs or the expense of renting a car while yours is in the shop. The savings are probably small, but your new-car warranty's roadside assistance provision may provide them at no cost.

Have your teenager share the family car instead of owning his or her own. Be sure to tell your agent if your son or daughter makes the Honor Roll or moves away to college. Both qualify for discounts with most companies.

If your group health insurance provides generous coverage, consider dropping the medical-payments portion of your policy.

Keep your credit rating healthy. A growing number of insurers are considering a person's credit score when setting rates.

Warranties

The warranties that come with your new vehicle are probably comprehensive enough to make extra-cost coverage a waste of money. A factory warranty is the manufacturer's pledge to absorb certain repair or replacement costs until a specified period of time elapses or the car has accumulated a stated number of miles--whichever comes first. The limitation is expressed as number of years/number of miles, the most common being 3 years/36,000 miles. Here's an overview of how manufacturers' warranties work and what they generally cover.

Manufacturer New-Vehicle Warranties
The Basic Warranty is "bumper-to-bumper" coverage for the entire car. It generally excludes tires and the battery, which are warranted by their manufacturers.

Warranties are generally describe