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Car Guide 2006    

Hot 'n' Not

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Sticker shock, fuel mileage are key topics in 2007

It costs a lot more money to drive a new car these days -- and we're not talking about the price of gas, although that's having a major impact on the auto industry, too.

But before you even start worrying about how much it's going to cost to feed that new set of wheels, consider this: The price tag on the average new car deal has shot up more than 20 percent in the past four years. And this is another trend with no end in sight.

Yes, it's true that some auto manufacturers are struggling for sales and profits -- particularly Ford and General Motors -- and factory-backed deals that include zero-percent financing or cash rebates have re-entered the marketplace on some vehicles. If sales trends for 2006 continue, shoppers can expect more such incentives on a wider range of models. It's also true that last year domestic manufacturers lowered sticker prices on many models to reflect the price buyers were actually paying because of rebates and negotiating.

But if those factors make you think you might pay less for a new car or truck this year, think again. According to industry figures, the average transaction price for new cars in 2002 was about $23,000. For 2006, it's expected to be about $28,000 and likely will be higher than that when 2007 is finished.

There are many factors that account for that, but several stand out:

Buyers increasingly want cars and trucks that are more upscale. Sure, you can find a Ford Explorer with a sticker close to its base price of $26,530, but it's far more likely that what you'll see on dealer lots are rows of Explorers with stickers of $30,000 and up. That's because buyers want the leather seats, the killer stereo and all the power assists.

Manufacturers also have raised base prices to include more and more equipment that was once optional. Remember windows that you cranked open with a handle? More than 90 percent of new vehicles come standard with power windows. Air conditioning, once an option costing $600 and more, has also become standard equipment on most vehicles.

Another reason why a 2007 vehicle could cost you a lot more than that 2002 you're trading in is that many import brands -- both from Asia and Europe -- have experienced record sales in recent years while U.S. manufacturers have lost market share. Consequently, many foreign automakers have not felt compelled to offer as many rebates or finance deals, or to cut sticker prices.

But there is good news for some. With interest rates on the upswing, combined with ever higher vehicle prices, more manufacturers will offer special lease deals. Like a pendulum, lease deals are starting to come back into favor. Mercedes-Benz, for example, is offering a $329-a-month lease on a C230 Sport Sedan.

Special lease offers, however, often include restrictions that may make them unsuitable for a lot of buyers, including a short term and limited miles -- 27 months and 10,000 miles in the case of the Mercedes offer.

-- Posted: Aug. 1, 2006
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