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Special section Experts' 8 smart moves for '08

Plan to buy a new or used vehicle in the coming year? Here are eight things you should be doing now, says Bankrate car columnist Terry Jackson.

8 smart moves for car buyers

8 smart auto moves in '08

If you have plans to buy a new or used vehicle in the coming year, there are some things you should be doing now before you make that major purchase.

Here are eight strategies that can help you save money and make the process easier.

8 smart auto moves in '08

1. Consider buying a used vehicle. The inescapable truth is that any new vehicle loses at least 30 percent or more of its value the minute you drive off the lot. While that loss has less of an impact if you keep a new vehicle for at least five years, it still should enter into your calculations. A vehicle that's 2 or 3 years old and with low mileage may be a better deal for you. To find out which type of car is best for you, check out Bankrate's "New vs. Used" tool.

2. Weigh fuel costs. Although there's no crystal ball to predict where gas prices are going, there's little doubt that prices aren't going to return to the $2 gallon mark. So look at vehicles with higher fuel ratings and give some consideration to hybrids, even though some hybrids cost considerably more than comparable gas-only vehicles. Also, be aware that for 2008, the government economy ratings have been revised downward to better reflect the actual mileage you'll receive.

3. Beware of low-cost lease deals. As manufacturers become more desperate to sell cars -- 2008 looks to be another down year overall, with sales of less than 17 million new cars and trucks - you'll see a lot of offers involving cut-rate lease payments. While these appear attractive, they can trap you if you drive more than the allotted mileage. Many of these leases allow only 10,000 miles a year and charge as much as 25 cents a mile for every mile over the allotment. Be honest with yourself about how many miles you drive -- it's likely more than most leases allow.

4. Get your financial house in order. The last thing most people do is check their credit worthiness before going car shopping. Do you know your FICO score? This is the number that can determine whether or not you qualify for the lowest interest rate on a car loan. You can estimate your score with the FICO Score Estimator. Check your credit report for erroneous information and look for ways to raise your credit score, such as paying off some open credit card accounts. Remember, though, that closing credit card accounts after paying them off can actually lower your FICO score.

5. Shop for the best loan deal before buying. One way to avoid getting burned on your next car purchase is to have your financing in place before you set foot on the dealer's lot. A good resource should be your credit union, which typically has the lowest rates. Another place to shop is the Internet, where lenders like Capital One offer essentially pre-approved loan checks that you can take directly to the dealer. Use Bankrate's Auto Loan Rate Search tool to find your best rate.

6. Build up your down payment. Too many people these days buy cars with little or no money down and then are surprised that for the first three or four years of ownership they owe more than their car is worth. A good rule of thumb is to put at least 20 percent down on any vehicle, either in cash or trade.

7. Clean up your trade-in. Look at the vehicle you currently own as though you were a shopper. Is it clean, does the paint shine and are their some dings that could be cheaply fixed? The difference between a car that looks like it has been well cared for and one that looks a little shabby can be thousands of dollars. Also, if you still owe money on your trade, make sure you can get enough to pay off the loan rather than roll the balance over into the loan on your new car.

8. Widen your shopping list. It's quite understandable that many car shoppers go directly to Toyota or Honda, given the impressive record of reliability that both of those brands have. But the truth of the marketplace is that the domestic manufacturers have closed the quality gap and have vehicles that favorably compare. Given the push by the Detroit-based manufacturers to regain market share, some of the best deals of 2008 can be found there.

-- Posted: Dec. 28, 2007
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