The Best of the 2007 Cars

What's hot, what's not? As the 2007 models roll into dealers' showrooms, it's a mixed bag. Carmakers are hedging their bets, trying to appeal to as many niches as possible, with the more than 60 new or redesigned models for 2007 spread all over the size, shape and power spectrum. In this market, says Jeff Schuster, executive director of global forecasting for J.D. Power and Associates, "there aren't really any significant standouts."

That's where our annual buyer's guide comes in. Featured in the December issue of Kiplinger's Personal Finance, it helps you zero in on the vehicle for you. We evaluated nearly 500 new models and selected winners in various price categories. We pulled together our top picks into an ONLINE GALLERY. You'll find sticker and dealer prices, projected resale values, plus what you'll pay to insure and service each of our favorite vehicles.

You'll also find Kelley Blue Book's new-car transaction price and estimated fuel costs. Our prediction for the year ahead -- barring a global catastrophe -- is based on an average of $2.40 a gallon for regular and $2.60 for premium.

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Sizing up the market

Car prices are higher this year than last. A year ago the average transaction price for a new vehicle -- what you pay after rebates and haggling -- was $26,140. This year it's $26,930, reports Power Information Network. The $800 hike is a result of more Asian vehicles being sold without incentives and more sales of higher-priced vehicles, such as the Cadillac Escalade and Mercedes-Benz S-Class. It also reflects Detroit automakers' efforts to stop throwing cash rebates at customers to clear inventory. GM, in particular, has promoted "value pricing," reducing the sticker prices of many models so they're closer to the transaction prices.

Even so, as end-of-model-year inventory piled up, incentives grew. In the latest tally, the average cash rebate offered by Detroit carmakers topped $2,600. For European vehicles, it was $2,100, and for Asian vehicles, less than $1,800. Detroit was offering up to $6,000 cash back on 2006 large SUVs and pickups. The most popular incentive as the '07 models roll in is 0% financing, being offered mostly on Detroit vehicles that have been slow to leave showrooms. That's been an effective come-on in a year when car-loan rates are stuck around 7%.

One other bit of good news: Don't worry about prices going up as the model year continues. For most high-volume models, carmakers are facing too much competition to be able to sneak in midyear price increases, says Tom Libby, director of industry analysis at Power Information Network.

So the hot spot for bargain hunters is Detroit. Yes, Motor City is downsizing, but don't be scared off by the headlines. And don't be quick to dismiss Detroit automakers because you have the impression that they churn out lower-quality vehicles than European and Asian carmakers. Domestic vehicle quality isn't so bad anymore. In J.D. Power's latest three-year dependability study, Lexus tops the list (as usual), but Mercury, Buick and Cadillac are close behind, and Lincoln and Ford rank above the industry average.

The real problem with domestic cars is the ho-hum factor. Says Erich Merkle, director of forecasting for IRN, an automotive-industry consulting firm: "People want to be seen in their car. A car is conspicuously consumed, and there's an entertainment value." Ford is saddled with gas-guzzling trucks and plain-vanilla cars, such as the Five Hundred. Chrysler and Dodge are also truck-heavy, and their big hits, the 300 and the Charger, are now dated. Plus, the domestic carmakers have been slow to join the crossover parade.

HIRE A HAGGLER

Hassle-free buying

Hate playing games at the dealer? Why not let a professional car shopper strike a deal for you? Kiplinger's Personal Finance has teamed up with CarBargains, the buying service of the nonprofit Consumers' Checkbook organization, to make it easier for you to take advantage of the service.

You tell us the make, model and style of the car you want and CarBargains will solicit bids from at least five dealers in your area. You'll receive a copy of each bid and the name of a contact at the dealership. The service costs $190. A similar service for leasing, called LeaseWise, costs $335. For more information, plus how to find out about the latest incentives, visit kiplinger.com/links/carbargains or call 800-475-7283.

Few would have guessed it six months ago, but GM is Detroit's bright spot. America's largest carmaker scored with its big new SUVs. It sells two sexy, value-priced roadsters (Pontiac Solstice and Saturn Sky). And its Saturn division is once again kicking tailpipe: The Saturn Aura wins a Kiplinger's Best New Car plaudit. Saturn's new large crossover, the Outlook, is at dealers, and large crossovers from GMC and Buick are also on the way. To boost consumer confidence, GM recently took a page from the Korean carmakers' playbook, extending its powertrain warranty to five years or 100,000 miles. Ford also extended its powertrain warranty to five years or 60,000 miles.

Nevertheless, the ascendancy of Toyota and other Asian carmakers can't be denied. They've done a better job at predicting buyers' preferences, so they offer more vehicles that people want to buy than domestic carmakers do. Toyota, along with its Lexus and Scion nameplates, may soon overtake GM as the world's biggest carmaker. Toyota also has more Kiplinger's winners than any of its competitors.

No matter which continent's cars you're shopping, as the year draws to a close, expect more deals. They will come in a trifecta of cash rebates, low-interest financing and leasing offers. For example, to move inventory by New Year's Day, Asian and European carmakers often offer subsidized leases as well as dealer cash. That's money from the carmakers that dealers can -- but don't have to -- pass on to you. (CarBargains offers a list of incentives as well as a vehicle-shopping service; see the box at right.)

Crossovers are king

For the first year ever, crossovers are likely to outsell traditional SUVs. (Crossovers look like SUVs but are built on car platforms for a smoother ride and better fuel economy.) Because there are so many new crossovers, this year Kiplinger's separates them into two classes: large/midsize and small. The new models range from ponderous-but-popular luxe-mobiles, such as the Audi Q7 and Mercedes-Benz GL450, to diminutive models, such as the Jeep Compass and redesigned Honda CR-V. Some of the biggest gas-guzzlers continue to sell well, proving that big-budget buyers aren't very sensitive to pump prices.

Why are crossovers so popular? "There's been a permanent shift from traditional SUVs to crossovers, but not necessarily because of gas prices," says Merkle. "Carmakers are taking more risks with crossover design, and that's capturing consumers' hearts and minds."

The Audi Q7's smooth, muscular exterior and refined interior caught Joe Harpaz's attention, but they weren't the only attributes that persuaded him to trade in his Infiniti FX35. The Q7 is "sporty, luxurious and practical -- all in one vehicle," says the New York business-development executive. The Q7 comes in handy when he's on the road for work because it includes a Bluetooth hands-free connection for his mobile phone and a voice-activated navigation system. It also has a rear camera, for backing up safely, and "side assist," which uses radar to alert you if a vehicle is in your blind spot when you want to change lanes.

He wanted the larger Q7 so that he could comfortably transport his wife, Pamela, plus daughter Maya, 3, and baby Zachary on weekend trips. Strong demand for the Q7 meant the Harpazes paid close to sticker -- $60,620 -- for the 4.2-liter Premium V8 model with a third-row seat and enough room for strollers and suitcases.

Even though the six-cylinder Q7 costs the same as the redesigned Acura MDX, which starts at $40,665, we pick the MDX as Best New Large/Midsize Crossover. The MDX's superior fuel economy and roomier cargo area are its main advantages. Compared with the 2006 model, the 2007 MDX is larger (although third-row passengers don't get any more legroom), faster, safer and sportier. The 300-horsepower V6 delivers plenty of oomph, and Acura's Super Handling all-wheel drive, which delivers extra torque as needed to any of the four wheels, comes standard.

The Best in Class honor goes to the $38,115 Lexus RX 350. The engine is bigger for 2007, and a mix of performance, roominess and safety pushes it to the top. Its outstanding resale value and $3,000-below-sticker average transaction price are icing on the cake. Mercedes-Benz has also introduced a large crossover for 2007, the $55,675 GL450. Saturn is the first in the GM family to debut its version of a large crossover, the Outlook ($24,000). Also arriving at dealerships this fall is the $25,995 Ford Edge.

Mazda's CX-7 beats the new Acura RDX for Best New Small Crossover. Both vehicles have a 2.3-liter turbocharged engine, high-tech add-ons and sport-sedan aspirations. And the RDX offers its Super Handling all-wheel drive as standard equipment. But at a starting price of $24,310 -- about $9,000 less than the RDX -- the CX-7 gets the nod. Best in Class goes to the Toyota RAV4 V6. Last year Toyota enlarged the original crossover (a third seat is optional) and goosed it with 269 hp (it can zip from zero to 60 miles per hour in less than 7 seconds). Yet at $23,530, it's still a bargain.

In the traditional, truck-based SUV category, the Best in Class and Best New SUV awards go to the GMC Yukon Denali ($48,370). Its 380-hp engine, 60-cubic-foot cargo area, three-year resale value of 58%, safety features and smart design are a winning combination. But consider the Yukon Denali a proxy for all the new large SUVs from GM. The base Yukon and Chevy Tahoe get up to a respectable 16 miles per gallon city and 22 mpg highway, and the top-of-the-line Cadillac Escalade redefines luxury. Ford has also freshened up its large Expedition and luxury Lincoln Navigator.

Fuel-efficient sedans

The gas-electric hybrid is getting a mixed reception despite fuel prices that soared past $3 in many areas last summer. The Toyota Prius still rules the hot-car list (see the box), and the Honda Civic Hybrid is selling well. But buyers are lukewarm toward higher-priced, less fuel-efficient hybrids.

So it's no surprise that a new standout in the hybrid arena is the gas-sipping Toyota Camry. Unlike the Honda Accord hybrid, which combines an electric motor with a V6 engine, the Toyota Camry scales back the power and uses a four-cylinder gas engine, achieving fuel economy of 40 mpg city and 38 highway. (Note that most hybrid drivers -- many drivers, in fact -- report lower gas mileage than Environmental Protection Agency ratings show; new tests starting with all 2008 models will produce closer to real-world estimates.)

The Camry hybrid has won fans coast to coast and among all age groups. Tatiana Santos of Los Angeles went shopping for a new car last summer, after she got a job with Bank of America. Only a year out of college, she was interested in the sporty Lexus IS 250 -- until the Camry hybrid caught her eye. She loved the new design, and her 40-mile-a-day commute put fuel economy near the top of her priority list. Fully loaded, it cost $31,000 -- just $1,000 more than a fully loaded Prius. The price was reduced by the $2,600 federal tax credit and the $3,000 reimbursement that Bank of America offered employees who purchased a hybrid. (Tax credits for hybrids are designed to be phased out and have since been cut in half for Toyota and Lexus hybrids.)

George and Cathy Rommal of Bethlehem, Pa., set out to buy either a Camry or its big sister, the Avalon. When they test-drove the Camry hybrid, they were sold. They wanted good fuel economy, and George was fascinated by the technology. "It's fun to drive, though in a different way than a sports car," he says. "The tax incentive combined with the economy took away the pain of paying a little more for the hybrid up front." And a Camry is roomy enough to transport the whole family -- including daughters Lauren, 18, and Andrea, 15 -- in comfort.

Two new hybrids are debuting this fall: the Nissan Altima and the Saturn Vue Green Line. The Vue doesn't rely as much on its electric motor as other hybrids do, so its fuel economy isn't stellar, at 27 mpg city and 32 highway. But at $22,995, it's the least expensive hybrid crossover on the market, and it qualifies for a $650 tax credit.

You can get about 30% better fuel economy with a diesel model, but there's a catch. Strict new emissions standards have just kicked in, and carmakers must tweak their diesel models to meet the new requirements. Only Mercedes-Benz and Volkswagen have new entries now, but Jeep will introduce a diesel Grand Cherokee early next year. None of the 2007 diesels on the market yet qualifies for the stricter emissions standards in California and four northeastern states: Maine, Massachusetts, New York and Vermont.

MOST POPULAR CARS

HOTTEST SELLERS: Vehicles averaging fewest days on dealers' lots

1. Toyota Prius

2. Honda Civic

3. Honda Fit

4. Toyota Yaris

5. Scion xA

6. Lexus ES 350

7. Toyota Camry

8. Toyota FJ Cruiser

9. Pontiac Solstice

10. Volvo C70

BEST SELLERS: For 2006 model year, not including pickups1. Toyota Camry

2. Honda Accord

3. Toyota Corolla

4. Honda Civic

5. Chevy Impala

6. Chevy Cobalt

7. Nissan Altima

8. Dodge Caravan

9. Chevy Trailblazer

10. Honda Odyssey

But you don't have to pay the higher price for a hybrid or wait around for diesels to achieve outstanding fuel economy. Subcompact and compact cars, which reside in our under-$20,000 category, have practically been driving themselves out of dealerships. The tiny Toyota Yaris wins the lowest-annual-fuel-cost derby, followed by the subcompact Honda Fit and Nissan Versa. But don't ignore the strong fuel numbers posted by the larger Honda Civic and Toyota Corolla.

Best New Car in this category is the $15,620 Volkswagen Rabbit. Although the redesigned Golf has a recycled name associated with the 1980s econoboxes, it has 21st-century amenities and Euro-sport-sedan handling, and it is one of the safest small cars on the road. Best in Class is the Hyundai Sonata GLS four-cylinder ($17,795) -- a value-priced, midsize sedan that's safe, roomy and fuel-efficient.

Value abounds in the $20,000-to-$25,000 class. The smartly redesigned Nissan Altima 3.5-liter V6 ($24,350) wins Best in Class. And the new Saturn Aura ($20,595) brings home Best New Car honors. This is no Ion: It has a smooth powertrain and a stiff chassis, and it accelerates and handles well.

Hyundai scores again in the $25,000-to-$30,000 class with the Azera Limited. It has entry-luxury features, such as leather seats and a rear-window sunshade, for $27,795. The $25,235 Toyota Camry SE V6 earns Best New Car accolades. It's the sportiest Camry, with a stiffer suspension and 17-inch wheels.

Luxury lines

In the $30,000-to-$45,000, entry-luxury category, the $42,150 Infiniti M35 wins Best in Class, propelled by a stunning design, high resale value, safety features and loads of technology. The Lexus ES 350 ($33,885), the benchmark "comfort" entry-luxury car, takes Best New Car.

Choosing winners in this intensely competitive category was tough. Here's where you find the BMW 525i as well as the smaller 3 series (the coupe is new for 2007). Also new is the sleek, fast rival of the BMW 3 series, the Infiniti G35 sedan, and the Volvo S80, which boasts high-tech safety features, including a lane-departure warning system.

In the luxury class -- vehicles $45,000 and up -- you'll find power and pampering. We give the Best in Class nod to the Mercedes-Benz S-Class ($86,175 for the S550), which debuted last spring. Besides superb ride and handling (and so much technology that you'll need to study the owner's manual), it sports options such as eight-way power rear seats and a massage feature on the front seats. The 382-hp, 5.5-liter V8-equipped S550 gets 16 mpg city and 24 highway. The penalty for this excess is a $1,000 gas-guzzler tax.

Best New Car is the Lexus LS 460. With the new LS, Lexus is gunning for the Mercedes S crowd. Starting at $61,715 -- $4,500 more than last year's model -- it's still a bargain in this class. The eight-speed automatic transmission and 4.6-liter V8 propel the car from zero to 60 in 5.4 seconds, the same time as the S550 manages with its larger, thirstier engine. An option lets this technology leader park itself (see the box on page 88), and it will keep a safe following distance with its optional dynamic cruise control.

Among minivans, the redesigned Toyota Sienna (about $25,000) stands out. It one-ups the Honda Odyssey with more horsepower and slightly better fuel economy. The sporty-yet-utilitarian Volkswagen Passat 2.0T wagon ($26,865) gets the Best in Class designation. Among sports cars, the $44,995 Chevrolet Corvette keeps its Best in Class spot. And the new Jaguar XK ($75,500 for the coupe) earns the Best New Car award. Coupe or convertible, this car will add a touch of British class to any driveway.

Go to our Gallery of Kiplinger's 2007 Auto Picks >>