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Smart Buying

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What is the least expensive car to own? How can you save money on car insurance? How can you get the best gas mileage? We answer your questions on everything you wish you had learned in school -- but didn't -- about the economics of getting from one

What's a good -- yet inexpensive -- car to own?

Should I buy or lease a car?

Should I buy new or used?

How can I make sure I don't get a lemon when buying used?

How can I avoid haggling over car price?

Wait. Can I even afford to own car?

How can I save money on gas?

How can I arrange a carpool?

I'm shopping for car insurance, and I have no clue what I'm doing. Help?

What's the best way to save money on car insurance?

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Q. What's a good -- yet inexpensive -- car to own?

A. Finding a car you can afford to buy and a car you can afford to own are two different things. You need to look at more than what you pay to the dealer when searching for the best bargain. Service costs, insurance bills, fuel expenses and depreciation can easily take a bite out of your automotive budget. We looked at these factors over five years of ownership to see which cars really are the least expensive.

Our winner: The Scion xA. With an MSRP of $13,245, it's already one of the least expensive cars on the market. But it drives to the top of the bargain pile thanks to a variety of other factors: It retains nearly half of its value after five years, costs less than its category average to insure and maintain, and gets a thrifty 32 mpg in the city and 37 on the highway. Scion is a branch of Toyota, which is known for its reliability too, so it isn't cheap -- it's just inexpensive. See what cars were our runners up in The Five Best Car Values -- and which entry-level cars will cost you the most to own.

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Q. Should I buy or lease a car?

A. The idea of getting a new car to drive every few years seems appealing, but leasing isn't for everyone. First, how much do you plan to drive? Most leases allow only 10,000 to 15,000 miles per year. Go over and you'll owe extra at the end of your lease, so heavy driving and road trips are probably out when you lease.

Second, how well do you treat your car? Leased vehicles need to be returned in tip top shape. So if you practically live out of your car and will put a lot of wear and tear on the interior or exterior, consider buying.

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Third, how long do you plan to keep your car? Leasing is generally best for people who want to keep the car four years or fewer. And remember, with leasing, you'll never experience the freedom of having a month without a car payment -- you never pay it off (unless, of course, you choose to buy at the end of your lease). You can run your numbers through our leasing vs. buying calculator to see which is the better option for you.

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Q. Should I buy new or used?

A. On a tight budget, buying used gets you the most car for the least amount of money. That's because a car loses a big chunk of its value in the first few years of ownership. When you buy used, you let the first owner absorb that loss. "For less than half the price of the average new car, you can buy a 3- or 4-year-old used vehicle that is larger and loaded with more features than the small, bare-bones new one," says Michelle Krebs, a writer for Cars.com. Besides, buying used doesn't mean you have to buy a junker. Vehicle reliability has increased in recent years, and you can even go with a so-called "certified pre-owned" car from a dealer that has gone through a rigorous inspection, and it may carry an extended warranty. Use our calculator to see if buying new or used is better for you.

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Q. How can I make sure I don't get a lemon when buying used?

A. Peace of mind is a big reason many people choose to buy new instead of used. But you can take steps to steer clear of a clunker. First, check out the car's reliability rating in Consumer Reports. Then, go the National Highway Traffic Safety Administration's site to check up on crash-test results, consumer complaints and manufacturer's technical bulletins, which alert dealers to problems. Once you find the specific car you want to buy, get the VIN, or vehicle identification number, to check a car's history at Carfax or Auto Check. Be on the lookout for a mileage discrepancy or a salvage/junk record. And of course, always have a trusted mechanic look over the car before buying. See our Used Car Buyer's Guide for more tips.

Another way to minimize the odds of a problem car is to buy from a manufacturer's "certified pre-owned" program. These vehicles go through a rigorous inspection and refurbishing and may carry an extended warranty. You'll typically pay a few hundred dollars more for a car with the "certified" label, but your peace of mind may just be worth the extra moolah.

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Q. How can I avoid haggling on a car price?

A. Haggling usually comes with the territory. If you pay the asking price, you're probably overpaying. See Ten Dealer Tricks and Traps for advice on getting the best price. But if you, like so many others, hate haggling and worry that the dealer is going to take you for a ride, you can hire a professional car shopper to do the dirty work for you. We're a fan of CarBargains, a division of the non-profit Consumers Checkbook, which will solicit deals and haggle down the price on your behalf. The service costs $190, but you'll probably save more than that off the price of your new car. Another way to avoid face-to-face confrontation is to do your wheeling and dealing via e-mail instead of on the dealer's home turf. See No-Hassle Car Buying to learn how.

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Q. Wait. Can I even afford a car?

A. Having a set of wheels may seem like a necessity, but once you add up all the costs, it can become a big financial burden. Start by looking at your budget to see how much you can afford to spend each month. Then calculate your monthly payment (and include any money you have for a down payment). Then, consider insurance costs. In general, you should plan on paying a base rate of $100 a month, or $1,200 a year. Your premium could be lower or much higher, though, depending on your location, driving record, type of car and age. Then you've got to take into account the cost of maintenance (plan on at least $500 a year), taxes and registration fees (which can range from about $50 to $500 per year, depending on your car and the state you live in) and, of course, the cost of gas and parking.

All those expenses can add up to a pretty penny. So consider how much you really need a car. In some cities, it can be a top necessity, while it's easy to get around in other cities without any wheels. If the cost is too high for you right now, consider finding an apartment on a public transportation route or one within walking distance to shopping. You also could arrange a carpool with a co-worker, pull out your old ten speed or put the money you save toward cab fare.

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Q. How can I save money on gas?

A. Easy: Drive less. Then, look for other ways to trim your costs.

  • Find the gas station offering the cheapest price in your neighborhood at GasBuddy.com or GasPriceWatch.com.

  • Fill 'er up with regular fuel. Most cars don't need the premium grade and will run just fine on the cheap stuff.

  • Check your tire pressure regularly. Properly inflated tires can help you improve your gas mileage by up to 3.3%, according to the Department of Energy.

  • Drive more smoothly. Try to avoid sharp acceleration and deceleration.

See AAA's Gas Watcher's Guide for more tips.

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Q. How can I arrange a carpool?

A. You can match up with someone planning to travel along your route on eRideShare, Craigslist or AlterNetRides. But your best bet -- particularly if you aren't comfortable driving with a stranger -- is to break out your networking skills. Ask friends, or check with coworkers and members of your alumni club.

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Q. I'm shopping for car insurance, and I have no clue what I'm doing. Help?

A. Everyone needs car insurance. Here's what you need to know about the basic types of coverage:

1. Liability. This pays for injuries and damage you cause to someone or their property. Nearly all states require minimal coverage, but you'll want to get more to truly cover your costs in case of an accident. Aim for a policy with bodily-injury coverage of at least $100,000 per person and $300,000 per accident, and property-damage coverage of $50,000, or a minimum of $300,000 on a single-limit policy. Learn more.

2. Collision. This pays for your car in the event an accident is your fault, or the other driver is uninsured. If you're driving an old clunker, you probably can do without this coverage. But if you're driving an average car -- or a really expensive one -- buying collision coverage is a good idea. Learn more.

3. Medical. This covers you and your family for medical costs resulting from auto accidents while in your car or someone else's car, or if you're injured by a car while walking or bicycling, regardless of who is at fault. But you may not need this coverage if you already have a good health insurance plan. Learn more.

4. Comprehensive. This covers your loss in case of theft of the car or some of its contents, collision with an animal, glass breakage, falling objects, fire, explosion, earthquake, windstorm, hail, water, flood, malicious mischief, vandalism or riots -- basically, anything not wreck-related. Learn more.

5. Uninsured motorist. This pays for your injuries when you get into an accident with an uninsured motorist. Sure, the state requires all drivers have auto insurance, but some people just don't follow the rules. Best be prepared. Learn more.

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Q. What's the best way to save money on car insurance?

A. Shop around. The same coverage could vary by hundreds of dollars between two different companies. First, you'll need to know how much coverage you need. Consult our Smart Shopper's Guide to Auto Insurance to help decode the process. Make sure you get a quote from the company you had coverage with under with your parents' policy -- you might be able to get a discount for being with the company a while. And you should also get a quote from the insurance firm that provides your renters insurance to take advantage of the multiple-line discount.

When you find the right deal, consider increasing your deductible (the amount you have to pay out of pocket before the insurance kicks in) to at least $500. That act alone can shave a significant amount off your bill. (But you will want to make sure you have an emergency stash of cash built up to cover the cost -- just in case.) Find out other ways to save on car insurance.

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