However, the catch is that those incentives are only good on selected vehicle models and styles, and only for a limited time.  If the particular brand, model, and style that you want is not one of those with incentives offers this month, you are back to square one — negotiating for deals the old fashion way.

A new company has come along that changes all that, and may change how we buy cars in the future.

TrueCar answers the question, “What should I pay for my car?” Even if you are a shrewd negotiator, you have to know your target price. You also would benefit by knowing what other people are paying for the same car, same model, same style that you want. With that knowledge, you will know the price you should be aiming at.

TrueCar tells you not only the MSRP sticker price for your car, but also the dealer’s invoice price and the average price that other people are paying in your area. They tell you what a good price, or a great price really is. They provide all of this new car pricing information at both a national and local level – free of charge – so you can understand how cars are being priced and sold all around the country.

Knowing the prices paid by dealers and other people is a great idea in itself, but it’s not the best part about TrueCar. Founder Scott Painter thought several years ago, “Why is it so hard to buy a new car? Why not simplify the car buying process?” And then a true revolution was born.

In addition to the free car pricing information, TrueCar also gives you a haggle-free, guaranteed price quote on brand new cars and trucks from local dealers in your area. It’s as easy as selecting the vehicle make and model, entering your local city zip code, and then reviewing the best local car prices against the car cost, average price paid, factory invoice price and MSRP. The prices offered are usually less than dealer invoice price.

TrueCar provides you free price quotes in writing from up to three dealers near you. You simply take our TrueCar price protection certificate to your local car dealer to get, and purchase the new vehicle of your choice at a significant savings off of the sticker price — and without all the usual hassle and haggling. It’s that simple.

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The most common type of incentive is a rebate, which is given to customers at the time they buy the particular vehicle model and style on which the rebate is offered. It is applied as a down payment and is especially attractive to customers who might be short on their own down payment cash.

Rebates, when at least $2000, are generally better than 0% APR loan deals and save you more money. As you may know, if a car company is offering both a rebate and 0% APR (or other low-interest loan rate), you must choose one or the other, but not both.

American car companies (General Motors, Chrysler, and Ford) have traditionally offered the best and highest rebates, although there have exceptions. Rebates are usually largest at the end of the model year, during the months of September, October, November, and December. Car companies and dealers are trying to sell off last year’s models to make room for incoming new models.

Luxury car makers such as Mercedes, BMW, Audi, Lexus, Infiniti, and others typically don’t offer out-and-out rebates but may offer “loyalty bonuses” or other incentives, hoping to avoid being viewed as a “discount brand.”

In most cases, dealers don’t “contribute” to rebates. The money comes entirely from the car manufacturer. The dealer makes his full profit just as if he had sold the cars at full sticker price. Therefore, smart customers will ask the dealer to chip in additional discount of his own, to sweeten the deal.

Currently as this article is being written, there are some very attractive rebates being offered for November and December 2011. Here are some examples:

2011 Cadillac Escalade - $4000 rebate

2012 Cadillac Escalade - $3000 rebate

2011 and 2012 Cadillac SRX - $2000 rebate

2011 Chevrolet Impala - $4000 rebate

2011 Chevrolet HHR - $3500 rebate

2011 Chevrolet Malibu - $3000 rebate

2011 Chevrolet Suburban, Tahoe - $3500 rebate

2011 Buick Lacerne - $4000 rebate

2011 Buick Regal - $3000 rebate

2012 Jeep Liberty - $3000 rebate

2012 Dodge Avenger - $2500 rebate

2011 GMC - up to $4505 (2011 trucks, selected models)

Other brands are offering rebates across the board on most of their current models. Here are some examples:

Volvo - $1000 rebate (2011 and 2012 models)

Chrysler - $1000 rebate (2011 and 2012 models)

Dodge - $1000 rebate (2011 and 2012, most models)

Jeep - $1000 rebate (2011 and 2012 models)

Lincoln - up to $3000 (selected models)

Saab - $2000 rebate (2011 models)

You can get free price quotes on any of the above cars from Edmunds.comThe quotes will automatically include any cash-back rebates or discounts that are currently available.

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The question is essentially this: “If a car dealer is offering a special promotional lease deal, a purchase rebate, and a low interest loan on the car I want, which one is the best deal?”

The short answer to this question is that the lease deal will nearly always be better — and it’s not simply because monthly payments are less. If the lease deal is one that is being offered by the car manufacturer, the company has usually applied a price discount, a low money factor (finance rate), and a high lease-end residual value. The combination of all these things makes for an attractive low monthly payment. Customers are not able to negotiate these kinds of deals for themselves  because a dealer only controls one of those three things — price.

By contrast, a manufacturer-to-customer rebate is essentially a price discount but doesn’t affect loan interest rate (assuming the customer is not paying cash). In fact, if a manufacturer is offer both a rebate and a low-interest (or 0%) loan rate, customers must select one or the other, but not both. A rebate is the best of the two if the rebate is large (over $2000) or the customer is short on down payment cash. A rebate acts as a down payment and reduces monthly payment amount.

A low-interest loan — or zero percent APR loan — is usually the least attractive of all the three options we’ve mentioned. Although it promises to create low monthly payments, a large rebate can do it better. And a special lease deal can do it even better yet.

Therefore, the next time you are confronted with a decision about whether it is better to lease or buy, and dealers are offering special manufacturer incentives, leasing will nearly always be the best choice — assuming you understand how leasing works and how to know if you are a good leasing candidate. See LeaseGuide.com for more details.

For information about current car company incentives, see Best Car Deals.

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Car companies often select certain models and styles for these rebates, and the selection can change from month to month.

Dealers can use factory-to-dealer cash (sometimes called “marketing support”) in almost any way they choose but most pass it along to customers in the form of price discounts. Some dealers might advertise the low prices (not the rebates themselves) or simply offer a discount to customers during the buying process. He may choose to give all or just some of the total rebate.

Most customers are not aware of which vehicles have factory-to-dealer rebates, or the amounts. Therefore, it is difficult to factor in those discounts in the negotiating process. However, our sister web site, Best Car Deals, provides such information.  Some of these rebates are very large and represent a significant discount off of sticker price. This is particularly true for last year’s leftover models that dealers must sell in order to make room for this year’s incoming models.

If a dealer gets a factory rebate on a particular model and gives it to customers as a price discount, he still makes his usual profit on that car, even though customers may be getting a great deal. Smart customers will expect the dealer to contribute some of his usual profit as an additional discount — which makes an even better deal. In many cases, customers can buy a car for less than dealer invoice price, which is only possible if the car manufacturer is helping with the deal.

In summary, factory-to-dealer rebates can be a large factor in making new cars — especially first cars — more affordable. Look for vehicles with the largest factory-to-dealer rebates.

You can get free price quotes for any vehicle at Edmunds.com. The prices you get will contain any current price discounts and manufacturer incentives that are available.

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If you decided to buy one of the cars that other people are buying the most, you could reasonably assume that those purchases are being made on the basis of those cars having most of the good characteristics that people want in a new car — such as good reliability, good safety ratings, good performance, good styling, good fuel economy, and good driving comfort.

Following is a list of the top ten best-selling new vehicles in the U.S. for the last several months:

1. Ford F-150 truck

2. Chevrolet Silverado truck

3. Toyota Camry

4. Nissan Altima

5. Honda Accord

6. Ford Fusion

7. Ford Escape

8. Chevrolet Cruze

9. Toyota Matrix

10. Ram truck

Notice that the top two vehicles, and the tenth, are pickup trucks. Trucks have always been on top of the list of best-sellers because they are not only sold as personal and utility vehicles, but also as commercial work vehicles.

The top car on the list is the Toyota Camry. This car has held the top position for years — for many good reasons. It has almost the perfect balance of all the things that car buyers want. It might not be perfect in any one thing but, overall, it has the best mix of everything. You could certainly find other cars that might have better styling, or better performance, or better fuel economy, or lower insurance cost, or more fun to drive — but you would be hard pressed to find all of these things in just the right mix as with the Camry.

The Nissan Altima and Honda Accord come in a very close second and third for essentially the same reasons that makes the Toyota Camry so popular. All of the cars have exceptional reliability, are economical to drive, maintain high resale values, and have a high value-to-price ratio.

The Ford Fusion and Ford Escape have risen in the rankings in the last year or two due to Ford’s improved reliability, safety, and styling. Ford is also a leader in innovative in-car technology, which has attracted many young drivers to its ranks.

The Chevrolet Cruze is the much improved old Cobalt with substantially better styling, performance, reliability, and safety. It, too, has attracted buyers who want a good solid car for an affordable price.

The Toyota Matrix makes the list as a very practical and economical small car with great interior space and fuel economy. It has excellent reliability and earns a Consumer Reports “Recommended” rating.

You can get free price quotes on any of the above cars from Edmunds.com. The prices will include any price discounts and manufacturer incentives currently available.

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The most common incentive is a direct to customer rebate, although there can also be other incentives such as low-interest loans, 0% APR loans, special car lease deals, and “hidden” factory-to-dealer cash.

Incentive programs vary from month to month depending on which models and styles manufacturers feel need sales “help”. Slow selling models or last-year’s leftover vehicles typically get the best rebates and incentives. However, it not ususual for a brand new model to get good rebates or other incentives.

A rebate is a credit that you receive when you buy a new car during the promotional period. It shows up on your paperwork the same as a down payment, although the money comes from the manufacturer’s pocket, not the dealer’s, and is like a gift to you that reduces the amount you pay for your car.

However, a rebate is not a price discount. It doesn’t change the selling price of the car (although it changes what you pay).  Rebates and discounts are NOT the same, although both reduce the amount you pay for a car. Let’s explain.

Because a rebate is like a down payment, sales tax is calculated on the price of the car BEFORE the rebate is applied. It doesn’t reduce the sale price of the car, although it does reduce the amount of money that comes from you. In other words, you pay sales tax on the entire sale price of the car, which includes the rebate. 

A price discount is different. A discount reduces the actual selling price of a car, and sales tax is based on selling price. Therefore, you don’t pay sales tax on a discount.

So given two cars at the same price where one has a $2000 rebate and the other has a $2000 price discount, choosing the car with the $2000 discount saves you sales tax money. However, you may want to choose the car with the rebate if you are short on down payment cash, since a rebate acts as a down payment.

For information about current rebate offers on new car models, see Best Car Deals. 

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Should I keep my old car and fix it up, or buy a new car?

Expressed another way, the question is this: Is it smarter, more practical, and more economical for me to keep and fix my old car than to buy another car, new or used?

This is always a tough one to answer. Generally, it’s going to be better to fix up an old car than buy a new car every five years or so.

However, the real answer depends on your particular circumstances. Here are some tips that will help you make a decision.

How old is your vehicle?

Older, high-mileage vehicles are more likely than newer vehicles to have problems. There are exceptions, of course. Older vehicles also tend to have more serious problems, such as engine and transmission failures, that are expensive to repair.

Is your old car breaking down frequently?

If your car is generally unreliable and is causing you inconvenience and unexpected costs, you may want a newer car that is more dependable and predictable. If your car has a long history of problems, it is not likely to end soon. You may find greater peace-of-mind and fewer suprise repair expenses with another car.

Does your old car need repairs now?

If so, how much is it going to cost to make the repairs? Will the repairs really fix the problems, or will they just temporarily patch the problems? Is it likely that these will be the only repairs needed for a while? Can you afford the cost? If you were to sell or trade the vehicle, could you recover the cost?

How safe is your old car?

Older cars have fewer safety features than new cars. There’s always the chance that an older car’s safety equipment doesn’t work properly. Do the airbags still work? Is the ABS still protecting you? Has your car been structurally damaged in an accident? A newer car may bring fewer worries about safety.

Can you afford to buy a newer vehicle?

Can you pay cash? Would you need a loan? Do you want a new loan and monthly payments? How much can you afford in monthly payments? Can you afford to buy a car that is substantially newer and better than your old car? Can you afford possible higher insurance rates and taxes? Does your old car have enough resale or trade value to help with the cost of a newer car?

Do you want a new vehicle?

Most people would answer yes to this question — but many don’t want new car payments, or a depleted savings account either. The stronger “want” wins. If you decide you need (want) a brand new car, be sure to check with TrueCar for pre-discounted prices at local dealers.

What are you really looking for?

What’s most important to you in making your fix-versus-buy decision?  Lowest cost solution? Easiest solution? More dependable transportation? More peace-of-mind? Fewer surprise breakdowns and costs? Do you have an emotional attachment to the old car? Or are you simply trying to squeeze the last remaining value out of your old car before discarding it?

Reasons to keep and fix your old car

You are frugal and don’t like being wasteful

Your car is less than 10 years old and has less than 150,000 miles

Your car has only minor problems that are not expensive to repair

Your car has been generally reliable and problem-free

You have always liked your old car

You can’t reasonably afford a newer car

You don’t like the idea of a new loan and monthly payments

Reasons to replace your old car

Your car is more than 10 years old and has more than 150,000 miles

The cost to repair your old car exceeds its value

You would like fewer unexpected breakdowns and repair costs

You want updated safety equipment and electronics

You don’t like your old car

You can reasonably afford a newer car

Make a decision – or not

Fix or replace or your old car? One decision you can make is……..to not make a decision. At least, not now. You can simply stick with your old car until it finally dies a natural death, at which point you’ll be forced to make a decision. It might be better to make a move sooner rather than later.

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In normal years, we would tell you that the best time to buy a car is when sales are slow at the end of the month, end or the year, or during vacation season. We would tell you that you might still have to negotiate your prices because dealers aren’t just going to give you a good deal because they like you.

BUT……..things are much different now. Sales have been slow for over a year and are still slow right now. As a result, we are now seeing some of the biggest and best car incentives on new cars that we’ve seen in years. Nearly every car manufacturer is now offering a combination of large factory-to-customer rebates, low-interest loan deals, 0% APR loans (even on long 72 month loans), special lease deals, free maintenance, and “secret” factory-to-dealer rebates that dealers usually give to customers.

Why has 2011 become such a good time to buy a car?

For a number of reasons.

First, the economy seems to be improving, if every so slowly, and car makers and dealers are anxious to give things a little push. They are offering attractive incentives as a way of convincing potential buyers to take action.

Second, even though there are people buying new cars, the market is smaller than a few years ago. This means there’s fewer cars to be sold and the competition among dealers and car makers is tremendous — to the benefit of automobile consumers.

This is a good time to buy because many of the deals are the about as good as they can possibly be. You can’t get lower than zero percent interest on a loan. You can’t get lower than a manufacturer’s cost to build a car and expect them to stay in business. You can’t much better on special car lease deals that give you a deeply discounted price, combined with a low money factor and high residual. Some even kick in free scheduled maintenance for a couple of years.

Another factor creating the outstanding car-buying opportunities right now is the “Toyota Situation.” Toyota’s unfortunate problems and Japanese earthquakes have caused a big slowdown in Toyota car sales. Most other car makers have tried to capitalize on the situation by offering some very attractive incentives. It’s like a feeding frenzy. Now Totoya, who is solving their problems, is offering some of the best incentives in their entire history in attempting to restore customer confidence and recover sales.

If you are looking for 0% APR loan deals, nearly every manufacturer has them on at lease some of their models and styles. Even if 0% is not available, other very low-interest loans are being offered.  Furthermore, the deals are being offered even on long-term loans, which has been rare until now. You might already know that you’ll need a good credit score to get these 0% APR deals. If you don’t know your latest credit score, you should. You can get your free credit score from FreeCreditScore.com that you can view instantly with a quick signup.

If you’re looking for great lease deals, Honda and Toyota come to mind. In fact, nearly all non-American brands have special car lease deals now. American brands (Chrysler, Ford, GM) haven’t quite come back to leasing after losing so much money on leases in the last few years.

Big rebates, however, are available on many brands, including American brands, and especially on leftover 2009 vehicles. Chrysler, Ford, and GM rebates are very attractive, as are those from Hyundai/Kia, Mazda, Nissan, and Mitsubishi. See Best Car Deals for more details on current new-car incentives and deals.

So if you are in the market for a new car and looking for the best time to buy your new car, NOW is a good time to buy. It might get a little better later in the year — and maybe not.

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First time car buyers have a choice of buying a brand new car, or buying a used car. Which is better?

There are advantages and disadvantages to either choice. Most people would rather have a brand new car with its new-car smell and latest style, but there are reasons that a new car might not be the best choice. Let’s take a look at the pros and cons of buying new and buying used.

Advantages of Buying New

• You get a brand new car with new-car feel and smell
• You get the latest style and technology
• You get the latest safety equipment
• You get a full manufacturer’s warranty
• You get Lemon Law protection
• You get lowest loan interest rates, if you qualify
• You get the option to lease
• You may get special manufacturer-sponsored pricing and financing

Disadvantages of Buying New

• Value of a new car depreciates rapidly
• Insurance rates may be higher than used
• Taxes may be higher

Advantages of Buying Used

• You avoid the high first-year depreciation of value
• If you buy almost-new, you may get same styling and technology as new car, at a lower price
• You get price flexibility by choosing between different model years, mileage, and condition
• You may buy “certified” vehicles with inspection and warranty – at higher cost
• You get lower insurance costs than same new model
• You get lower sales tax and personal property tax

Disadvantages of Buying Used

• You buy “as-is” unless some manufacturer warranty remains
• Lemon laws don’t apply to used cars
• You may be buying someone else’s problem, unless you have your vehicle inspected
• You risk buying a wrecked or salvage vehicle, unless you run a CARFAX Vehicle History Report
• You typically don’t have a lease option
• You pay higher interest rates
• You may get fewer safety features

Summary

To summarize, buying a used car can be a better value for your money but it comes with higher risks.

If you are looking for cheap used cars, read the article Finding Cheap Cars for suggestions on where and how to find them.

Find already-discounted used cars at dealers in your area at UsedCars.com, the largest online used car source.

For online pre-discounted prices on new cars, see TrueCar. Price quotes are free and easy. Get multiple quotes so that you can compare deals.

Any used car purchase should include an extensive test drive, an inspeciton by a qualified mechanic, and a CARFAX Vehicle History Report. Also consider buying an extended warranty.

If you’re considering an almost-new vehicle, make sure you can’t get the same vehicle, new, at about the same price, which can happen if the manufacturer is offering special promotional deals. See Best Car Deals for cars that currently have special incentives, rebates, and low-interest loans.

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Until relatively recent times, it was standard for car dealers and finance companies to require at least 20% down payment on the purchase of a car. It was for a good reason.

Because cars depreciate in value from the moment they are driven off a dealer’s lot, a down payment helps offset that rapid decrease in value, which may keep the loan from becoming “upside down.”  It also protects the loan company or bank because, if they have to repossess the vehicle, they have a smaller risk of losing money.

Things are different now
Auto manufacturers and dealers are now very competitive and business must be fought for. They are willing to take risks that were unheard of just a few years ago. In many cases, down payment requirements have been reduced or eliminated altogether, primarily for customers with good credit.

Even if you have good credit, accepting a “no down payment” deal is not wise. Because your vehicle will depreciate in value faster than your monthly payments pay down your loan, you will be upside down for most of your loan term.

So, what is the problem with being upside down?
First, if you decide to sell or trade your vehicle before your loan is paid off, or nearly paid off, you’ll get a nasty surprise. You’ll find that you still owe more on your loan than your vehicle is worth. Maybe thousands of dollars more. You’ll have to find the extra money to pay off your loan.

Second, if your car is stolen or totaled in an accident, your insurance pays only what the car is worth, not what you still owe on your loan, which again, could be thousands of dollars difference. In order to pay off your loan after the accident, you must come up with the additional cash on your own.

How much down payment?
A down payment not only helps you avoid the problems of being upside down, but it also serves to lower your monthly payment. The amount by which it reduces your payment depends on the amount of the loan, the amount of the down payment, the length (term) of the loan, and the interest rate. You can use an auto loan calculator to play around with the numbers to find out the effect of different down payment amounts.

A good rule of thumb is 20% for a down payment. You can take advantage of manufacturers’ rebates, which can be used as a down payment. If you can’t do 20 percent,  do the best you can.

In some cases, especially if you have poor credit, the bank or finance company will dictate how much down payment you must make to get a car loan from them. It’s usually not negotiable. If it’s more than you can pay, try other banks, credit unions, or loan companies.

If you have poor credit, you might consider looking for your car at a dealer such as Drivetime.com, who specializes in working with buyers who have less-than-perfect credit. They have dealerships all over the country. If you don’t know your latest credit score, you should know it before going car shopping. You can get your most recent credit score online at FreeCreditScore.com. It’s free with a simple signup.

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