Choosing a Make and ModelA look at four important factors to consider when choosing a car: fuel consumption, insurance rates, reliability, and depreciation.

Determining the right car is a decision only you can make, and there are a host of options to consider when determining the make and model. In car language, the "make" is the brand and "model" is the particular car that brand manufacturers.

Let's take a close look at some of the factors you will want to consider when making your decision.

Fuel Expenses

Depending on the type of car and how many miles you drive, simply keeping fuel in the tank could be one of your biggest expenses. And since gas prices vary daily, it's impossible to tell exactly what your fuel costs will be in the future. So how do you make the best decision for you?

Some people need the extra passenger or cargo room offered by a SUV or pickup truck, or they plan to drive off road. Others like the idea of an SUV or truck, but will probably not use the extra space or power. But owners of larger vehicles will pay higher fuel costs than owners of smaller vehicles.

Here are some ideas for minimizing fuel costs:

  • Don't buy more car than you need. In most cases, a smaller sedan will get you there just as well as larger car or truck.
  • If you do need a truck or SUV, investigate different engine options and manufacturers. Most people don't need an eight cylinder engine, for example, and smaller engines use less fuel. Some manufacturers also make smaller models that may offer the capabilities you need in a more economical package.
  • Be sure to check the type of fuel recommended by your car's manufacturer. Since premium fuel can cost thirty cents or more per gallon than regular fuel, simply choosing a car that uses regular fuel can save hundreds per year in fuel cost.
  • Finally, the best way to save on fuel cost is to limit your driving. Carpooling, taking public transportation, or walking is not practical for everyone, but these alternatives will help to reduce fuel costs, as well as the wear, tear, and mileage of your car.

Insurance Expenses

Many car buyers get an unpleasant surprise after they purchase their car - an insurance quote. In fact, the cost of insuring a car can be one of the main expenses, especially if you choose a sporty car or have a history of traffic accidents or violations. And because some people may have underestimated the cost of insurance coverage, they may choose to purchase a low-cost policy, potentially with higher deductibles and lower coverage amounts, that could cause a financial hardship in the event of a serious accident.

Please review our auto insurance module for a detailed explanation of the costs involved in insuring a car and how to choose coverage that is appropriate to your needs.

Reliability, Maintenance and Repairs

Unfortunately, all cars are not made to the same quality and reliability standards. And this difference is reflected in factors such as repair costs, the inconvenience of missing work or school because of trips to the repair shop, your safety in the event of an accident, and how much value the car loses over time.

One of the easiest expenses to overlook when considering a car purchase is the cost of basic maintenance and unforeseen repairs. Consider the difference in total maintenance costs between a car that requires scheduled maintenance every 15,000 miles, compared with a car that requires no maintenance other than oil changes and tire rotations until 100,000 miles. Depending on the makes and models involved, the difference could be substantial over the life of the car. You could potentially even eliminate scheduled maintenance costs if you sell a low maintenance car before the 100,000 miles maintenance is due.

But the biggest out-of-pocket expense you are likely to face, particularly with used cars, is out of warranty repair. Not only do repairs cost money, you may have to miss work because of time spent at the repair shop - making a repair cost even more.

The best way to minimize repair cost is to buy a well maintained car from a dependable manufacturer. Independent, non-profit publications such as Consumer Reports publish detailed reliability rankings each year.

Depreciation

Another concept to consider is depreciation - the amount in value that a car loses each year. Almost every car depreciates, but the amount varies widely between makes and models. New cars also depreciate considerably faster than used cars. In fact, many cars lose half their value or more over the first three or four year of ownership.

Considering depreciation and financing costs, one situation many car buyers find themselves in is being in an "upside down" loan, meaning they owe more on the loan than the car is worth. So in the event you wanted to sell the car and pay off the loan, you would have to not only sell the car, but you would have to actually pay your lender additional money. And since lenders use your car as collateral and actually hold the title to the loan, you cannot sell the car unless you can pay off the loan.

The best way to avoid an upside down loan is to make a substantial down payment (20% or more) and keep the financing term as short as possible - preferably three years and no more than five. Buying a car that keeps more of its value is a solid strategy, as is buying a used car.

Consumer Reports also rates the depreciation of every vehicle, another good reason to visit your local library.

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