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Clark Howard: New car today can be cheaper than used one

  • Story Highlights
  • Four million used cars reportedly purchased in the U.S. during May
  • Average new car is $1,700 cheaper than during the last quarter of 2008, data shows
  • Clark Howard: Arrange financing first to see how much car you can afford
  • AAA reports the annual cost of owning and operating a car is $9,369
By Clark Howard
HLN
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ATLANTA, Georgia (CNN) -- Are you one of the seemingly few Americans in the market for a car? There are more of you out there than you might think.

Clark Howard: Before jumping at all the new car deals, think about the bigger picture of car ownership costs.

Clark Howard: Before jumping at all the new car deals, think about the bigger picture of car ownership costs.

CNW Marketing Research, a respected automotive marketing research firm, reports that 4 million used cars were purchased in the United States during the month of May alone. That's amazing when you consider that the market for new cars is 9 million in the United States over the course of an entire 12 months.

Yet don't overlook the new car as a potential purchase just yet.

New data from Comerica Bank's Auto Affordability Index shows that new cars are now the most affordable they've been since records started being kept in 1979. In fact, the average new car is now $1,700 cheaper than it was during the last quarter of 2008. And we've got more price cuts coming because of oversupply.

As you probably know, I'm a used car guy, the self-proclaimed champion of driving a car until the wheels fall off. So I can't believe the advice that I am about to give ... but it's now possible to get a better deal on a brand new car than on a relatively new used car.Video Watch Clark Howard talk to a woman who learned what not to do when buying a used car »

It's really just a classic case of supply and demand. The used car market is up about 23 percent, and new car sales are down 34 percent, according to CNW. More new cars on dealer lots mean more deals for you.

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But realize this: It's just a temporary phenomenon. Do not take this blip on the radar as gospel for the future; in most instances, a used car will almost always be a better buy. Just not right now.

When buying a new vehicle, you want to start by arranging your financing first. Go to your bank or credit union and prequalify for a car loan or apply online. This will tell you how much car you can afford and what type of monthly payment you will have to budget.

Next, you want to get a price for the car you have in mind. In the past, I've talked about using CarsDirect.com to get a guaranteed quote. A car dealer then can do his or her best to beat that online quote and win your business. In some cases, the price from CarsDirect.com winds up being the best a consumer can get.

But now there's a new kid on the block known as Zag.com. This service gives buyers instant guaranteed upfront prices from a network of certified dealers. It also offers an easy delivery process that helps you avoid "the grind" at a dealership.

Do you know what "the grind" is? That's when you're at a dealer lot, and the sales representative says he or she will go talk to the manager about getting you the best deal. Instead they go watch TV for five minutes, and then come back and tell you that the manager couldn't help out with a good price -- despite their best efforts on your behalf.

That's why sites such as Zag and CarsDirect are so appealing; they take you out of the car dealers' ballpark and put you on level playing ground.

But before you jump at all the new car deals, take a moment to think about the bigger picture of car ownership costs. It's more than just the sticker price and the expense of gas. AAA reports that the true annual cost of owning and operating a car is $9,369. Ouch.

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That $9,369 takes into account somewhat hidden costs such as insurance, maintenance, interest on a car note, depreciation and other factors.

Hey, maybe driving your current car until the wheels fall off is still a great idea.

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