When shopping for a car, consider the total cost

DALLAS -- These days, buying a vehicle has a lot more to it than just the monthly payment. Because of higher insurance, fuel and repair costs, buyers should take a holistic approach to purchasing an automobile.

The good news is, with so many information sources available, it's easier than it has ever been for buyers.

"You can now go online and look at a dealer's inventory and build a car on a manufacturer's website or on a dealer's website," said Drew Campbell, president of the New Car Dealers Association of Metropolitan Dallas. "There's the potential for the consumer to be more educated about that purchase and informed about that purchase than ever before."

Online tools also can help you determine the total cost of owning and operating a vehicle.

Edmunds.com and Kelley Blue Book (kbb.com), two independent auto information providers, offer total-cost-of-ownership calculators on their websites. The calculators consider not just the purchase price, but also depreciation, financing costs, fuel, insurance, taxes, repairs, and maintenance.

"A lot of people are very good at ignoring this kind of thing because it's an emotional purchase. So very often they're in the position of wanting to justify something that really is not within their means," said Philip Reed, consumer advice editor at Edmunds.com. "If they know this kind of thing, they can avert a bad financial decision."

Depreciation is the biggest single factor in ownership costs, Reed said.

"People don't factor that in because it doesn't affect you until you sell it or trade it in," he said.

You may find that when comparing two vehicles, the one with the lower purchase price ends up costing you much more in the long run.

So let's consider some of the choices car buyers have to make that affect the total cost of ownership.

Assuming you know the basic type of ride you're looking for -- sedan, SUV, pickup, motorcycle -- the most basic question is whether to buy new or used.

Your answer may depend on why you're buying.

For some people, it's a purely practical, financial decision. For others, it's a personal and emotional undertaking.

"A lot of people don't want to buy a used car almost for ego reasons more than anything else," said Jack Nerad, executive editorial director and market analyst at Kelley Blue Book. "They don't want something somebody previously owned. They want something new and fresh."

That's one reason new cars lose value so much in their first year -- in some cases, 30 percent of their original price. New cars also depreciate because the transaction changes from a dealer-to-consumer sale, which includes things like license, registration, and destination charges that aren't part of a trade-in or private-party sale price.

If you're more of a practical buyer, you can take advantage of that depreciation.

"If you're trying to maximize your money, the used car is definitely the way to go," Reed said.

The rate of depreciation "slows dramatically" after the first year, Reed said. "It will start to drop off again between four and five years."

In that gap is the best opportunity for a savvy car consumer to minimize costs -- by buying cars when they're slightly used, driving them for two or three years, and selling when they're perceived to be still only slightly used.

The downside of buying used is that there are more unknowns.

"A new car is based on known factors like condition level, the sticker price," Reed said. "With a used car, the condition is never really fully known."

You can get more peace of mind through a manufacturer's certified pre owned-vehicle program, in which the used car undergoes the original manufacturer's strict inspection and is backed by an extended warranty.

"Certification changes things dramatically because you don't have to take it to a mechanic and you don't have to inspect it yourself," Reed said.

The belief that buying a used car could land you a lemon isn't entirely true anymore.

"Today, cars are better made and made to last longer," Nerad said.

One question many car buyers are asking is whether now's the time to buy a hybrid.

Soaring gas prices and tax breaks have helped make hybrid vehicles popular. A hybrid vehicle operates with a gasoline engine augmented by an electric motor that charges itself when the driver slows down or brakes.

"A hybrid would be perfect for somebody who stops and starts a lot," Reed said.

But it still may not make perfect financial sense.

"You'll pay a premium for the technology," Reed said. "You're buying about a 20 percent premium over a gasoline-priced engine."

Better gas mileage and tax incentives make up some of that premium. But the online calculators show that hybrids still wind up costing consumers more over the long run.

For some people, that brings emotion back into the calculation.

"Most people who buy hybrids have some interest in environmental issues or they want to move toward energy independence," Reed said.

Repairs and maintenance represent a key cost of ownership. As cars have become more safe and reliable, they've also become more complex.

"The cars we're driving now are much more technologically advanced and have many more features than previously," Reed said. That includes things like anti lock brakes, air bags, stability control, and tire technology.

As a result, repairs and maintenance have become more complex and potentially costly.

For example, if you get a hybrid, you'll have to pay close attention to where you get it serviced.

"Considering that it's fairly complicated technology, if you're used to having your vehicle serviced at the corner gas station, your typical corner gas station will not be able to service a hybrid," Nerad said.

Before you begin the negotiating process, you should have a good idea of the price of your target vehicle, as well as the financing options.

The Internet provides a wealth of information.

"Try to determine in your own mind the price you can live with," said Campbell of the New Car Dealers Association. "If you go in not having a price, it makes negotiating almost impossible."

Also, "you have to start shopping around for financing before you step into the dealer's lot," said Greg McBride, senior financial analyst at Bankrate.com, which tracks consumer interest rates.

"It gives you flexibility because if they're offering a choice between a rebate and low-rate financing, you're in a position where you might be able to take their rebate because you still have been able to line up low-rate financing."

However, you should also be open to attempts by the dealer to beat the terms of your pre approved loan.

"It's very competitive, and the consumer should never be embarrassed to try and get a better deal," Campbell said.

Dealers are offering zero-down, zero percent deals or low-percent loans, but don't get stars in your eyes.

"A car is one of those purchases that is within reach of some people," Reed said. "The financing of it has become flexible enough, so that people are encouraged to buy more car than they can afford.

"A car will be your second-largest purchase next to a home," he said. "If people make the wrong choice, it can really damage them financially."