We are not going to go into great detail about buying new cars, but when you purchase a new car there are certain factors you need to consider and certain things you need to know:

1. There is a considerable mark-up placed on the price of a new car by the dealership. The price is almost always negotiable. There are several books on the market about how to negotiate the best price on a new car. Remember to include the service and reliability of the dealership in your computation of where to buy your car.

Â

2. Should you buy or lease your new car? The advantages of leasing are certain tax advantages and you should check with your accountant as to how these will apply to you. Leasing a car usually requires impeccable credit, much harder to get than if you are buying a car, often because you can get into a lease for next to nothing down, whereas most car loans for purchasing require you to put 20% or more down. The cost per month for a lease is often less than the monthly payments on a car purchase loan payment. However after two, three, four, or five years the lease comes to an end and the car belongs to the dealership or the bank and not to you, unless you pay an often astronomical price to retain the vehicle, usually requiring a large lump sum. Also on a lease there is usually a maximum mileage allowed and if you go over the allotted amount (about ten to fifteen thousand miles per year average over the life of the lease) then you have a fat additional payment due. If you like to keep a car for two or three years and then get a new one, or if you can take advantage of the tax benefits, then leasing may be the hassle free and economical route for you.

3. There are certain "hidden" costs when buying a new car. If you are purchasing on a loan or lease, then you will be required by the bank that is financing you to purchase full comprehensive insurance coverage. In some states, depending on the car you get, this can be very expensive. Compare this to a used car, for which you can purchase liability and uninsured motorist coverage for quite a bit less, if you paid for the car outright. (Uninsured motorist insurance guarantees that your insurance company will pay for the damage if another motorist who is not insured is responsible for an accident that causes damage to your car, you, or your passengers). Another hidden cost is the amount you will be required to pay for your annual registration fee. This fee, in most places, is calculated based on the purchase price of your vehicle and reduces gradually year to year. If you buy a new car with a high price tag your registration will continue to be quite expensive for many years to come. Another cost to consider on a luxury car is whether it falls into the luxury tax bracket. Automobile purchases over a certain ceiling are subject to a heavy luxury tax. Again check with your accountant for the details.

4. One of the greatest advantages of a new car (if you know how to break in a new car and do so properly) is that you know the car has been handled right from the word go. The initial break-in period is crucial to the longevity of a car and if you buy a used car you can never be sure how exactly the car was treated from the start.