A major reason for this disparity is that many European countries put a much higher fuel tax burden on the motorists, including the so-called “value-added tax” (or VAT). For example, while federal and state taxes make up only about 11% of the gas price in USA, in France and UK this tax accounts for about 70%.

I decided to look up the current gas prices in some of the major countries around the world, and here is the list.

After seeing some of the entries in this list, I feel lucky to be driving in America!

The study shows that your car color may reflect your personality to some degree. For example, the color silver, which over 30% of buyers choose, indicates wealth and prestige. (And I thought many choose silver because it comes standard, so they do not have to pay few hundred dollars extra on custom paint!)

If it is yellow, then you are probably idealistic and novelty loving. (When I see a yellow car on the road, I steer clear thinking the driver is advertising a big “L”, for learning, on the back. Don’t ask my why – I just do.)

Or, if you like green, you may have hysterical tendencies. (I mean come on! What about people “going green” in these days of global warming and environmental movement?)

The color red indicates lot of energy and zest, and the owner is likely to be fast mover. (No argument there – stay away from red cars on the freeway!)

And black car owners are supposedly aggressive, and have rebellious personality. (I don’t know about that, but I avoid black to keep the interior tolerable during summer afternoons.)

There is some speculation on whether auto insurance companies are using such psycho-analysis (psycho-babble?) to set your premium. But it appears they cannot, even if they would like to. There is no easy way for them to know about your car color, unless they actually ask you about it while selling insurance (the color is not encoded in any of the 17 characters of the VIN). So, go ahead and zip around in your bright red (or yellow, or green) SUV.

1. In order to run for 15 years, or 225,000 miles (with the national average of 15,000 miles a year), you must buy a new car and maintain it regularly.
2. Many new cars, even with proper maintenance, do not survive 200,000 miles. The “good bets”, according to the article, are SUVs, pick-up trucks, and hybrids. This leaves out the significant segment of standard mid-sized sedans, a preferred choice of many average American families.
3. The price comparison is made with a Honda Civic EX bought every 5 years, accounting for depreciation, insurance and maintenance cost.

This is a great advice for those who do heavy driving. In an earlier post, I suggested a similar “buy and hold” strategy for new car buyers. But my main suggestion there is to get a reliable used car every 5 years (or after it dies on you, whichever is later). This is for those who have a relatively short time horizon with the same car, mainly because of changed circumstances in family, job and such other that cannot always be foreseen.

1. Edmunds: A great site for information on all kinds of new and used cars, excellent reviews and how-to-buy guides.
2. Kelley Blue Book: An excellent place to look up used car prices, and also has lot of other information on both new and used cars.
3. CarBuyingTips: A definitive source for tips for buying new and used cars.
4. Samarins: Another source of car buying tips that is my favorite.
5. CARFAX: The place to visit for used car history.
6. Buying a used car: A Federal Trade Commission site offering facts for consumers.

You got your car. Congratulations! The car has at least two to three months of dealer warranty to cover for any problem in its early days (unless you bought it from a private seller, in which case you are on your own). Also, depending on the car’s age, it may still carry the remaining balance of the original factory warranty that you should be able to use.

These are good to have, but not enough, even nearly enough. You still need few additional years of comprehensive coverage for most common and some rare problems that can occur. Modern cars carry expensive parts and many automated features, all of which are prone to frequent failures and require costly repairs that can add up over long term.

The popular choice among companies offering extended warranty for used cars is Warranty Direct. At a cost of $1000 or thereabout, you can buy a multi-year coverage for your car that rivals the best factory warranty in the market, and even includes the coveted wear-and-tear coverage. The package also offers a number of useful services such as 24-hour emergency road assistance, hotel fare and rental reimbursement during the period of repair. Read here for a detailed discussion on extended warranty.

This is the end of this guide. Hope it helps you find your next car. Here are some more links on car buying tips and guides. Good luck and happy hunting!

You have checked the car inside and out, test drove it, got the green signal from your mechanic, and now back to the seller to “seal the deal”. If you are buying from a private owner, the process is easy. The car usually costs less than it would in a dealership, and depending on the urgency of the owner, may cost even less than Edmunds’ TMV. You may try bargaining down further if the car needs some major repair. Get all maintenance records from the owner (to make sure the car was in good hands). Complete the formalities of title transfer etc. and the car is yours.

Dealing with the salesman is harder. But the basics are simple as long as you are prepared. Keep in mind is that it is you, and not him, who is at the wrong end of the checkbook. But this is also a good thing: you have the option to walk away and make sure he knows. Jeff Ostroff suggests you show up carrying a folder, giving the impression of a know-it-all guy with all necessary papers (at the very least your folder should have the TMV estimates and your mechanic’s report).

Being able to pay the entire amount upfront, instead of in loan installments, has two-fold advantage. The obvious one is that you do not have to make the extra interest payment on the loan (which may amount to a lot depending on the loan terms). The other advantage is psychological in that you have the upper hand – the dealer is not about to turn away a $10,000 check at the end of a long day.

The only time paying in installments makes good sense is if the loan carries 0% interest. But this is rare, requires you to have an outstanding credit score, and is offered only during limited days in the year. If you are unable to pay in full, and cannot get a 0% loan either, arrange for the loan from a reputed source before going to the dealership. Do not choose the dealer’s own loan offer – he will bury you under heavy interest. Check out these tips on how to get a good auto loan.

While negotiating always insist on the out-of-the-door price, which includes all applicable fees (including dealer fees, licensing fees) and sales tax. This is the amount you write on your check. You do not want to spend a hard hour negotiating for a price, and then see it blows up by couple of thousands because the dealer added all sorts of hidden fees that were never mentioned before. Refuse any extra offer, such as the dealer’s extended warranty that will cost another few thousands but not worth a dime (more on extended warranty in the next post).

Use all the weapons in your arsenal. Tell him about the scratches and dents you saw on the car, show the TMV printout, and wave your mechanic’s report at his face. Do not be coy about offering him several hundred dollars below his quote. Almost as a rule the dealer will “mark up” the price way over the car’s true value (you already know this from your TMV estimate). But do not make an unreasonably low offer – stay near TMV. (When I bought my 2001 Toyota Camry last year from a local dealer, he quoted $13,500 for it. I stood firm on my offer of $9000 which was reasonable, and got the car.) If your offer is reasonable, he will know it and ultimately relent.

The moment arrives! He makes a last trip to his manager, comes back with a grin and shakes your hand. You write the check, get the title+registration papers and keys, and drive away in your shiny used car!

But wait! One last point – the extended warranty »

You have short listed 4-5 used cars in your neighborhood that you are ready to check out and test drive. Give yourself a weekend to complete this process (unlike most of our work places, car dealers are not only open on weekends, these are some of their busiest days).

Visit the dealership (or the private seller), and inspect the car inch-by-inch, both outside and inside, for any visible dent, scratch, or damage. Take a friend along with you – four eyes will miss less than two. Samarins gives a detailed checklist of the items you should look for in the car. Tell the salesman if you see anything that bothers you. Such cosmetic problems will help later in negotiating the price down.

Important: (Skip this paragraph if you are buying from a private seller.) Check the buyer’s warranty form (you need Acrobat Reader installed on your computer to see it) that should be pasted on the car window (dealers are required by law to display it). If the “As Is” box is checked, tell the salesman that you are interested only if he gives you at least 2-3 months of dealer warranty (under “As Is” deal, the dealer takes no responsibility for any trouble with the car the moment you pay him – you do not want that kind of deal for a used car). If he does not listen, leave.

It is now time to go for a test drive (“the feel of the wheel will seal the deal”). Settle into the driver’s seat and shut out all distractions so you can listen in to every possible noise: turn down the A/C, switch off the music, and politely ask the chatty salesman to pipe down. Use a route that includes a significant stretch of highway so you can test both accelerator and brake. Make hard turns to test the steering wheel. Try all possible maneuvers short of giving the salesman a heart attack (you may use this checklist).

By the time you reach the end of your list, you should know the one car you want. Ask the seller if you can take it to your own mechanic for a “pre-purchase inspection”. If he objects, leave. You do not want a used car without getting the approval of your trusted mechanic. They have an exhaustive list of items to check for in the car, and will charge between $50-$100 that is well worth paying. You should get a report of possible problems, which you can use to bargain the price further down.

It is time to Seal the deal »

Visit Carfax.com with your list of cars and their VINs. This is where you look up the entire history of the car, from its birth up to now. Carfax offers a free service too, but it is more than your money’s worth to pay $30 for the detailed history report for unlimited number of cars. The icing is Carfax’s “buyback guarantee”, the offer to buy the car back from you at the price you paid if the report misses any serious violation. Enter each of the VINs on your list, and look them up.

Study the report carefully. Things you should check for are

1. if the car had been to any major accident or had storm/flood damage and salvaged in the past (remove it from your list rightaway);
2. any odometer “rollback” (inconsistency in mileage shown – a no-no again);
3. any report of it being stolen (run!);
4. ownership history – it is desirable to have a single owner for the entire period, and Carfax shows a “1-owner” seal of approval in its report. Also check if any rental agency owned the car during its early years – such cars tend to have many dents and scratches.

Pick out 4-5 best prospects from your original list based on these reports. Keep this new list short so you can inspect and test drive all of them in a single weekend. Check with your DMV office to see if the car has any outstanding lien on it – loan amount that the previous owner hasn’t paid off yet (you do not want collectors to knock on your door for money that you do not owe!).

Last but not least, you need to know how much you expect to pay for these cars in your area. This is the price you should bargain for with the dealer, no matter how high his quote is. Here comes Edmunds’ TMV (“true market value”) to your rescue. From your ZIP code, it will give you the average market price of your car, from both the dealer and private seller, based on the year, make, model, mileage and other details. Take a printout of this page along with you when visiting the seller.

Go on to Check the car out »

You want to buy a used car (why? because of this and this), and have a budget of $10,000. Which one car, among the several hundreds of different types out there, should you choose? For the sake of this discussion, we narrow the field down to the 4-door sedan cars in mid-sized segments. (Everything said here holds for most other types of cars as well.)

While choosing the car, first think about your needs. Do you drive a lot? With gas price touching $3 a gallon in most places, a car that gives 25 miles a gallon costs $450 a year less than another that gives only 20 miles (assuming a yearly driving average of 15,000 miles) – a net saving of $2250 over 5 years. If you drive on snowy roads, you may need ABS (“anti-lock braking system”) fitted to your car. (ABS comes standard in most new cars these days, but it was offered as an option in older models.)

After you have made your choice of the type, it is time to hit Internet. Look up the online inventory of all new car dealerships in your neighborhood (leave out used car dealers – it is harder to find a reliable car there), and also check out personal sales ads such as craigslist and classifieds in your local newspaper. New car dealers keep a variety of used cars that are traded in by customers who swap them for new cars. These are privately owned, and generally well maintained.

Besides, dealers may add a few months of warranty (more on this later) that gives you some peace of mind. The downside is having to deal with the dreaded salespeople, if you are not well prepared (worry not, this guide will teach you enough to face him with courage). A private seller, by contrast, is ready to sell without much hassle and also the car is usually cheaper. But the problem here is that you must buy his car “as is”, without any accompanying warranty.

Make a list of at least 10-15 cars based on your budget and other needs. (Dealers often “mark up” the price by several hundreds and even a few thousand dollars, which can be negotiated down. So if you like a car in the inventory that costs more than your budget, do not discard it just yet.) Ask for the VIN (“vehicle identification number” that uniquely identifies every car on the road) and odometer reading (number of miles the car has been driven so far) for each car on your list. The lower the mileage on the car, the less is its wear and tear (a rule of thumb is that the total number of miles should not exceed 15000 multiplied by the car’s age in years).

It is time to research your car »

So you are going to buy a used car. Great! You have made a smart decision. The next step is to pick a budget – how much you want to pay for your car. This step is important, because your choice will decide how old a car you are going to get. From the depreciation graph, tweaking the budget by a couple of thousand dollars can mean getting a car that is few years newer or older.

In the world of used cars, the cheapest deal is not always the best deal. Getting a car for only $3000 may sound great now, but what you will likely get is a 10-year old clunker that may require costly maintenance over time. (My first car was a 13-year old Honda Accord with over 120,000 miles on it, for which I paid $3100. Over the next 4 years, it needed a few thousand dollars worth of repairs.) On the other hand, if you get a car that was kept well by its previous owner, and has low mileage, paying more now can buy you many nights of peaceful sleep.

Samarins suggests picking a budget between $8000 and $12,000, and I agree. From the depreciation graph, this means choosing a car that is 3-6 years old. With proper maintenance, such a car can go on for many more years relatively trouble-free. Let us settle on a budget of $10,000.

It is time to Make a list »