The US car industry is in the worst shape since the early 1980s, with sales for some manufacturers off by more than 30% compared to a year ago. Credit has tightened by at the same time cash rebates and financing incentives have never been better. Truly, if you are in the market for a new car, truck, van, sport/utility or crossover vehicle, then taking advantage of these offers can save you thousands of dollars.

Tax Credit For New Car Purchases

Now the federal government is getting into the action as part of the $787 billion stimulus package signed into law by President Obama earlier this week. One provision in that package includes a $2.3 billion tax break for new car and truck buyers a move that could help consumers save several hundred dollars more on top of already deep discounts.

“This tax credit may make a new vehicle purchase more feasible for many consumers in the near future,” said Eric Hoffman, spokesperson for AWARE, a non-profit auto financing education group. “Auto buyers should educate themselves about financing before making a purchase. Shoppers should maintain a solid credit track record, and shop around for financing among several sources, including banks, credit unions, financing companies and auto dealers.”

Save Hundreds of Dollars

Taxpayers will be able to deduct both the local and state sales tax paid on new car purchases up to $49,500. The tax break will cover the purchase of any new car, domestic or foreign, through the end of 2009. Moreover, the deduction is treated as being “above the line,” which means that it reduces the amount of a filer’s taxable income. Eligible taxpayers must have an annual income below $125,000 for individuals or below $250,000 for families.

“Auto shoppers who are considering purchasing a car today or within the coming months should continue to educate themselves about the financing process,” Hoffman said. “Our research has shown that consumers who are educated and informed about the auto financing process are the most satisfied with their auto financing decisions.”

Free Tools to Help You Decide

Our sister site, SayLending.com offers consumers free tools to help them calculate how much car they can afford as well as monthly payments, interest rates and related loan terms. You can also get a free, no obligation auto loan quote to help you find the best rate on your new car. We always recommend that you secure your own financing before visiting a dealer to purchase a car, applying the cash rebate to your down payment while negotiating the lowest price for your vehicle.

Small cars like the MINI Cooper may cost you much more to insure than the large truck you traded in.

Exchanging your large car or pickup truck for a small, economical vehicle will yield important fuel savings. If you are in the market for a new car, considering something more fuel efficient than your current vehicle will reduce the pain you feel every time that you fill up.

While your gas, maintenance, and registration costs will drop, there is one expense with switching to a new vehicle that will rise. According to Insure.com, switching from a larger vehicle to a small car like a Honda Civic or Toyota Prius is likely to raise your car insurance rate.

“Small cars tend to increase insurance costs because they get into more crashes,” says Russ Rader, spokesperson for the Insurance Institute for Highway Safety (IIHS). “There’s a myth that a smaller car is more nimble and helps you avoid crashes, but smaller cars tend to have more collision losses.”

“Of course it’s not the cars causing the accidents, it’s the people behind the wheel. “Part of the reason is the driver,” says Rader. “Smaller cars tend to be less expensive and driven by younger, higher-risk drivers. And they think they can zip around in traffic.”

Past insurance loss experience tracked by the Highway Loss Data Institute (HLDI), a division of IIHS, gives some insight into where these smaller vehicles are resulting in bigger insurance losses (the most recent data comes from 2004 to 2006 model vehicles):

• The Honda Civic is “worse than average” for personal injury protection losses and medical payments. That means passenger injuries are costly for this car.

• The Honda Civic Coupe fares even worse: It is “worse than average” for bodily injury and “substantially worse than average” for collision, personal injury protection and medical payment losses.

• The Honda CR-V, classified as a small SUV, performs at “average” for all loss categories except comprehensive losses, where it is “substantially better than average.” Comprehensive coverage includes payments for theft, fire, vandalism and natural disasters.

• The Toyota Sienna minivan is “better” or “substantially better than average” across all loss categories, meaning insurers are paying out less in claims for Sienna drivers. (Very large station wagons and minivans, like the Sienna, Honda Odyssey and Chrysler Town & Country, show no worse-than-average losses at all.)

• Ford F-150 pickups perform “substantially better than average” for personal injury protection and medical payment claims. Their only “worse” category is comprehensive claims, probably because the F-150 ranks at No. 4 on the “most stolen vehicles” list compiled by the National Insurance Crime Bureau.

“There’s a big safety downside to moving to a smaller car because you’re putting yourself at more risk of injury,” confirms Rader. “It all boils down to the laws of physics: People think about safety features like air bags, but no matter how many air bags you stuff into a smaller car, it’s not going to be as safe as a larger, heavier vehicle.”

If you are considering buying a smaller car you’ll save money in some areas, but your insurance risk will increase. Frontal and side impact airbags may help, but they cannot protect you from serious injury or even death in certain accidents.

(Source: www.insure.com)