Freedom Isn't Free
Your First Car Can Relieve You of Hassles, and Saddle You With Costs

By Karen Blumenthal
Staff Reporter of The Wall Street Journal

Your own car. Just thinking about it conjures up glorious images of freedom-freedom from carpools and parents' schedules, freedom to come and go as you please.

Unfortunately, someone has got to pay for your wheels. And if that someone is you, you'll quickly find that a car is one of the biggest financial burdens out there. The very cheapest new cars, basically small boxes on wheels, cost $10,000 to $12,000, and even a basic five-year-old, midsize sedan with 100,000 miles on the odometer can run $10,000 or more.

If you don't have that much cash saved up, you'll be looking at a monthly payment for several years. To keep your key to freedom from becoming a financial ball and chain, here are some tips for buying your first car:

Consider a used car. True, it's exciting to own a brand-new car. But most car experts recommend that your first car be a used one. They're cheaper to insure, for one thing, and you can buy a higher-quality car for the same price or less than the least expensive new models. Besides, most teens will have some kind of accident during their first years of driving. A scratch or dent on a used car is far less traumatic than damage to a new car.

Buy a fairly recent model. In the last few years, automakers have added a raft of new features that make cars much safer for drivers and passengers. Airbags were required in passenger cars starting with the 1998 model year, and in sport-utility vehicles, pickup trucks and vans starting with the 1999 model year. Though it may cost more, "you don't want to go too far back," says Alberto Rojas, spokesman for consumer watchdog Consumer Reports.

In addition to front airbags, Consumer Reports recommends looking for cars with antilock brakes, side airbags, and traction or stability control, which will help you avoid skidding.

Safety should be as important as price. Paying close attention to both safety features and a car's crash-test results could pay off if you're in a bad accident. Car experts say they would never buy an SUV or a pickup truck for their own kids because both types of vehicles are tall and more prone to rollover than sedans.

To check out the crash tests of models that interest you, go to the National Highway Transportation Safety Administration's Web site, www.safercar.gov. You'll want a car that gets at least a four-star rating. Since 1995, the Insurance Institute for Highway Safety, a research group funded by insurance companies, has tested cars in collisions that are primarily on the driver's side or the passenger's side, which it says are more like real accidents. You can check those ratings at www.iihs.org.

The ratings don't tell the whole story, however. Small cars like the Volkswagen Beetle get high ratings-but they are measured in a crash against an inanimate object, not in a tangle with the kinds of SUVs that crowd our roads. "It's the laws of physics," says Russ Rader, spokesman for the Insurance Institute. "If you are in a collision with a bigger vehicle, by definition, you are always at a disadvantage."

For any driver, "bigger and boring is better from a safety standpoint," he says.

Research will give you a leg up. To sort through your options and narrow down your choices, check out Web sites like kbb.com, the Kelley Blue Book site; cars.com and Edmunds.com. There you can find the estimated price for those cars in your area, find tips on how to buy cars and calculators for figuring out your costs. Bring your findings with you when you shop. They'll give you more power to negotiate.

Check out your financing options and your credit score. In a perfect world, we'd pay cash for our cars, owning them outright. If that isn't possible, you can still scout for better deals. Are your parents or grandparents willing to finance your purchase at a reasonable rate? Does you bank or credit union offer a lower car-loan rate than the dealer might? It helps to know before you go to buy a car.

It also helps to know your credit score and your parents' score, if they will be signing on the loan with you. Many dealers base the interest rate you pay on how good your credit record is. Consider the new Scion brand from Toyota, small cars aimed at young drivers. Buyers with an excellent credit record borrow at 5.05%, according to the Web site. Buyers with a poor credit record, or no record, pay 13.6%. On a four-year loan of $14,000, the buyer with poor credit will pay $380 a month, or $58 a month more than the buyer with good credit. Over four years, that amounts to $2,784 in added interest.

Focus on the price, the interest rate and the length of the loan, not the monthly payment. It's tempting to consider only what you'll be paying each month for a car. But realistically, you want more of your money to go to the car, not to interest payments. That's one reason the loan should be for four years or less, though many dealers may push a five-year loan. If you need a longer loan to afford the car, you should consider whether you are spending more than you can really afford. Negotiate the best price and find the best rate, and then feel confident that you've gotten yourself the best deal.