Buying A New Car? Don't Despair

A long row of unsold 2007 Corolla sedans sits at a Toyota agency in the east Denver suburb of Aurora, Colo., on Sunday, May 13, 2007.
AP
Thinking about buying a new car? Don't settle for just checking the Blue Book value and comparing sticker prices online. Here are five simple steps to becoming a savvier buyer:

Predetermine your monthly payment:
If you want to own a home some day, your car payment should be no more than 8 percent of your gross monthly income. Why? Because most mortgage lenders are reluctant to lend to people who spend more than 36 percent of their gross monthly income on debt. Fully 28 percent is expected to be put toward housing costs, leaving you with a margin of 8 percent. If you're shouldering other debts, such as student loans, the amount going toward your car payment should be further reduced.

Factor in other recurring expenses:
While it's important to find a car with good gas mileage, fuel is just one of the monthly expenses associated with owning a car. You should also budget in regular maintenance, roadside assistance coverage and, of course, insurance. Thankfully, pricing insurance has never been easier. To get quotes and compare rates, visit sites such as Progressive.com and Car Insurance.com.

Choose shorter loan terms:
They range from 36 months to an astonishing 96 months. Stretching out your payments as long as possible cuts your expenses in the short term, but costs you more as time goes on. Not only does your principal accrue more interest, but the value of your car begins to depreciate, leaving you owing more than the vehicle is worth.

Check theft rates:
Lower your chances of having your car stolen by researching which makes and models are most likely to get pinched. Older model Toyotas and Hondas get stolen most often, according to the National Insurance Crime Bureau. The least likely to be ripped off? The Ford Taurus and Pontiac Vibe. For more information, visit NCBuy or Esurance.com.

Shop around:
When visiting different dealers, remember the best sticker price doesn't necessary equate with the best deal. Keep in mind that advertised prices generally run $150 to $300 above dealer cost. Make sure to look for the lowest interest rate before signing on the dotted line.

By Marshall Loeb