Auto News: Mr. Green Car: Saving money with a low-cost new car

April 18, 2012

The Kia Soul is rated the ninth least expensive car in America with an MSRP of $13,900. (Photo by Allen Penticoff)

By Allen Penticoff
Free-lance Writer

While I’ve long been a proponent of keeping a car forever, because, overall, it is less expensive to repair a car or truck than it is to pay for a new one, there are good reasons why a new car may be the right thing for some people.

I have too often seen people of lower income driving some vehicle that is so worn out, ratty, rusted and grossly inefficient that it is no wonder they spend far too much of their income trying to repair and drive it — causing them to get behind on rent and utility payments — their life is a mess. Often, these vehicles are barely safe. The suspension may fail at some inopportune time, the transmission may break — which is a very expensive repair that often leads to the vehicle being scrapped. The brakes and tires may be quite marginal — something that can lead to an accident.

I’ll make the case herein that one should let these tired, polluting, gas hogs go to the great scrapyard, and those people of struggling income might consider instead a small, inexpensive new car. Below is a list of the 10 least expensive cars in America. All the prices are the manufacturers’ suggested retail price (MSRP).

The MSRP is a reference point, as all these cars will likely sell for more than MSRP because of optional equipment, “transportation” and taxes at the very least. It is difficult to buy one actually, as these inexpensive models are not really all that popular. You may need to order one to get the minimal equipment or the base model — in which case you probably won’t get much of a discount. However, all the dealerships have at their disposal some flexibility in price, discounts and financing. Often, the manufacturer will offer very low interest for financing through their loan service.

Those with poor credit history can often still get financing. According to Matt Jensen, sales manager at Rock River Kia, even those with credit scores in the 400s may be able to obtain financing. The catch is you will pay more in interest. This can run from 6 percent to 14 percent. Over the course of a long payment period of perhaps six years, this will add up to a lot of money going to the bank — but there are advantages.

Advantage one — you will have a NEW car, one that should not break or let you down. It won’t be costing you thousands of dollars in unexpected repair costs — you have your monthly payment — and you budget that into your lifestyle. Now you can get to work on time — every time. You’ll get a long warranty that should last you quite a while. Kia, for example, has a 10-year/100,000-mile power-train warranty (engine/transmission), five-year/60,000-mile bumper-to-bumper warranty and five-year/60,000-mile free roadside assistance. Other manufacturers are also upping their warranties to attract new buyers. Not only are most new cars reliable, but you now have a lot of peace of mind in knowing you’re not going to be stuck with huge repair bills.

A common thread among the least expensive new cars — they are all fuel efficient. Most will honestly see 40 mpg on the highway and low 30s in the city. With gas at $4 per gallon, moving from an old mini-van getting 20 mpg to a small sedan getting 40 mpg will exactly cut your monthly fuel cost in half * — savings enough to nearly pay for the car if you commute a lot. You will also cut way down on air pollution — something your children may appreciate.

Most new cars are much safer than anything now 10 to 20 years old. A Chevy Sonic has no less than 10 air bags. The Sonic, Soul and several small cars have earned the “Top Safety Pick” of the Insurance Institute for Highway Safety. This brings the cost of full coverage insurance down into the realm of liability-only insurance — and more peace of mind in knowing you’re not stuck with a junk car if an accident occurs.

There is considerable pride in driving something new around instead of an old beater. Making your payments on time will go a long way to restoring bad credit — before you know it, you may be buying your own home with a much-improved credit rating. With elevated self-esteem, you’ll have fewer problems in your life.

The trick is to keep the cost very, very low on the purchase. The average loan for people with a 500 to 600 credit score is $22,700 with monthly payments of $470. This means they’ve bought a larger or more highly optioned vehicle — twice the lowest MSRP. Many well-equipped small cars realistically can be had for about $15,000. A lease option may bring the monthly payment down into your budget range as well. In the case of a lease, you make a down payment, a monthly payment and then pay for the car for a couple of years. At the end of the lease, you turn the car back in, pay extra if you put too many miles on it, or refinance it to buy and keep it (and get to pay sales tax twice in Illinois). The downside is the car is often not worth what you still owe on it at the end of the lease — but if you roll over into a new lease, life continues on pretty much as it was before, and you have another new car not to worry too much about.

Below is the list of 10 least expensive cars for 2012, according to Autoguide.com (which has a nice, short summary of each car on their website). For suspense, I will, as they did, list the least expensive car last. Most are listed with the base manual transmission — a few have a base automatic. As with the one 2011 Kia Rio listed, you may find a new last year’s model at a heavily discounted price without the mileage of or uncertain history of a used car.

10 least expensive cars in America

10. Yaris 3 door, $14,115

9. Kia Soul, $13,900

8. Chevy Sonic, $13,737

7. Suzuki SX4, $13,699

6. Kia Rio sedan, $13,600

5. Ford Fiesta, $13,200

4. SmartForTwo Pure, $12,490

3. Hyundai Accent, $12,445

2. Kia Rio (2011), $12,295

1. Nissan Versa, $10,990

Finally, I’d like to thank Chuck Hays, sales manager at the Bocker Automotive Group in Freeport, Ill., for his input on this report, too.

*15,000 miles per year/20 mpg = 750 gallons per year. 750 gallons/12 months = 62.5 gallons per month. 62.5 gallons x $4 = $250 per month. Half of $250 = $125, or roughly a small car payment/lease.

On an unrelated note, check out this funny link when you get a chance: http://www.wimp.com/drivingcar/.

From the April 18-24, 2012, issue

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