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In an average year, a car or light truck will be driven a little more than 12,000 miles. A vehicle that gets 20 miles per gallon (mpg) will use 600 gallons of gas. With gasoline costing roughly $4.00 per gallon, the average driver will spend $2,400 on fuel for a car or light truck that gets 20 mpg. Given the fact that the average household owns two vehicles, annual fuel costs can approach $4,800! Thankfully, there are numerous simple ways to reduce your fuel costs. By following all of these recommendations you can reduce your expenses on gasoline by up to 50%, saving close to $2,400 per year.
Before you do any research on a new or used vehicle you need to determine how much you can afford to spend. The general rule of thumb is that your monthly payment should not exceed 20% of your monthly take home pay (not your gross income). This rule applies to car payments as a whole. If you are making payments on two vehicles, the total of the payments for both vehicles should not exceed 20% of your monthly net income. Knowing how much car you can afford is very important because it could prevent you from becoming upside-down on your loan -- meaning you owe more than the vehicle is worth. According to Edmunds.com, almost 25% of Americans are upside-down on their auto loans, with an average of $4,442 in negative equity. Being upside-down can really hurt you when you go to purchase your next vehicle because many people sell or trade in vehicles they own and use that money as a down payment on their next car.
Once you have established your budget you are ready to start pricing out that dream car. There are primarily three websites that provide upfront vehicle pricing information: KBB.com (Kelley Blue Book), Edmunds.com, and NADAguides.com.
Each site provides a trade-in value and a retail value for all vehicles from model years 1990 to 2012. Edmunds.com and KBB also provide private party values, and KBB recently released a 4th value, the certified pre-owned or CPO Value. Trade-in values will be the lowest, followed by private party, retail values, and finally CPO values. Retail and CPO values are the highest because dealers incur costs (detailing, reconditioning, inspecting, simple maintenance) after taking ownership of the used vehicle and add value to it. These sites also calculate prices based on features, vehicle color, mileage, and condition of the vehicle.