If you're thinking about taking the leap and trading your clunker for cash, you should consider the total impact on the family budget of owning a new car. And think about that old car you'll be trading in -- in particular, the fact that it may have meant no car payment, cheaper insurance and lower licensing fees than you're about to face.
Some questions and answers about whether it makes financial sense to leave your clunker behind.
Q: What factors should I consider?
A: Although the $3,500 or $4,500 you'll save through the government's cash-for-clunkers program seems very enticing, be sure to look at all the other costs associated with owning a new car.
The most obvious cost is your new car payment. But even if you've already factored this in -- say, if you were already planning to buy a new car before this program came along -- don't forget that a new car will likely also increase your insurance premium and annual licensing fees.
Of course, the new car likely will save you money on gas and maintenance costs.
How will the numbers balance out?
Try this online calculator, which allows you to compare all the costs of your old car with those of a new car to see how your situation adds up.
You might also want to plug a used car you might consider buying into the calculator and compare its cost with that of the new one with the rebate.
And keep in mind another cost associated only with new cars: depreciation.
Q: How can I assess the cost of keeping my older car, to figure out whether it's a good idea to trade it in?
A: The cost of owning a car includes more factors than you might think. Edmunds.com, an auto consumer Web site, has identified eight components: depreciation, interest on financing, taxes and fees, insurance premiums, fuel, maintenance, repairs and any federal tax credit.
A Web calculator on the Edmunds site will help you figure the true cost of owning a car.
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