By David Pitt, AP Personal Finance Writer
Is the government's cash-for-clunkers rebate and the thought of that new car smell about to pull you off the couch and into the nearest showroom?
Before you take the leap, 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.
Here are some questions and answers about whether it makes financial sense to leave your clunker behind and drive off in a new car.
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, especially if you're no longer making payments on your old car. 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 to 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. A new car can lose 20% of its value when you drive it off the lot, while a used car suffers no such loss in value.