April 1, 2009 at 1:00 am

Brian O'Connor

Approach new-car incentives with caution

Do the new job-assurance plans from General Motors Corp. and Ford Motor Co. mean today is the right time to buy a car?

Only if yesterday was, too.

Yes, there are all kinds of incentives for new car buyers now, from 0 percent financing and cash-back deals to extended warranties and programs that make your car payment if you lose your job. But first you should need a new car, be able to afford buying, driving and maintaining it, and take the time to research what type of reliable, economical vehicle makes sense for you.

"You're ultimately trying to seek out a good car that you can get a good deal on," says Jeff Bartlett, deputy online editor for autos at ConsumerReports.org. "There are many great deals out there, but they're not all good cars."

Shop for dependability

For instance, Bartlett points out, Consumer Reports doesn't recommend a single Chrysler, Dodge or Jeep product.

"You can very easily get drawn into a mediocre car that looks good upfront, but the long-term cost of ownership isn't as good as something else you can buy."

And while President Barack Obama announced Monday that the government would back GM and Chrysler products, it's best to buy a dependable car that you don't have to push to some to-be-determined third-party for repairs. Especially since, like most third-party insurance programs, they'll look to disqualify claims and, unlike an auto dealer, they won't be the least bit interested in keeping you happy in hopes of getting your business the next time you need a new car.

Pitfalls in the fine print

With all these programs, the devil truly is in the details.

Take the unemployment assurance announced by Ford and GM. To qualify, you must be eligible to collect state unemployment benefits. That leaves out more than 60 percent of the unemployed people in Michigan who, because of rules requiring them to earn a minimum amount of money and to have worked so many hours in a specific time period, don't qualify for unemployment benefits.

And some of the very people most likely to lose jobs soon -- GM workers -- don't qualify for coverage under GM's Payment Protection Program.

Crunching the numbers is the key to deciding if these deals make sense. While you can deduct sales tax on a new car on next year's federal tax return, you only get back a small percentage. Buying a $20,000 vehicle and paying $1,200 in sales tax gets you a $300 federal deduction if you're in the 25 percent tax bracket.

Likewise, 0 percent financing on a $30,000 vehicle buy sounds good, too. But you need to have very good credit to qualify -- and you'd better be able to afford the $500 payment in the first place, since the financing deal trims only $94 off your monthly obligation.

Still, there are qualified buyers sitting firmly on the sidelines, worried about losing their jobs, notes Brian Moody, senior editor of the auto site Edmunds.com.

"This takes away the one thing most people don't like: uncertainty," Moody says. "A lot of the problem now for people who aren't in danger of losing their house or their job is just psychological."

So if your fear of buying a new car is all in your head, these new programs may be for you. But do your research and check your budget. Taking away the psychological barriers to buying is one thing, but it's no excuse to go crazy.