Is this a good time to buy a new car?

MADISON, Wis. (2/17/10)--Car manufacturers have cut production, but dealers are hungry for sales, so it's still possible to buy a new car at a good price. Here are some things to consider, according to the Credit Union National Association's Center for Personal Finance:

Be skeptical of low-rate financing. Carmakers' offers of 0% to 2% financing are often limited to the least popular models. In addition, you'll typically need a premium credit score--720 or better--to qualify.

Take the rebate. Automakers are likely to continue to offer cash back as an alternative to low-rate financing. In many cases, the rebate is the better deal. That's because the rebate reduces the amount you have to borrow. A smaller loan, even at a higher interest rate, can cost less overall. For example, with a four-year loan, the total cost of borrowing $18,000 at 6.5% is less than the total cost of borrowing $20,000 at 2%. If you accept a rebate, just be sure you negotiate the lowest possible purchase price first. Run the numbers on the "When a Rebate is Better Than a Low-Rate Auto Loan" calculator in Home & Family Finance Resource Center to see which option makes more sense.

Compare lease vs. loan carefully. Monthly lease payments can be lower than loan payments at first glance, but make sure you compare apples to apples. At the end of the lease, you'll need to enter another lease or go carless. But at the end of a loan, your payments stop and you can continue to drive the car. For example, to drive a $22,000 car for six years, compare the total cost of two three-year 6% leases ($27,940) vs. one three-year 6% loan ($24,094).

Talk to your credit union loan officer first. Getting preapproved for a loan puts you in a better bargaining position at the dealership because you know how much money you have to spend. In addition, a credit union loan rate is likely to be better than a bank loan rate--on average, 6.4% vs. 6.8% respectively, according to Kiplinger's Personal Finance (March ).