NEW YORK (Money magazine) - The thing to remember about incentives is that they're not a gift: Car makers wouldn't offer you a dime if the car could sell well enough at full price.

A big incentive might simply reflect tough competition rather than problems with the vehicle itself, as in the case of the Dodge Durango. In other cases, though, a rebate is a flashing neon sign warning you to avoid a particular car. Before you buy, you've got to determine whether the incentive outweighs the car's flaws.

"You don't buy a pink elephant sculpture just because it's on sale," says Jesse Toprak, director of pricing and market analysis for car research Website Edmunds.com.

Start by looking at the critical standing of all the vehicles of the type, and in the general price range, you're interested in. An hour or two of magazine reading and Internet clicking will reveal which models are held in high regard and which are also-rans.

Having eliminated the losers, you're now ready to start thinking about value. Note that the word is value, not price.

Certainly, you should know what incentives are available on cars that you're looking at. You can do that by going to manufacturers' websites and research sites like cars.com. But be sure to consider the total cost of ownership, including insurance, repairs and depreciation.

This kind of information is now widely available on the Web. The depreciation ratings from Automotive Lease Guide, available at Edmunds.com, are especially valuable.

Next look at the age of a vehicle. Automakers create "all new" versions of a model, meaning a full redesign, roughly every six years. In the interim, a model will get (typically minor) appearance and feature upgrades each year. As cars and trucks move through their life cycles, they often require bigger discounts to keep up with newer rivals.

It's critical to know whether a vehicle is fresh bread or two-day-old doughnuts, and whether it's on the verge of replacement. That's because the arrival of a redesigned model sometimes creates worthwhile deals on an outgoing version. Other times, the new model is such a leap ahead in quality and technology that it renders the old one DOA, despite huge rebates from automakers desperate to unload their relics.

As mentioned earlier, the 2004 Odyssey is a perfect example of an oldie but goodie. A redesigned 2005 model went on sale in September with not a penny in rebates. But the new model brought with it the first significant discounts on the '04, which still ranked among the class leaders despite last being redone in 1999.

If you don't need the latest and greatest, the 2004 Odyssey will be a smart buy, as long as the discount makes up for the eventual resale gap between the '04 and '05. (With '05s already in showrooms, walk away if a dealer won't grant a $1,500 to $2,500 break on an '04.)

In contrast, short of winning one in a raffle, there's no reason to drive off with the 2004 Jeep Grand Cherokee. It has fallen far behind the mid-size SUV leaders, and a dramatically upgraded 2005 model makes its debut in October. Already the '04 is dropping to the bargain basement like an old Walkman in the age of the iPod.

Bottom line: Life is short. Car loans are long. Saving $25 or $50 or even $75 a month sounds nice, but don't go for an incentive that will cost you the performance or reliability of a superior vehicles. And realize that the used car market will automatically deduct much of that rebate amount from your car's resale or trade-in value.

"The deal will fade, but the vehicle will be with you for years," says Tom Libby, director of industry analysis for Power Information Network, an affiliate of J.D. Power & Associates. "Get something that you'll enjoy, that holds its value, because you'll have to live with it down the road."

There are other reasons for discount skepticism: With consumers now trained to expect a rebate, automakers are stealthily raising sticker prices so that the post-discount price looks better than it really is. GM, Ford and Chrysler all boosted retail prices five times in 2004, and more hikes are expected on '05 models.

And remember, it's not a rebate unless you pocket the dough. The typical discount may be a shocking 17 percent off sticker price, but most buyers use that money to move up to fancier models or pile on options. The result? Out-the-door prices are averaging about $24,800, up nearly 5 percent from two years ago.

You may wind up with a glitzier car, but you're going to be dropping more money. Ask yourself some tough questions here, like do you really need the heated seats or six-CD changer?