Car shopping 2006: The inside track
With more great vehicles and intense competition, this will be a terrific year to be in the market for a new car.
By Lawrence Ulrich, MONEY magazine senior writer

NEW YORK (MONEY magazine) - If you've paid any attention to the news coming out of the auto industry, you know it's been a tumultuous time.

In the past year alone, a fuel crunch has put a crimp in the sales of SUVs (Detroit's most profitable product), unions have rattled their sabers in the face of more job cuts, and people have started whispering about GM possibly declaring Chapter 11.

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But what's bad for the auto industry isn't necessarily bad for you. Quite the contrary.

The fact is, you have access to more great cars than ever before. And those great cars can come from anywhere. The old line was that high-quality cars came almost exclusively from Germany and Japan, and you had to pay for the privilege of the "right" nation of origin.

But when Mercedes-Benz has one of its biggest recalls ever in 2005, and former bargain-basement-brand Hyundai continues its steady climb up quality surveys, it becomes clear that the old prejudices are just that -- old. You don't need to limit your search to a small group of companies or countries.

You also have more new categories of cars to choose from. With demand for large SUVs beginning to level off, automakers are finding new ways to blend roomy interiors with better fuel economy and driving characteristics.

Besides the usual hatchback, sedan and SUV, car shoppers today can consider yet-to-be-categorized cars such as the Mazda5, a micro-minivan, or Mercedes-Benz's R-Class, a maxi-station wagon. They join models such as the boxy Scion xB and Honda Element.

More are on the way -- the talk of this year's big Detroit auto show was all about "crossover" vehicles such as Ford's new Edge and Acura's RDX, while even Mini is planning to build a wagon version of its beloved Cooper hatchback.

A little confusing? Maybe. But you've come to the right place. We have four simple tips to help you get the most out of car shopping in the new world

Make sure the price is right

Last summer, car sales soared under the "employee discount" plan started by GM and copied by other automakers -- and then fell to earth with a resounding thud when those programs were shut down in the fall. Don't look for the same thing to happen this year. GM has announced that it is moving to a new pricing strategy called "total value pricing," which will lower the sticker price of new vehicles but also eliminate hefty rebates.

That's good for resale values but not as good for bargaining (lower MSRPs cut into the dealer's profit, giving him less room to negotiate). On the other hand, if other automakers follow GM's lead, rebates might return on top of lowered MSRPs -- and that would really be the best of both worlds. If you can hold off, wait and see what develops.

Watch the hybrid hype

Last year was undoubtedly the Year of the Hybrid, and 2006 will continue that trend.

But while hybrids are mighty efficient, you will pay a premium for their thriftiness -- a premium that wipes away any savings in fuel costs. That's going to be more of an issue this fall, when the tax credit for some hybrids starts to be phased out.

Still want a frugal ride? Take a look at the growing diesel market (Mercedes-Benz plans on rolling out no fewer than five such models this year) as well as a raft of new subcompacts headed our way: Honda's Fit, Toyota's Yaris and Nissan's Versa will save you nearly as much fuel as a hybrid but cost thousands less.

Look out for No. 1

By the end of 2006, it's quite possible that the Big Three automakers will look something like this:

1. Toyota
2. GM
3. Ford.

Within the auto industry, this is huge, tectonic-plate stuff. Massive corporate egos are on the line. And you may be able to benefit from all of it. If Toyota is within a few thousand units of the brass ring toward the end of the year, expect some softening of prices to push the car maker over the top.

At the same time, GM isn't taking any of this lying down. If it thinks it can hold on to the top spot for one more year, it will. All of which means one thing: Get ready for the mother of all price wars this fall.

Keep on truckin'

If you're in the market for a full-size SUV, this could be your year. Sales of big trucks were down 18 percent last year, a figure that many attribute to concern over rising gas prices. That hasn't stopped GM from launching its redesigned line of plus-size sport utes, which include the Chevy Tahoe, the GMC Yukon and the Cadillac Escalade.

The new models are miles better than the SUVs they are replacing (stiffer body construction, nicer-looking interiors), but again, it may pay to wait: If these trucks can't sell for full price -- or close to it -- look for GM, Ford and other makers of big SUVs to slap some incentives on the hood.


The street smart 15: The best cars of 2006.

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