Photo by naotakem

Insuring your car is a necessity that can seem expensive if you don't know ways to cut back the cost.

Car insurance is vital to your financial health and legally required in most states. But how much coverage you're required to carry and how much you need can be two different things. You want to be certain you have enough coverage in case of an accident, but you don't want to be paying for coverage you don't need. Insurance can be expensive, if you have more coverage than necessary.

Auto insurance covering liability for injuries and property damage done to others is compulsory in most states. New Hampshire, for example, doesn't require motorists to carry liability insurance, while residents of Virginia must pay the state a $500 annual fee per vehicle if they don't carry liability insurance. 

Penalties for not purchasing auto insurance also vary, but most involve a substantial fine, license and/or registration suspension or revocation, and possible jail time. Usually, the minimum required by law is protection to cover third parties against the financial consequences of loss, damage or injury caused by a vehicle.

Some states, such as North Carolina, require drivers have liability insurance before a license can be issued.

Check out these 12 tips to ensure you're doing all you can to get the right coverage at a fair cost.

1. Shop Around
Insurance companies' rates will vary depending on where you live. Different companies could have better rates for different vehicles or zip codes. One company could have the best rates for your needs one year and raise them the next. It pays to shop around each year before automatically renewing your policy. Be sure you receive at least three quotes for exactly the same coverage.

Photo by thomas.merton

Photo by Sunfrog1

The end of 2009 is approaching and we all know what that means: Time to buy a new car!

If you didn't get in on Cash for Clunkers, count yourself lucky to not have wasted money on a new car.  Statistically, cars lose 15-20% of their value every year or two.  As soon as you drive it off the new car lot, the retail price you paid drops immediately to the dealer's wholesale price.  That's like a $3,000 joyride.  Since your car will always lose value (unless it's a legitimate classic) it is an expense, not an investment, as people seem to think.

In light of this, you need to make the best financial decision possible when it comes to cars.  You can still have reliable transportation driving a pre-owned automobile, despite what your neighbors say.  (And there's no rule stated that new cars never break down.)  Check out some of the top used models rated on reliability, safety, and availability.

Compact Sedan*
Before you start mocking Hyundai, you need to know this make has experienced a revolution in the last several years.  They are quickly catching up to the competition and have a good, solid product.  The Elantra, reswizzled in 2001, has a great feel on the road with some fun extras and superior safety ratings.  Definitely select a model between 2002-2007.  You can score one for between $4,000-$10,000 depending on mileage and condition.  Don't ignore the Toyota Corolla as an attractive option as well.  With a myriad of options depending on year you can purchase a smaller, reliable, and solid car for thousands less.

Midsize Sedan
Long have Honda and Toyota thrashed the competition here.  The Accord and Camry, respectively, are solid, reliable cars that run in top shape forever.  You'll pay extra for the nice handling, but they are definitively the best, without question.  The Hyundai Sonata and Kia Optima have put up a good fight in recent years, but as an owner of a ten-year-old Accord that has never needed more than an oil change after 125,000 miles I've come out far ahead financially by paying a bit more up front.  You're also solid with any 2002-2007 Camry.

Minivan
Again, Honda is the forerunner in used car performance.  With a powerful V6 engine and spacious interior, you'll ride in style new or used.  And yet again, you'll need to shell out more for it.  But taking into consideration long-term usage and repairs, sticking with Honda is a good financial bet. 

My dad is a pretty frugal dude.  He picks and chooses his penny-pinching categories, relentless to give in (think keeping a computer ten years or $1 beef tips), yet enjoys splurging on lavish vacations.  Spend five minutes with him and you'll discover he has a '94 Honda Civic he bought for $300.  And "it still blows cool air".  Dad's funny like that.

Part of his vehicular success stems from an intimate knowledge of engineering and mechanics.  I see car maintenance as take-it-in-when-it-doesn't-run-anymore.  He is diligent about keeping the machine in strong working condition, catching problems before they become pricey.  Here are some of Dad's tips to keep the car in tip-top shape, saving you thousands in the long run.

1. Check the oil and get it changed regularly.
Only check it after the car has been turned off for a while and is cool.  Read your manual to find the oil dipstick and pull it out.  Wipe it down once with a rag and reinsert to get an accurate reading.  Your stick has a "full" measurement, which you want to see.  If it's a bit low, add more of the same brand oil with a funnel.  Look at the color also--if it's black, time for a change.  Whitish usually means something funky is mixing in with the oil and you'll definitely want to take it in.  

2. Check transmission fluid.
This takes a bit more finesse but you can check it on your own.  Locate the transmission fluid dipstick under the hood.  Put the car in park and pop the hood.  The stick has a cold and hot measurement at the end.  If your vehicle has been running for a while, it should read "hot" and if it's a cold engine you should see "cold".  Make sure you wipe down the stick before reading it.  When the fluid is brown, it's time to switch it out.  

3. Keep engine coolant full.
That big tank-looking thing under the hood is like engineered sweat for your engine.  When it runs out or stays low for a long time, failing to cool the engine, you can expect serious auto heart failure.  This is a big money fix so you'll want to keep an eye on it.  Keep the level between "low" and "high" for the best efficiency.  If you are constantly running low, take it in to check for leaks.

4. Become a tire pressure nerd.
Remember how part of last November's campaign to propose energy reform was to encourage more tire pressure checks?  While this is a laughable option to finding alternate energy or new drilling areas, there are measurable savings to be had just by keeping your tires at the right pressure.  You can save around 3.3% just by adding a bit of air to your car's rubber shoes.  Check it at least once a month.

President Obama has approved the CARS program to stimulate new car purchase and help you buy a more fuel-efficient car.  We've looked at the details of this new plan and outline how you will profit, or not, from taking advantage of it.

Which cars are eligible?

• None older than 25 years old (no yard-bound clunkers) are eligible.
• You must have owned it for at least one year prior to trade in.
• The new car must get at least 18 mpg city/highway combined.
• Trucks have different requirements.  We still aren't sure what they are right now.  
• Your new car must be purchased new.

What do I get for my trade in?
If your purchase meets the requirements you will be given $3500 or $4500, depending on the new vehicle.  

Can I buy a used car or get a lease?
This is the biggest caveat to the CARS program.  You may not buy a pre-owned vehicle to qualify for the credit.  However, you may sign up for ridiculous debt (lease must be at least 5 years long) and have no car at the end of your payments.  This should not be an option in any thinking person's framework.

When do I get reimbursed?
Trade in the old car, buy a new fuel-efficient one, and Uncle Sam will send you the credit within 10 days after the sale, assuming the NHTSA approves the transaction.

It's a no brainer, right?
Not exactly.  It's only going to save you money if you had enough saved or a vehicle and you've been looking to buy.  Similar to the housing credit, I definitely wouldn't advocate going into debt.  Cars can lose up to 20% in value as soon as you drive off the lot, so even with the credit it may not be a huge leap in savings.

One of the most significant costs of buying and driving a new car is the depreciation on its value. New cars can lose as much as 45% of their original value in the first three years (MSN Auto), leaving many people owing much more than their car is worth. If you find yourself in this “upside down” position, chances are your options for selling are limited. But in tough economic times, freeing up a car payment is often just enough to balance a household budget, so don’t give up the idea. Here are five steps to selling that upside down car.

1. Check the Kelley Blue Book (KBB) value.
Kelley Blue Book offers a great online service for looking up your used car’s value, making allowances for mileage, vehicle options, and the overall condition of your vehicle. By objectively classifying your car’s condition (hint: few cars are “mint”) you can get a good idea how much your car is really worth.

2. Get your car detailed.
It’s always a little surprising to see how many people are trying to sell dirty cars. Dirty cars bring low offers. Spend the money to get your car cleaned up, inside and out. It will be well worth it.