$8,604

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That’s what the average U.S. household spends annually on transportation, the bulk of it in the form of automobiles—purchase price, fuel, insurance, finance charges, repairs and maintenance, but not factoring in depreciation. For a lot of Americans, more than 20% of their take-home income heads right back out of their homes and into their car payments.

Liz Pulliam Weston, in an MSN Money story, flatly suggests that the real reason so many Americans are broke is sitting in the driveway. Or should we say reasons—because plenty of car-crazed consumers own more automobiles than they could possibly drive at the same time.

The data in the story is pulled from sources like the Bureau of Labor Statistics and Edmunds, which offers nuggets such as:

One-fifth of cars that are financed include debt rolled over from a previous vehicle, according to Edmunds.com. As of March 2010, the average amount of negative equity in these deals was nearly $4,000.

Why do so many consumers make poor financial decisions when it comes to cars? Lots of reasons, suggests Weston, including:

Treating cars as a status symbol. You can’t watch television for long without being bombarded by car commercials, and many of us have absorbed the idea that we are what we drive. It’s complete BS, of course, but some people have been so brainwashed that they literally drive themselves into bankruptcy.

Failing to consider the overall costs. When buying or leasing a car, many people consider nothing more than the monthly payment. They’re not seeing the whole picture — far from it. Once you factor in insurance, gas, maintenance, repairs, taxes, depreciation and other costs, most cars will set you back at least twice the initial purchase price over five years…

Acting like a lamb before the slaughter in car dealerships. If ever a transaction were designed to soak the consumer, it’s the typical car purchase. Car dealerships are experts at getting people to pay too much for cars or financing, and often both.

There are ways to intelligently buy a new car: In fact, there’s a new post from BillShrink suggesting 12 sensible strategies and considerations. Including:

Consider Your Budget
Once you know what type of car you need, it’s time to consider your budget. Prices can vary wildly even in the same category of vehicle. A Honda Civic, for instance, can be several thousand dollars cheaper than a Volkswagen Jetta. Deciding between the two (or other cars) is not simply a matter of which one you prefer, but also which one you can afford to own. Nor can this be determined solely by the car’s sticker price. Total cost of ownership calculators like the one at Edmunds.com will analyze your prospective vehicle in terms of taxes, fuel, repairs, loan costs and more. Be sure to run any car you are considering through this calculator before talking to any dealers or salespeople.

And:

Pick Options Carefully
It’s easy to get caught up in the car buying spirit and add on all kinds of attractive-sounding options. Heated seats, bike racks, ground kits and automatic starters are just a few options commonly added to new vehicles. Yet every new car buyer should be careful to select their options deliberately. It might sound obvious, for instance, that any “respectable” new car should come with a sunroof. But if you live in a perpetually rainy area or truthfully don’t use the sunroof you already have, why pay an extra $1,000 to get one?

But first, before you find yourself in a dealership sniffing that new-car smell and drooling over the freshly-waxed vehicles, take BillShrink’s big upfront warning into consideration:

Conventional wisdom says that a brand new car is one of the worst purchases a consumer can make. The biggest objection is depreciation. A new car, we’ve all heard, loses 25% or more of its value as soon as you drive it off the lot. But is it truly that cut and dry? After all, if you plan to own a car for ten years, the depreciation argument is irrelevant. Furthermore, some people take pride in owning a new car and knowing it was cared for from the start.

If you’re going to resell the car within a couple years, it’s almost always a bad investment to buy new. You may still opt for a new car anyway—just do so with the understanding that you’re losing money on the deal.

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