The best way to save money on a car is by buying used cars that are fuel-efficient car -- and put the several thousand dollars in "up front" costs you'll avoid toward fuel instead.
But which cars make the cut?
Try buying used cars that are only slightly used -- models (including late model hybrids) with just a couple or three years on them -- with fewer than 50,000 miles or so, on the clock. Such cars are new enough to look and drive very much like brand-new cars -- and assuming proper upkeep, usually have at least 8-10 years and 100,000 miles-plus of reliable service left in them. They may even still be partially under warranty in some cases. But the most important thing is they're great deals because buying used cars means you can get them for 25 percent to 40 percent less than what they cost when new. (Your cost to insure will also be lower, as will any applicable personal property taxes, etc.)
Here are some lightly used but high value -- and high-efficiency -- late model contenders to consider when buying used cars:
I. Used Hybrids
* 2002-2003 Toyota Prius (48 - 52 mpg) -- A good idea three years ago, the Prius hybrid is an even better one today. While the cost of a new Prius is $21,725 (before the inevitable dealer markup), you could buy a slightly used '03 for about $17-18K -- the current average retail price range, according to various used-car value guides. Or go back another year, to 2002 -- and savor the flavor of $15-$16K before you haggle it down. While the 2006 model Prius is fancier, by buying used cars, you'll still win when it comes to fuel efficiency (as much as 50-60 mpg in city-type driving) and the thousands you'll save up front will keep you in "free" gas for years to come -- even at $3 per gallon.
* 2002-2003 Honda Insight (61-68 mpg) -- Highly efficient commuters are back (Toyota's Yaris, the new Honda Fit), but if you reach back a few years, you could do even better with the original. The two-seat Insight is the most fuel-efficient vehicle you can buy on four wheels -- and its ultra-compact size makes it a snap to park and maneuver on crowded urban/suburban streets. And while a brand-new one would cost you $19,320, buy buying used cars like a slightly older '03 or '02, you can get one for a lot less. Current retail average prices range from about $15K or so for an '03 to around $12K for an '02 -- which works out to $4,000-$7,000 in gas (or vacation!) money for you.
(Editor's note: Good deals when buying used cars can also be had on other late-model/used hybrids, including the 46-51 mpg Honda Civic hybrid (available since 2003) and more recently introduced hybrid SUVs such as the 31-36 mpg Ford Escape and 28-33 mpg Toyota Highlander hybrids -- which are now becoming available on the used-car market.)
II. Used Compacts
* 2002-2003 Toyota Echo (35-43 mpg) -- It may not be glamorous, but the Echo approaches the real-world fuel efficiency of some hybrids -- and by buying used cars, it can be purchased for less than $8,000 or so for a 2 to 3-year-old model. The Echo's also available in both two-door coupe and four-door sedan body styles -- and its centrally mounted instrument cluster is a guaranteed conversation starter.
* 2002-2003 Ford Focus (27-36 mpg) -- Let depreciation work for you! The Focus is an excellent little car but has suffered along with America's No. 2 automaker. But that doesn't mean it's not fun to drive (it is) or a good choice for an economical runabout. It's available as a coupe sedan or hatchback wagon -- and prices for '02-'03 examples run from around $6,500-$7,500 -- vs. almost twice that ($13,450) for an '06 model. Same basic car -- just a lot less expensive!
* 2002-2003 VW New Beetle TDI (42-49 mpg) -- Buying used cars that are diesel-powered is an even better bet because with decent treatment, a diesel engine will last for 200,000-plus miles. That means a 2 to 3-year-old New Beetle diesel with 40,000 miles on the clock is barely broken in -- and should give you many years of trouble-free service. A new New Beetle TDI starts at $18,390, but you could snap up an '03 for around $15K; an '02 for even less.
* 2002-2003 Kia Rio (26-33 mpg) -- The Rio is an "affordable Hyundai" with the same incredible 10-year powertrain warranty, so even if you're buying used cars you're still covered (and will be, for several years to come). Inexpensive when brand-new (starting MSRP for an '06 Rio is just $10,770), an '03 or '02 can be yours for not much more than the cost of a big screen TV -- about $5K for an '03; maybe $4K or so for an '02. Send your best regards to OPEC -- and your money someplace else!
III. Used Crossovers/Sporty Cars
* 2003 Pontiac Vibe (29-36 mpg) -- Built by Toyota, sold through Pontiac, the Vibe combines sporty American styling with Japanese reliability in a versatile, high-efficiency package. You can save by buying used cars that are as easy on the wallet as they are on gas -- about $12-$13K for an '03 model (vs. $16-$20K-plus for a new one).
(Editor's note: The Toyota Matrix is the same basic car.)
* 2002-2003 BMW Mini Cooper (28-37 mpg) -- Who says fuel-efficient cars have to suck? The snarky, retro-styled Mini Cooper is based on the BMW 3-Series and so shares that car's outstanding handling/driving characteristics -- while tickling 40 mpg on the highway. First-year (2002) Minis are currently going for around $13-$16K (for the supercharged "S" versions) while a new one will set you back $21,950. . A surprisingly fuel-efficient option when buying used cars.
* 2004 Scion xB (31-34 mpg) -- Toyota's youth-oriented spinoff has become just as popular with drivers of all ages, who love the pugnacious bulldog looks of the xB "paddy wagon" as much as they appreciate its surprisingly spacious interior. Fuel economy that's solidly in the 30s (city or highway) is just a nice side bennie that comes along for the ride. Two-year-old xBs are in the $11-12K range right now -- a nice discount over the '06 MSRP of $14,030.
IV. Used Luxury
* 2005 Mercedes-Benz E320 CDI (27-37 mpg) -- This large luxury sedan with all the bells and whistles is as economical to drive as a Honda Civic in terms of gas mileage -- but a lot more prestigious! It's a steal, too -- at least compared with a brand-new one. Current used-car pricing guides peg the retail range of an '05 E320 CDI at around $40-$42K -- vs. the $51,050 Mercedes wants for a new one. And remember: Different standards apply when buying used cars that are diesel-powered cars. They can be expected to last for 10-15 years and 200,000-plus miles with proper care -- so a 1- to 2-year-old example is just a baby and hardly even broken in yet.