There are two car-buying options: new or used. As the cost of a new car continues to rise, many car buyers are opting for quality used cars. Car manufacturers are fighting back with incentives including low interest payment plans, rebates and other means of attracting new car buyers. The Internet, meanwhile, has made it much easier than ever to locate new car incentives and used car savings. Either way, the choice typically comes down to:

Why you are buying the car: Often, a second or third car, perhaps one for your son or daughter, will be a used car.

How much you can afford: Used cars cost significantly less than new cars (even with rebates). There are greater risks involved, however.

Whether a car is a status symbol: For some people a car is a sign of stature, while for others it is simply a means of getting around.

Typically, if you can put some money down on a new car without dipping into your investments or putting a dent in your budget and can pay off the car in three or four years with monthly payments, then a new car is a possibility. Of course, you have to consider your insurance payments and the regular costs of maintaining a car.