Consumer uncertainty is the hallmark of this recession. People just aren't buying new cars, a fact born out by the February 2009 sales figures: Toyota, down 39.8%; General Motors 53.1%; Ford 49.5%; Chrysler 44%; Honda 38%; and Nissan 37.1%. Large dealerships, like AutoNation are cutting their orders for new cars by as much as 60% to avoid unsold inventory just sitting on the lots and automakers will slash their production levels by as much as 41% in coming months.

These declines come in the face of some of the most aggressive incentive campaigns in the history of car sales. Chrysler's buyer inducements for the first two months of 2009 averaged $5,566 per vehicle and they still couldn't close the deals. It would be logical to assume that Americans are turning to used car purchases to answer their transportation needs, but that's no longer the easy answer to more affordable transportation. In a normal market, about 60 percent of new car sales generate a trade-in, a process that in turn supplies a new unit for the used car lot. The equation is pretty simple. No new car purchases, no "new" used cars -- and the prices for those previously owned vehicles that are on the lots are going up. Essentially, the consumer is caught in something of a double bind.

The best advice in the new vs. used cars debate is to aggressively research your options according to your own economic circumstances. Some new car incentives may actually be a better option than going for a lower-priced previously owned vehicle. Hyundai, for instance, is offering an enhanced incentive plan through April 30, Hyundai Assurance Plus. Buy or lease a Hyundai, lose your job, and they will pay your loan or lease for up to 90 days while you look for a new job. And the real lure? You don't have to pay back the assistance payments. No used car dealer is going to do that for you and you get a brand new car with all the warranties and insurance benefits that apply.

On the flip side of the coin, however, after a vehicle is five years or older, most insurance companies will offer a worthwhile premium reduction (something that happens again at ten years of age.) Generally premium rates are calculated by a vehicle's value, the costs for repairs and replacements, overall security, and performance. A well-maintained older car driven by someone with a clean record can be much less expensive to insure monthly, an attractive option for many budget conscious Americans in the current economic climate.

There is no one answer in the used vs. new debate at this time because the economic factors shift daily. Your best course of action is to research all your options and consider the long-term expenses according to what you can afford monthly in terms of both car payments and insurance premiums.