After a home, the next-largest purchase you'll make is probably a car. Unlike homes that generally appreciate in value, cars depreciate, or lose value rapidly. For most of us, buying a car is an unavoidable cost of living. One of the most frivolous purchases you can make is a new car, or even more costly, a new luxury car.

According to Consumer Reports, a car's value drops by one-third to one-half the first two or three years it's on the road. Buying a used car can save you thousands — thousands that could be used to pay down other debt or invested in college or a retirement savings plan.

As with buying a home, shop for the lowest interest rates, and nail down a preapproved loan for an amount you can realistically afford. That way the seller will know that you are serious and that you can pay for the car, which should help you negotiate the best price. Verify the car's value by checking the Kelly Blue Book or by looking up the value through Edmunds.com.

Avoiding Lemons

Most certified car dealers thoroughly check used cars for mechanical issues and offer a guarantee for a certain number of miles and years from the date of your purchase. You may pay more, but the peace of mind can be worth it. Consumer Reports publishes an annual Used Car Buyer's Guide that provides substantial information on the reliability of different models and model years.

If you buy from a private party, hire a qualified mechanic to inspect the car before you buy it. Also, for about $20, Carfax.com, Autocheck.com, or Cardetective.com will reveal whether an owner has tampered with the odometer or if an insurance company totaled it after a major accident or natural disaster. All you need is the car's 17-digit vehicle identification number, or VIN, which can be found on the left side of the dashboard or on the car's frame inside the driver's door.

Buying Versus Leasing

Car leasing has become a huge industry, and you will see tempting ads touting low down payments and manageable monthly rates, but car leasing can be far more expensive than it appears. At the start of a lease, you pay a fixed amount, usually a few thousand dollars, and then monthly payments that are 30 to 40 percent less than what you would pay if you bought the car outright using a loan. At the end of the term of your lease — usually three to five years — you either buy the car or return it. The extra costs of a lease are often clouded by those attractive low monthly payments.

You'll also pay an “acquisition fee” of $500 to $600 and high fees if you terminate the lease early. If you don't buy the car at the end of the lease, you may be charged a “disposition fee.” Leasers also charge extra for “excessive”wear on the car (using parameters they arbitrarily determine, but will disclose), as well as additional charges for mileage over 12,000 miles driven per year. You'll also pay extra if you modified the car from its original condition — even if the modification added value to the car.

In spite of this cautionary advice, if you decide to lease, don't allow low monthly payments to cloud your thinking. Negotiate the purchase price, the interest rate, and the cost of breaking your lease. Also, you'll want “gap coverage”to cover the difference between what your insurance company will pay for “cash value” of the car and what you will owe on the lease if your car is totaled or stolen, as what you owe could be several thousand more than the “cash value.”

JD Power and Associates, a market research firm, found that 64 percent of people who bought luxury cars financed their purchase with a lease, compared to only 21 percent of people who bought non-luxury models. Far too many people lease a car when they covet it but can't afford to buy it outright. First of all, a money-savvy woman will do better by buying a used car that she can afford — and saving her money. If she makes smart investments, one day she will be able to buy her dream car with cash.