A New Car for a Lower Monthly Paymentand rising used-car prices is creating a money-saving "sweet spot" for car buyers. In some cases, owners of 1- to 3-year-old vehicles can trade in their used cars and finance new cars at lower monthly payments with no money out of pocket. Sometimes, the sweet spot can save as much as $93 a month and let the buyer enjoy all the benefits of a new car with cutting-edge technology and better safety features.

Another factor creating this sweet spot is that dealers are searching for vehicles they can buy for their certified pre-owned (CPO) programs. Used-car inventories are tight now, and this is driving up prices at auctions and trade-in prices for consumers.

"It's hard to believe, but for the same money you're paying now, you could have a new car with lower payments," said Ivan Drury, Edmunds.com's supervisor of pricing and industry analysis. "This is particularly attractive since many of the mainstream vehicles have been redesigned in the past year or two."

Here's an example of how to use this car-buying sweet spot. Say you bought a new car three years ago for $20,000 and financed it at the then-current rate of 7.4 percent. Your payments on a five-year loan would be $400 per month and you would still owe about $7,000. If you traded in that car, you would get about $12,000 and, after paying off the current loan, you would have $5,000, which you can use for a down payment. You could then buy a new car for the current cost of $23,000, minus the $5,000 down payment and finance $18,000 at 0.9 percent — a not-uncommon interest rate these days. Your monthly payment for the new car would be $307. (Note: Taxes and registry fees are not included in this calculation.)

The beauty of this arrangement is that you could make this transaction without any cash out of pocket. But it is important to understand that with your 3-year-old car, you would be just two years away from paying off the loan. At that point you would have no payment at all, which is a tremendous relief for many people. If you negotiate a "sweet spot" deal, it's important to remember that even though you will have a new car at a lower price, you are still facing five years of payments.