Today, it’s official. The US is in recession and this “thing” called the credit crunch is biting us. It’s a scary time. So what does it all mean? Well, like all situations, there’s good news and bad news. The good news is there’s still money out there to borrow. If you use a site like this, you will find there’s still money looking for borrowers. The bad news is loan companies are only lending to the people with the best credit scores. Even the top-rated borrower is thought a risk for a more substantial cash loan unless there’s collateral. Worse, if the companies offer loans to people with lower scores, they are asking for cash deposits on the property or goods, and charging higher rates of interest. This puts a lot more pressure on people to manage their credit scores and ensure they remain as high as possible. Now back to the question: even though you can borrow, should you?

There’s a simple rule about keeping your credit score high. Use the credit available or watch your score fall. The way the score is calculated will penalize you if you don’t use your credit cards and take out loans. So you have no choice. You should borrow. Running money through your cards for routine household bills is good. But don’t use your cards for big ticket items unless you have no choice. Always try for a separate loan where the interest rates are usually lower. Then think carefully about what you’re buying. For example, the biggest purchase most people make is a vehicle, but it’s the item that’s going to lose its value the fastest. Buy a new car and it will lose two-thirds of its value in the first four years.

So never buy a new car unless you can afford the loss. More importantly, don’t be tempted by car loans offered through the dealerships. Even the zero-percent deals are expensive when you look at the profit margin built into the retail price of the car itself. Unless you’re made of money, stick with used cars with two or three years depreciation already paid by the first owners. Then, make sure you get a free-standing auto loan. You want to be a cash buyer in the dealership. That way, you get the best discount on the price. Using your credit wisely during a recession is the way to keep your credit score high.

Take Florida as a case in point. It requires local drivers to carry two policies, both in the sum of $10,000, for personal injuries and damage to property. Have you seen how fast the cost of medical treatment has been rising? Even everyday drugs are expensive. But the moment you set foot inside a hospital, the bill starts escalating faster than a Hummer burns up gas. And what about the cost of repairs in a body shop? How much will $10,000 buy if two other vehicles are involved in the same traffic accident? Now let’s go to Maine. Here the minimum is to carry $50,000 for one person injured. If two or more are injured, they share $100,000 to (hopefully) cover their medical expenses. The minimum for property damage is $25,000. These are slightly more realistic figures but, when you add in all the possible claims for consequential and incidental losses, both sets of numbers are inadequate.

If you were to ask an agent for one of the auto insurance companies, he or she would tell you that you can’t have too much insurance. Since agents earn a commission on the sale of policies, this is not a surprising opinion. So it comes down to a simple rule. If you have a choice, you don’t need to top up your minimum liability policy if you don’t have assets to protect. Let’s say you live in a rental apartment with few items of furniture and no savings in the bank. If you get involved in a traffic accident, there’s no point in chasing you for money. But should you own an expensive house, have a portfolio of investments and enjoy a good lifestyle, you’re worth suing. It’s therefore in your interests to buy additional collision, comprehensive and uninsured/underinsured cover. As a final thought, you may not have a choice because lenders of auto loans always insist on full insurance.

So, today, the Treasury Department announced moves to make borrowing easier to buy new and used vehicles. There’s just one problem. No matter how much money the Fed and Treasury pump into the system, no matter how generous the interest terms offered on the loans, if you buyers don’t have the confidence to go back into the showrooms, the economy seizes up. All those fancy economists up in Washington can talk about “freeing up the credit market” and “easing liquidity”, but it all comes to nothing if you don’t trust. . . “Trust”? Well, if you were thinking about a new car, who wants to trust the Big Three not go bust. That would make the warranty look a bit sick and what happens to spare parts? Guess that’s why new car sales are now running below one million a month. The market has not been this slow since 1992.

How many people do you know with the cash to buy a car? Almost everyone borrows from the banks, licensed lending companies, credit unions and the car makers who offer their own finance. But here comes the big irony. Because of the Fed, the credit crunch is less tight today than it was yesterday. More people could get finance to buy a vehicle. But there’s still that fear. What will happen if I lose my job? So even though it’s all better news for borrowers, there’s not going to be a big rush into the showrooms until your confidence as consumers picks up again.

Except there’s never been a better time to buy a car. Prices have been dropping fast, particularly in the used car market. If you used this site and picked up a car loan, walking round the dealerships with the cash that represents gets you a really big discount. Note you need a free-standing auto loan to draw down when you’ve found a car. Or do it the other way round. Find a car, negotiate a price and then look for a loan at the best interest rate. Believe me, the dealer will hold the car for you.

So what’s driving this hybrid technology? The main reason is fuel economy. Gas prices have been rising fast with the $4 gallon reached and passed. Although some prefer to play around with biofuels to keep conventional engines running on greener fuel, the better strategy looks to use less fuel. It’s now not uncommon for hybrid vehicles to achieve 50 mpg - a big improvement on the SUVs and Hummers.

The retail prices have been quite high as the first of these new cars rolled out on to the public roads so, to encourage the switch to this more eco-friendly technology, there have been various federal and state tax incentives. Some states have been giving priority in the use of parking spaces or reductions in tolls. All these add up to big savings, which get even bigger when you look at the auto insurance industry. Many of the companies offering auto insurance have been offering a discount of up to 10% for those using the new technology. Using a site like this is the best way of shopping around to find out which company is offering the best rates.

This is not a corporate policy to combat global warming. It reflects the reality that those who buy hybrid cars are more thoughtful and careful, buying a vehicle that is slightly less powerful than the conventional car, and one that will probably not be driven quite as many miles in a year as the conventional car. People who drive less powerful cars more slowly have fewer accidents and so justify lower premiums. It’s sad that Detroit chose to stay with the gas-guzzler as the main product line.

The big three U.S. car producers are facing an uncertain future as the hybrids grow more popular. If they survive the economic downturn, hopefully they can retool and compete in delivering this new technology. Until then, imported cars save money both at the gas pump and in reduced auto insurance premiums. They are a good buy.