Next to buying a home or funding your children's education, buying a car is the most expensive purchase you'll make. And car-related expenses, such as gas, maintenance and insurance, can take a big bite out of your wallet.

The Starting Point
Shopping for a car loan should begin with a calculation of your overall income and budget. The average finance payment on a car is about 13-15% of your monthly income. Take into account the cost of gas, insurance, licensing fees and other costs to get a picture of what type of car you can afford. Remember, as the cost of your car rises, your costs of gas, insurance tend to increase with it.

You should decide on a year, make and model. Then, find out what options and features are available. Make a list of your desired options in the order of importance, it always helps when trying to negotiate. For detailed information on new and used cars, including reviews, options, and specifications,
Tip: Always negotiate the price before you reveal that you are thinking about dealer financing. If they know ahead of time that you plan to finance, they will frequently try to confuse the issue by giving you a lower rate on a higher price or a lower price at a higher finance rate.
If you do decide to finance through the car dealer, you can negotiate the interest rate. Dealerships usually have several loan sources, including local banks and the manufacturer's credit company. Each source sets their rates to the dealer.
It is important to investigate other sources for an auto loan (such as your bank or credit union) before you sign on the dotted line. Investigate your financing options and find out from banks or credit unions if they have any special deals right now. Use a Car Loan Worksheet to compare lenders.
So many car loan choices, so much to learn. Be sure to consider your financing carefully.
Do your loan shopping before closing the deal on your new vehicle-chances are you'll be better informed and save money, too.

Be prepared to reveal detailed financial information when filling out a loan application. Options abound for getting financing for that new or used car or truck. New vehicle buyers-facing an average price of more than $700,000 today for a car, truck or van-average new-vehicle loans of more than $600,000. Buyers of used vehicles average nearly $200,000 on their purchases and often need financing help, too. So it's important to weigh all the financing choices available. Actually, you should consider the purchase of a vehicle-new or used-as a two-step process. One involves settling on a vehicle you want at a price you want. The other involves researching the available car loans and finding one that fits your needs. Be aware that the process of shopping for financing may take as much time and research as, or more than, the actual vehicle purchase.