You are in the market for a car since that old clunker of yours is in such bad shape that a flat tire would consider the car totaled. The problem is that most people in this situation approach the process backwards. In other words, they determine the car they want and then look at their payments, and the final step is to secure the used car loan.
This is totally backwards and is not going to save you much money. A car is almost a necessary expense these days, but there is little sense in spending more than you need to, and you can save a ton of money if you shop for your used car loan first and THEN determine the car that you want to buy .
I am going to assume that you have already decided that a used car, usually a late model, is going to meet your needs much better than a brand new car right off the showroom floor. You can generally find good used late model cars at a reasonable price, sometimes even with some warranty left on it. You also realize that a new car depreciates several thousand dollars as soon as you sign the paperwork and drive it off the dealership's lot, which is a prospect that does not appeal to you at all.
Before you even determine what type of car you want to buy, you first need to sit down with your budget and realistically find out how much used car you can afford. I am absolutely serious about this step, since that figure will not change by even a penny, irrespective of the model, type, year, mileage or any other aspect of the used car you want to buy. You need to realistically find out how much you can afford and how much you are willing to sacrifice for your used car loan without stretching your budget to the breaking point. After this step is done, and not until, you can start shopping for cars that fall into the price range that you have determined, and do not even consider cars that are "close" or "just above" your price range, because you will inevitably find cars in that category as you are shopping around.
To keep your car payments as low as possible, also determine how much money you can put as a down payment on the car. Is it just the minimum that the dealer or lender needs, or if possible, can you put more down without breaking the budget?
Before you sign on the dotted line, you need to find out where you can get your best deal on a used car loan. In fact, some say that this step should occur even before you start the actual shopping process for the car. The reason is because you have decided how much your budget will allow for a car payment, but depending on where you get your financing and what the interest rate is, that monthly figure can vary significantly.
Like your car shopping, you need to shop around to find your best used car loan program. Compare what the dealership offers with what your local bank or credit union can offer. But you are not done yet – you need to do yourself a favor and compare those with the used car loan quote you can get from an online lender. Many times (but not always) these quotes are quite aggressive and can often beat the pants off the best deal your bank can offer.
With your used car loan financing established, you are in an even better position to negotiate with the dealer. You can be pre-approved for a ceiling figure without even knowing what car you are going to buy, which gives you great leverage.