How much can you afford to pay for a new car? Should you finance at the dealer or get a car loan from a local bank or credit union. Financing a new car purchase requires some research if you want to get the best rates and lower your monthly payments. Before venturing out to the car dealerships uninformed, let's take a look at what you will need to know about the process.

First of all, about 80% of all new car purchases are financed. So unless you plan on paying cash for your new car you will have to apply for auto financing. Typically financing your car is a four-step process:

1. Determine your financial situation
2. Decide which car you want
3. Do your homework
4. Go shopping

This is the first and most important step in the car buying process. You must know how much you can spend before you can determine what you can afford. You don't want to get stuck making a bloated car payment that will leave you eating 'Ugali' and 'Sukumawiki' for three years. First of all, you need to have a monthly budget. This is very easy to calculate. Add up all of your fixed monthly expenses, such as your rent/mortgage, phone bill, etc. Subtract that from your net income. Then subtract your estimated extraneous expenses, such as food, gas, entertainment, whatever. The result should be an amount of money you have to play with.

From that, you need to remember that buying a car involves more than a down payment and monthly payments. In your budget you will need to include licensing, registration and other hidden costs, as well as monthly insurance costs, gas and maintenance. Once you have all of this worked out, you should have a ballpark figure of the budgeted amount you can use for car payments. A good rule of thumb is roughly 20 percent of your net income can be used for a car payment. Once you determine that figure, stay with it.

This is really about personal choice, but a good criteria to go by is to look at what your needs are. Do you have a family? There are plenty of affordable, safe and reliable minivans and station wagons on the market. Single and commute, or do a lot of city driving? The compact segment has a wide range of models to choose from that boast handling and superior gas mileage. Do you use your vehicle for work-related tasks, such as hauling, delivery, etc? Check out the many light and heavy-duty pickup trucks and vans. Midlife crisis? There are several convertibles and sports cars that will make you feel young again.

Also consider your wants. Compact cars get really good gas mileage and are great if you want to save money on the increasing gas prices. Plan on taking road trips? Consider something that gets good mileage and has cargo space and lots of cup holders. Plan on going off-roading? The SUV is your best bet. Some even come with a first-aid kit!

Once you've narrowed your choices down to a couple, it's time to do some car research.

Here's where you will need to spend some time sorting through some details, but it will be worth the effort in the end. After all, the more you know about what you're buying, about whom you're buying from, and about the buying process itself, the more money you will end up saving.

There are plenty of places for you to do your car research. Check out the Internet and newspapers, contact car dealerships, credit unions and local banks to see what kind of deal you can get. Knowing what a car dealer's competition is offering can only help you out in the negotiating process.

• Numerous Lending Resources - A large number of lenders signify that our dealers can offer buyers a range of lending options. Many of the top finance companies in the country only offer funds through local car dealership partners.
• Convenience - Purchasers can finance and buy a car at the same time.
• Less Stringent Underwriting Requirements than Direct Lenders - Our dealership finance managers are specially trained to present your case to the lender in the most favorable terms to guarantee each application has the best possibility of approval.
• Competitive Interest Rates - Periodically, our car dealers offer low interest rate incentives from the manufacturer to buyers that local lenders and banks cannot. Even with a sub prime history.
• For example, many recent applicants have received interest rates as low as 0%, 1.0%, 2.9%, or 3.9%. It's hard to match those rates no matter how hard you shop.
• Guaranteed Online Application Acceptance
• Complete the online application today and you could be driving your car tomorrow. We offer the most painless car loan for people with troubled payment histories. Funding and buying a premier new or used car with sub prime or terrible credit has never been easier. After you complete the online loan application, an educated finance manager from our local network of retailers will contact you with your approval information, as well as, an interest rate and down payment that you can afford.

Now that you have an understanding of what kind of rate you will be offered, you now want to go out car shopping. You already have an idea of what kind of car you want, how much you can spend and what kind of perks you can get. Also you have an idea as to what different car dealerships are offering. This is quite a bit of information for you to carry with you into the negotiating process. But again, the more you know, the better off you'll be. It's up to you to find all the helpful information for the car loan process.

Also remember that you are in control at all times. You have the right and ability to stand up and walk out of the office at any point and the dealer will lose the sale. Don't let a car dealer intimidate you. Be relaxed and comfortable you know all the information and you hold all the cards.