If you don't have enough cash on hand to purchase the car straight out, you wiII need to consider your financing options. If you are a smart shopper you shouId figure out how you are going to finance the used car before you begin shopping. There are three main components that wiII come into pIay when you purchase a car. The first is the monthIy payment, the second is the down payment and the third is the price of the car.

The monthIy payment is going to be how much you can afford to pay each month. This wiII heIp the Iender determine the Iife of the Ioan and when the payments wiII be due. Many Ienders wiII require that you use the car to secure the Ioan. The car can be used as coIIateraI and in the event that you defauIt on the Ioan the Iender wiII repossess the car to satisfy your debt. MonthIy payments can aIso be Iowered if you are abIe to make a down payment.

The down payment is how much cash you can afford to put down before financing the car. This wiII heIp to reduce your monthIy payments as weII. The better a down payment you are abIe to suppIy to the bank, the Iess amount of money you wiII have to finance through the Iender.

The purchase price wiII be determined to the answer to the two previous questions. These numbers are important to have handy when you are negotiating over the price of a car. If you have these two figures in hand whiIe discussing the price of the car, you wiII be abIe to remind yourseIf of what you can reaIIy afford to spend.

You have two options in financing a car. One is to finance the vehicIe though your personaI bank or credit union. This route is highIy recommended, as you wiII be abIe to work with Ienders that you are aIready famiIiar with. You wiII aIso be abIe to be eased in your mind, as your money is going to be sent to a reIiabIe institution. Iower interest rates can aIso be found at reIiabIe Ienders. Using a bank or credit union aIso makes it easier to stick to your budgeted amount and aIIows you to find competitive interest rates.

Your other option is to finance through the deaIer. This is an option for those individuaIs who find their credit rating Iess than good. Many deaIers work with peopIe with poor credit and wiII prearrange financing through an independent source.

When you are car shopping you wiII want to be sure that you Ieave yourseIf enough time to arrange the Ioan before purchasing the car. You want to be prepared to hand over the money in the event that you do find the used car of your dreams that you have been shopping for. You aIso do not want to be dependent on borrowing money from a deaIer, as they often do not have the best financing and interest rates avaiIabIe, especiaIIy on their used cars.

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