How to get the best price (and a great loan) on a new car

1. Know the type of car you want to buy beforehand: Set a sensible price range for the car you want to buy and stick with it. Your monthly car payments and related expenses should not exceed roughly 20% of your monthly net income. Car shopping is a lot easier when you already know which vehicle you want to purchase, plus a buyer with an objective goal in mind is a lot less likely to be swayed by persuasive sales techniques. Also, getting price quotes from competing dealers or sellers is always something you should do.

2. Target your shopping: If you want a hip fuel-sipping commuter, you may not get a great deal on popular cars like the MINI Cooper or new Honda Fit. You'll do better looking at the Toyota Yaris and Nissan Versa -- two good cars that are overshadowed by their competitors. Also, don't be afraid to go against the current trend: most shoppers are staying away from SUVs and trucks now, which means that you can finally get that bit diesel rig you’ve been eyeing to haul your fifth-wheel, or a slick Chevy Tahoe you and the family’s always wanted.

3. Look at the vehicle on a dealership’s inventory list: These cars are typically marked down because they've been sitting on the lot for a long time – dealers are willing to sell these cars at a good deal to facilitate a quick sale, since manufacturers charge dealers interest and other fees on unsold inventory.

4. Try shopping at large dealerships: They typically make profit off volume sales, whereas small dealerships focus more on buying low and selling high, or simply making a profit by selling high with plenty of marked-up extras.

5. Regarding preapproved credit: You should try to arrive at the dealership with approved auto financing in hand. Secure a no-obligation loan before visiting the dealer.

6. Buy a car at the end of the month: Sales staff are known to offer the largest discounts at the end of the month as they want to push their numbers to meet quota or receive a monthly bonus. With decent negotiation skills you have a good change at taking over control during a car's sale and avoiding the common games.

7. Stop by a dealership on a rainy day: Rainy days are a great time to buy simply because of the very low traffic. Salespeople are eager to make a quick sale on these days, no doubt. Note: this may not work if you live in, say, Seattle, where rain is common throughout most of the year.

8. Remember there’s no harm done by walking away: If the dealer will not cooperate and make a deal, simply walk away – it’s a salesperson’s worst nightmare as it makes them look bad in front of their sales manager if they lose a “committed” buyer, and will try their best to give you a good deal, sometimes at their commission’s expense.

Tips on how to get the best car loan rate:

While it may seem silly to part with your little hard-earned cash right now, economic downturns mean that now is one of the best times in years to get a great deal on a new car—if you are in the position to afford one. If you have some cash to spare on a monthly basis, have an income, and have good credit scores or a cosigner (don’t be afraid to invest some time in finding a person with good credit to cosign for you if credit is a problem area for you at present).

When you finance a new car you want to be sure your money is spent wisely over time. For one, online loan rates can be lower than what a dealership would give you if you simply walked in. Comparing various lender quotes online can be very helpful and save you a good deal of time. When applying for any auto loan you should clearly and honestly answer all questions regarding your financial situation and history (incorrectly stated facts will only come back later and bite you from behind when they run your credit history, which they will). Physically walking into your bank or credit union for a quote is also an option, and you will walk away with a preapproved loan you can present to the dealers. There’s no reason you shouldn’t  arrive at the dealership without a no-obligation quote/ loan preapproval,  either from an online or in-person consultation.

Having your own loan could save you significant money. For example, a 60-month $26,000 loan at 4.49 percent can save the consumer about $1,500 over the life of the loan, compared to a loan at 6.56 percent.

The price paid for borrowing via an auto loan is of course mostly found in the interest rate. Interest rate percentages and loan amounts are solely dependent on your credit history and the new car you choose to purchase. Those with excellent credit histories obviously receive the best advertised “prime” rates, but of course not everyone is in the high 700’s or 800 FICO score range, so those less fortunate always receive slightly higher rates.

Zero-percent interest rates can be found today, but not like in past years. Most people today won't even accept a loan with more than 7% total interest, but while the desperate with tarnished credit will be forced to pay as much as 20%. Many dealers often offer a choice between zero-percent financing or a rebate —  but not both. New car buyers may assume that the zero-percent loan will deliver the most savings, but sometimes it's better to take the cash rebate and apply it against the purchase price of the vehicle —  and then use your own (better) preapproved car loan to finance the vehicle.

Always negotiate the length of your loan, amount of the interest rate, terms and conditions, prepayment penalties, and due dates. A down payment is required by most auto loan lenders; however there are some who offer zero down signing. If you have a large up-front down payment (20% or more) you should automatically be entitled to a good rate. Of course, shorter loans typically have lower rates with higher monthly payments, while longer loans have higher interest rates and lower monthly payments.

If your application is rejected don't be ashamed. Rejected loan applications gives time to clean up your credit score, avoid accumulating additional debt, and as cynical as it sounds, help you save money by not buying, or buying cheaper. There are lenders out there willing to qualify even those with hardly any credit, but in the end you’ll have to pay.

Edward Pacheco, consumer advocate and auto enthusiast, shares his knowledge on the new cars pages of Automotive.com. Head there and try their free auto loan calculator for additional car-buying help.