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The biggest question in the car buying process is whether to buy new or used.

The second biggest question is what make and model to purchase.

The third most important question is where to get your financing.

New or Used

The average new car costs more than double what the average used car does. (The Kelley Blue Book pegs the average new car price in 2005 at $26,100 and the average used car price at $13,000). It's not surprising, then, that used cars outsell new cars three-to-one.

New car loan rates are about the same as used car loan rates. The major difference between the two is the length of the loan. Most used car loans are for no more than 36 months whereas new car loans can be 60 or even 72 months long.

Remember to take depreciation into account. Depreciation is the difference between the Manufacturer's Suggested Retail Price when you bought the vehicle and what it's worth now. Some new cars lose as much as one-third of their value within a year. On most vehicles, depreciation settles down to about seven-to-ten percent per year after the first three years.

Which brings us to . . .

Make and Model

One way to slow depreciation is to buy a make and model with a prestigious nameplate. Models that depreciate faster than most include: Jeep Grand Cherokee, Ford Explorer, Ford Taurus and Lincoln Continental. Cars that hold their resale value longer include the more expensive makes like Lexus, Mercedes-Benz and BMW.

To learn more about which makes and models offer the best value in today's market, you can research several auto review sites online. You can also use the Internet to check everything from the performance ratings to the safety records of the vehicles you*re interested in.

Be sure to test drive any vehicle you are considering under varied road conditions. If the vehicle is used, ask to see all maintenance records and check its history on CarFax. And don*t forget to have your mechanic give it a thorough inspection. If you are buying new, try to pay as close to the factory invoice price as possible. You can look up factory invoice pricing online.

Car Financing

Many experts recommend getting your financing before you start car shopping. This puts you in a better bargaining position because the dealer knows money won*t be an issue. (They also won*t have the chance to run you through their finance department, which is a good thing for you!)

Of the 60 million new and used cars sold annually in the U.S., about 27.5 million are financed by subprime loans to buyers with less than perfect credit. If you have bad credit*a FICO score of 620 or lower*you will need one of these loans.

You will not qualify for the new car offers advertised on TV, like the *0 Down,* *O Interest* or *Low APR* deals. However, you can still get a good deal on a bad credit car loan from Internet lenders like https://www.autoloansinseconds.com. Their free online application process lets you know exactly how much you can borrow, and at what rate.

*Consumers should shop around for financing with the same vigor that they shop around for a car,* says Jack Gillis, public affairs director for the Consumer Federation of America. *One or two percent can erode all the money you negotiate in a good price.*