What can you afford? Be painfully honest with yourself. How much of your monthly budget can be devoted to vehicle payments, insurance, maintenance and repairs? Using Bankrate.com's Auto loan calculator, you can determine your monthly payments based on the amount financed and the current average used-car loan interest rate. At this early stage, add another $200 per month for maintenance, repairs and insurance.

Next, get prequalified for a loan. This will tell you exactly how much money you have to work with. It also simplifies your strategy in the negotiating phase.

Click here for today's interest rates and lenders on new and used cars in your area.

Local credit unions and small banks also are good sources for financing a used vehicle.

If you have a particular vehicle in mind, research the current value of that model through various online sources such as Edmunds.com, KBB.com, NADAguides.com and AutoTrader.com. Edmunds even features a "True Cost to Own" for most cars over the next five years.