Refinancing makes the most sense and yields the biggest savings when a simple-interest loan with no prepayment penalties is refinanced into a simple-interest loan with a lower rate. Bankrate.com’s article on auto refinancing will show you how to land a good deal.

Rethink your spending habits
Refinancing is also a good option for car owners who are strapped for cash and have several years of car payments ahead of them. Before you refinance, take a close look at your monthly budget. You may be able to make that car payment more manageable by cutting back on discretionary spending.

Bankrate.com can help you scrutinize and trim your monthly budget and find 10 quick-and-easy ways to save $50 a month.

Be sure to check in with Bankrate’s Frugal U. section for additional savings strategies and tips from readers.

For more advice on surviving a bad auto financing decision, including how to negotiate a new payment plan with a lender and how to sell a car with a lien on it, check out this article from Bankrate.com.

Make things simple for yourself with your next car purchase by taking a long, hard look at your finances before you start shopping for a car.

The aim is to determine how much car you can realistically afford and stick to that figure no matter how tempting a more expensive vehicle may be.

Not sure how much car you can afford? These calculators from Bankrate.com can help you decide. The down payment calculator lets you see just how much a good-sized down payment helps to push down your monthly auto payments.

And this calculator lets you see just how much more interest you’ll be socked with when you sign on for a super-long auto loan.

Not sure what kind of interest rate you qualify for? Find out. Shop around for financing at banks, credit unions and independent financing companies. This Bankrate.com search engine will help you compare car-loan rates in your area.

It’s a good idea to have an auto loan in place before you set foot on an auto lot. That way if a dealer wants your financing business, he’s going to have to beat the best rate you’ve found on your own. And he won’t be able to talk you into signing on for a loan with a higher interest rate than you deserve.

Once you know how much money you’re able to spend and what kind of financing you qualify for, you can concentrate on finding the best deal on an auto in your price range.

Compare prices, reliability studies and resale values. Much of the research can be done online by visiting sites such as NADAguides.com, Intellichoice, Autoweb.com, Edmund’s Automobile Buyers Guide, AutoSite, Autopedia and Kelley Blue Book.

Don’t overlook used cars. There are tons of late-model used cars available. Finding a previously owned dream car could save you thousands of dollars.

Promise yourself that you’re never, ever going to sign a financing deal before you’re good and ready. It doesn’t matter how many hours you’ve already spent on an auto lot or how excited you feel about a particular car. You won’t be talked into a hasty financing decision.

“Avoid the impulse purchase,” Holb says. “Go home and think about what you’re going to do.”

The last thing you want to do is spend another five or six years regretting an auto decision.

Long after new-car euphoria ends, the payments remain.

— Updated: Dec. 12, 2003