Between researching, test driving, comparing cars and visiting dealerships, the process of buying a car can be highly complicated -- and that's before you ever consider financing. In fact, securing a car loan can be one of the most challenging parts of the car-shopping process. Which bank should you go to? Who will offer the best rate? How much do you have to put down? To help you through the process, we've listed a few of our ideas about the best way to shop for financing when you're buying a car.

Shop Around

We can't stress this enough: Unless the interest rate you're getting is truly excellent, we strongly suggest that you shop around to get different quotes from different lenders. Yes, this might have a slight impact on your credit score, but it won't be more than a few points, and the potential savings from paying even a small percentage of lesser interest far outweighs any troubles that may be caused by loan shopping.

The reason you should shop around -- especially if you've only had a quote from the dealer -- is that everyone assesses risk differently. One bank might consider you a medium- or high-risk client and offer you a high rate, while another might feel differently and give you a lower rate. If you go directly to a bank for a quote, you bypass the dealership, which often takes a cut of the interest or adds a point to the rate to increase its profits.

Where Do You Look?

A major reason that many people avoid shopping around for a loan is that they're not sure where to look. Another reason is that the dealer is simply the most convenient place to find financing.

To us, shopping for a loan is a crucial part of the car-buying process. There are many websites that can help by showing you the average car-loan interest rates in your area or even by putting out your information to several banks so you can see what offers you get. Even if you don't take one of these offers, this sort of loan shopping can be a good place to start the process.

You can also try a local credit union or bank. Your own bank, for instance, may offer you a rate that beats your dealership's, which is something many shoppers don't consider until after they've signed the papers. Going to a bank or credit union to see exactly what rates you'll get and what loan you'll qualify for is a good move before trying your luck at the dealership.

Check Total Cost and Interest Rate

Another thing to consider throughout the financing process: Your monthly payment might not be as important as you think. In fact, we think two other factors are more important: the total cost of the loan and the interest rate.

To explain, say you're buying a car and you get two loan offers: one for 12 percent interest over 60 months and one for 6 percent interest over 36 months. In this case, the 12 percent loan is likely to have lower payments since it's spread out over a long period of time, but that's misleading: The 6 percent loan is far less expensive because it requires less interest to be paid. The only reason the 12 percent loan seems cheaper is that it's spread out over a longer time period.

As a result, we advise you not to sign anything until you've verified the total cost of the loan and the interest rate. We also strongly suggest that you factor in these items when searching for a loan. You should ultimately choose the loan with the lowest cost and best interest rate that you can afford.

Stay Smart

In the end, buying a car isn't always easy -- and neither is searching for a loan. We hope our suggestions can help. Remember to shop around for financing rather than take the first offer that comes your way. Use the Internet to get offers, or try your local bank. And be sure to keep an eye on the interest rate and the total cost of the loan, not just the monthly payment. If you follow our advice, the loan process will go as smoothly as possible.

author photo

Doug DeMuro has a wide range of automotive industry experience, from work at a Ferrari dealership to a manager for Porsche North America. A lifelong car enthusiast, Doug's eclectic vehicle purchases include a Porsche 911 Turbo, an E63 AMG wagon, an old Range Rover and a Mercedes Benz G-wagen.

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