Tips on Buying Cars: trade in, toyota corolla, value of my car

Question
i have a 2001 ford focus, that i bought in Nov 2004, the tag price was $10,000.00, and they give me a 16.00% interest because of my poor credit,im paying $300.00 a month, the sales person told me i could trade-in me car after 6 months from the purchase. its been more than 2 years and i still owe $7000.00 on that car, and its been at the shop constently, right at this moment my car is broke from the engine, its been at the shop for a month, luckly my car is still under warranty, but the warranty is about to expire, my question is, if is a good idea to trade-in my car?,i look for the value of my car in the bluebook and is in between $3000.00 - $4000.00, im planning to trade it in for a Toyota RA4 2006.i have $2,500.00 to put down. im hoping to get a good deal and a better interest rate since i have never been late on my focus and my credit score its a litter better. i would appreciate if you can give me an advice on making this step, im really bad on negotiating, can you please give me advice on getting a good deal, how to get a better interest rate, and negotiate the price of the car and the value of my focus.                          thanks

                                     Ivan

Answer
This is a question that can have many answers... financially.. you should consider: Do you really need to take a substantial loss and go even more in debt for a different vehicle? what if it has problems too? if you take a loss on that as well you will be adding to just how far under you are... if you have the 2500 to put down... I say... from a financial perspective you best bet would be to sell the focus, take the loss, pay it off with your 2500 (or some of it).. and use your better credit to get a used car loan on a ~7-12,000 dollar honda civic/toyota corolla or similar.... super reliable cars, affordable, and it will have small payments... going 10,000 in debt with a reliable car that will last and hold value seems better than getting a new car and being 20? or close... thousand in debt... plus your payments will be smaller, the car will get good mileage, and if you pay it off early you may be able to sell it for enough to make a nice down payment on another car if you like... It would take a long time and you will always probably owe more than the rav4 is  worth (which is bad if you need to sell it for some reason)... from a vehicular stand point.. the RAV4 is a great car.. I say car because the rav4 is not an SUV or a truck.. its a SUC (sport utility car)... and if you choose to go this route you really need to think about your wants vs. needs - it has the off-road ability of a car, and the storage space of a small hatchback or wagon... but because they call it an SUV you will pay SUV pricing.. not car pricing... I say about 90% of suv's bought these days are bought because some one wants one.. not needs.. if everyone bought what they needed there would be a lot more cars and minivans on the road and less SUV's... buying what you want is fine, if you can afford it.. but if money is tight, or you just want to stay ahead (maybe afford more of those wants in other parts of your life.. tv's, vacations, etc..) of the financial game.. sometimes what you need is more than enough...
Now regarding your focus... this will depend if you trade in or sell.. I almost always recommend selling - you will get more for it.. if you sell.. use blue book to give you an idea of what its worth, and use your own judgment.... and list it for sale for about 500-1000 dollars more than that... that will give people room to negotiate down to the price you want.... if you trade in, you really dont get much say, you can argue that its worth more, maybe give some higher figures, thats about it... not much room to work...  
For interest rates, shop around.. local banks, dealers, credit unions... credit unions usually seem to be lowest... dealers are sometimes the highest.. sometimes not... it all depends on your credit score and the lending institution.. the best way to get good rates is to shop around...

For buying a new car or used car... any type... (oh and on a tangent, if a warranty is important to you, and you decide to try a civic or similar, the certified used cars from the dealerships are usually really good... also with one of those cars.. theres not much to worry about in the first place) .. anyways.. for buying a new/used car... you need to have done research & lots of it.. know what the cars are going for locally (autotrader.com, cars.com, oodle.com), know what they are worth (kbb.com, nada.com), and make sure you go to buy that car with a set maximum price you will pay for that particular vehicle.... (and if used.. make sure some one mechanically inclined checks it out, if its not at a dealership).  Dont be afraid to walk away if a dealership wont go down to your max. price... if you have done your research you should be able to offer a price much lower than your max and force the dealer to negotiate up from that price... Try to deal in OTD or out the door pricing.. that way you know you can afford to get the cars title/tag... and the tax is factored in as well...

I tried to cover all the basis.. but please ask again, I am sorry for my delayed response, I was busy during the holiday's, but I am more than happy to help.. If you find a car in particular your like, or just have some other question feel free to ask.. I want to see you do what is best for you personally and financially and I hope it all turns out well.  Thank you for writing.
-Robert