Start with a painting template of at least 1024 x 1024, or 2048 x 2048. Leave the 1024 x 1024 alone, but if the 2048 x 2048 is too big, then using your paint program re-size it to 1024 x 1024 BEFORE painting the car. Also, when you're finished painting, don't for get to turn your mask off before flattening your image.
Tbay is exactly right. Anything smaller will be blurry and blocky.
Hope this helps you out.