Granada has a population of about 250 000 people and is not a very big city. When you are actually in Granada you don't need a car. The only point of having a car is to go on excursions, such as visiting the Alpujarras mountains or going to the beach.
Granada has become increasingly pedestrainised over the last few years and access to the centre of Granada is very restricted. The only real option is to park in an underground car park.
The most central car park is San Agustín just off the Gran Via. At the time of writing (21st November 2007) the price is a staggering 32 euros per 24 hours.
For this reason it is much better to use one of the cheaper car parks and get a taxi into the centre.
The best one is Severo Ochoa becuase the price is 32 euros per week and it is easilly accessible from the ring road (circumvalación)
When choosing accomodation in Granada it would be a mistake to choose a hotel because it has parking. Most of the best hotels don't have their own parking because the centre of Granada was designed before cars existed.