Within LFS in car menu you can generate template and start with that.
Then you can work with any tool you like. The skin name start should be the same as LFS name.
I do most of my skins with inkscape. I set a 2048*2048 workspace work with that and export directly into lfs\data\skins . At the same time I have LFS running car viewer and hit reload everytime I overwrite the skin. It is the fastest way I have found to quickly see my changes.
I sometimes use Gimp also but mainly for finish like adding shadows...
Other than that it is a huge open question. Go start and try for yourself!