Okay, you financing gurus...here's a quick question. How can I get a lower financing rate...by putting down $20k and taking out a smaller loan over, say, 5 years; or putting down the bare minimum and taking out a bigger loan for the same term? In the second scenario, I would then immediately put the $20k in. I haven't ever bought a car before, so I'm not sure which is the better way to go. I figure that if I take out a smaller loan, they may try to make some of the money back by increasing the rate; so if I took out a larger loan, they might drop the rate knowing that they make more money since the percentage is part of a larger number.

 

FIrst of all, I would not recommend putting the $20K in at all, especially with today's interest rates. Cash is more powerful in your hands than in the banks. Leverage their money to buy your car and use yours for investment/growth purposes. You can always draw upon the $20k later to make payments if needed.

As to what will give you a better rate, this is usually a factor of duration rather than amount. Shorter duration will allow for a lower rate. I would be surprised if the additional $20k will result in a lower rate. If the bank won't lend you the full amount, offer to let take a security interest in the $20k which stays in a bank account you open with them. As the loan is reduced, the amount that you must keep in this account should also decline.