conversation: User (cjwarren): "Hello PF! I am currently in the market for purchasing a car. I have done a lot of shopping around and found the car I wanted at a price that no other dealers can beat. \n\nCurrently, I have a quote for the car for 16,500, which does not include taxes, dealer fees, or registration fees. With all the taxes and fees, the car will come out to be approximately 20k. I have also been offered 0.9% APR on the car for up to 48 month. I have the ability to pay for the car in full, however I was wondering what is the best option would be in my case.\n\nShould I:\n\n1. Pay off the car in full immediately. Do not take advantage of 0.9% financing\n\n2. Make a sizable down payment on the car and pay off the rest of the car with the financing offered. With this option, do I take a 12 mo. finance or longer?\n\n3. Make a small down payment on the car and pay off the rest with financing. With this option, do I take a 12 mo. finance or longer?\n\nMy thought is that I make a sizable down payment of about 8-10k and take advantage of the financing program. Whatever financing length I choose, I would pay off the car in a shorter amount of time. Would this increase my credit score? Would it be wise to invest the money I did use on down payment?\n\nAny advice would be great!"
  Self: "With a reasonable interest rate like that, I think making a small down payment would be best. No reason not to take out a cheap loan, assuming you'll put the money you save to work in the market. In my opinion, just put enough of a down payment so you don't have to purchase GAP insurance, and not a cent more.\n\nAnd as far as length of financing, was there a reason you were thinking 12 months? That's pretty short. With an interest rate that generous, I think financing it for up to 3 years is pretty reasonable. Not that much interest will accumulate regardless."
  User (cjwarren): "Thanks for the reply. The only reason that I was thinking of a short term like 12 months, is I was unsure of whether it was better for credit purposes to have a short term or long term. I just assumed that shorter was better. To avoid GAP insurance, what percentage of the car has to be payed in a down payment?\n\nEdit: I found that it is 20% down required to avoid GAP insurance."
  Self: "&gt; Thanks for the reply. The only reason that I was thinking of a short term like 12 months, is I was unsure of whether it was better for credit purposes to have a short term or long term. I just assumed that shorter was better. \n\nShorter is better in terms of having lower utilization in your installment loans. Longer is better in terms of having a lengthier history of on-time payments.\n\nHonestly the difference to your credit score will be pretty minimal as long as you always make your payments on-time.\n"
  