What to do with $20K from a car trade-in?

We are currently revisiting the issued of getting a replacement car for our Toyota Prado. We have had it since 2001 and had traveled about 135,000 kilometers in it. For a 4WD, it has hardly reach middle age. What caused us to revisit it is the price of fuel and the maintenance cost of it. The car runs on diesel and it is currently approaching $1.50 per litre, plus the fuel economy on it is about 17litres per 100KM.

I had another chat with my HR manager about novated leasing and the following point was made.

The novated lease is only valid for the true value of the car, not the amount needed to change over the car.

In my situation, I will be looking to finance about $40K (value of the car) instead of $20K (change over cost of the cars). This will be OK if all you are considering is the out of pocket expenses at the time of purchase, but if you are looking at it over the term of the lease, it could make a major difference to your wallet.

So what are the options to help lessen the financial hit. I have only able to come up with two possible options.

1. With the $20K cash that we will get for the trade in, we could invest it a high interest bank account that pays monthly. The interest will offset the novated lease repayments. So if the novated leased is financed at 9% and the high interest bank account is at 6.75%, the net effect is the new car is being financed at 2.25%.
2. Take a overall perspective, and use the $20K cash to reduce the current mortgage, and any other high interest bearing debts like credit cards bills. This should cut a large chunk of interest off, especially the mortgage.

What would you do?