Suppose that you are thinking about buying a car and have narrowed down your cho

Question

Suppose that you are thinking about buying a car and have narrowed down your choices to two options.

The? new-car option: The new car costs ?$28,000 and can be financed with a five?-year amortized loan at 5.67?%.

The? used-car option: A? three-year old model of the same car costs ?$15,000 and can be financed with a three?-year amortized loan at 6.61?%.

What is the difference in monthly payments between financing the new car and financing the used? car?

The difference in monthly payments between financing the new car and financing the used car is . ?(Round to the nearest cent as? needed.)

Explanation / Answer

New car Finance amount(PV) $28,000 NPER 60 (12 x 5) Rate 0.4725% (5.67%/12) PMT (Monthly payment) ($537.03) =PMT(0.4725%,60,28000) OLD Car Finance amount(PV) $15,000 NPER 36 (12 x 3) Rate 0.5508% (6.61%/12) PMT (Monthly payment) ($460.48) =PMT(0.5508%,36,15000) Difference in monthly payment is (537.03 - 460.48) = $76.55

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