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

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 $26,000 and can be financed with a four-year loan at 7.54%.

The used car option: a three-year old model of the same car costs $14,000 and can be financed with a three-year loan at 7.07%.

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

The difference in monthly payments between financing the new car and financing the used car is $____.

Solutions

Expert Solution

The new car option:

New Car Loan amount = $26,000

Calculating the Monthly payment of new Car using Excel "PMT" Function:-

Monthly Loan Payment of new Car is $629.14

- The used car option:

Used Car Loan amount = $14,000

Calculating the Monthly payment of used Car using Excel "PMT" Function:-

Monthly Loan Payment of used Car is $432.73

The difference in monthly payments between financing the new car and financing the used car = $629.14 - $432.73

The difference in monthly payments between financing the new car and financing the used car = $196.41

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jeff jeffy answered 1 year ago

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