Answer
The monthly payments for the new-car option are $\$950$ more than the monthly payments for the used-car option.
Work Step by Step
We can use this formula to calculate the payments for a loan:
$PMT = \frac{P~(\frac{r}{n})}{[1-(1+\frac{r}{n})^{-nt}~]}$
$PMT$ is the amount of the regular payment
$P$ is the amount of the loan
$r$ is the interest rate
$n$ is the number of payments per year
$t$ is the number of years
We can find the monthly payments for the new-car option.
$PMT = \frac{P~(\frac{r}{n})}{[1-(1+\frac{r}{n})^{-nt}~]}$
$PMT = \frac{(\$68,000)~(\frac{0.0714}{12})}{[1-(1+\frac{0.0714}{12})^{-(12)(4)}~]}$
$PMT = \$1633$
The monthly payments for the new-car option are $\$1633$
We can find the monthly payments for the used-car option.
$PMT = \frac{P~(\frac{r}{n})}{[1-(1+\frac{r}{n})^{-nt}~]}$
$PMT = \frac{(\$28,000)~(\frac{0.0792}{12})}{[1-(1+\frac{0.0792}{12})^{-(12)(4)}~]}$
$PMT = \$683$
The monthly payments for the used-car option are $\$683$
We can find the difference in the monthly payments.
$\$1633 - \$683 = \$950$
The monthly payments for the new-car option are $\$950$ more than the monthly payments for the used-car option.
