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 $32,000 and can be financed with a

five-year loan at 6.84%. The used-car option: A three-year old model of the same car costs

$13,000 and can be financed with a three -year loan at 5.57 %.

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