Lets turn to thinking about a car loan. A car loan is repaid (amortized) over a shorter period of time. Now, you are choosing between buying a new or used car. The used car has relatively low mileage and is in good condition. Both vehicles come with good warranties. You can borrow either $15,000 (new) or $5,000 (used) over 3 years at 6.5% interest.

How much more is the monthly payment for the $15,000 loan than the $5,000 loan? That is, calculate the payment for borrowing $15,000 at 6.5% interest for 3 years then substract the payment for borrowing $5,000.

How much more is the total interest for the $15,000 loan than the $5,000 loan? That is, calculate the total interest for borrowing $15,000 at 6.5% interest for 3 years then subtract the total interest for borrowing $5,000.

Will you buy new or used? Explain by comparing benefits and costs. Also discuss from where the funds will come in your zero-based budget when you purchase a car.