Purchase Cost Analysis – Finding The True Cost
The purchase cost and the buying cost plus financing requires some analysis.
To find the financing cost – in case of loans, get the total of all payments and subtract the amount of cash obtained from the lender. In case of purchase credit – as in conditional sides or similar contracts, the financing cost is listed separately. Otherwise, in purchase credit, get total of all payments including down payment and subtract the cash price.
Financing cost may also include special fees, filing or recording fees and, setup fees on the account, delinquency charges. Insurance costs, separately stated, although part of the financing, are not considered part of the financing cost.
Thus, you can determine dollar cost of financing and total dollar cost of your credit transaction per month or per year. Dollars are what you pay and that is the important point in relation to your budget. However, if you must know cost of credit on the basis of percentages – or on basis of interest rate per year – banks and loan companies and finance agencies can give you an approximate figure.
The lowest dollar cost of credit, however, should not be the only consideration. All the elements of a transaction should be considered, such as terms, convenience, fairness, dependability, leniency, helpful guidance, etc.
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