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from The Complete Car Cost Guide

Finance Costs

It is now time for a very brief accounting lesson. When we talk about finance costs, it is important to distinguish between what is actually a cost and what is not.

Let's say you bought a new car for $19,000. You no longer have the money, but you do have a car of equal value an asset. If a bank loaned you $19,000 to buy the car, you owe the bank that money, but it still hasn't cost you anything. However, when you borrow money from any lending institution, not only will the lender ask you to pay back the money they loaned you, but they will also charge you interest. The money that they loan you is not a cost the interest charge is. End of lesson.

1998 The Complete Car Cost Guide™ IntelliChoice® Inc. Campbell, CA