Direct net cash cost
Purchase and finance cash flows + ownership costs − net resale proceedsA financed purchase includes the deposit, payments made and any balance still due at the resale date rather than counting the asset price twice.
True Cost of a Purchase · Methodology
How the calculation works
Estimate the economic cost of a purchase by combining cash outflows, ownership, resale and the value foregone elsewhere.
Return to calculatorIncluded
- Cash or standard amortising finance
- Upfront and recurring ownership costs
- Net resale value
- Opportunity cost
- Today-money, monthly and cost-per-use views
Outside this method
- A judgement about whether the purchase is worthwhile
- Product-specific finance schedules
- Tax unless entered as a cost
- Emotional, practical or environmental value
Calculation
Core formulas
Future wealth used
Σ cash flowₜ × (1 + alternative return)^(T−t) − resaleEach outflow is carried to the end using the user’s alternative-return assumption.
Today-money cost
Future wealth used ÷ (1 + inflation)^yearsThis expresses the result in today’s purchasing power.
Timing convention
When cash flows occur
Upfront costs occur at the start, recurring costs and finance payments are spread monthly, and resale proceeds arrive at the selected horizon. Any finance balance still due at that point is treated as settled from the sale or other cash.
Limitations
What the result cannot establish
- Resale values and ownership costs may be difficult to estimate.
- A generic finance schedule may differ from a lender statement.
- Opportunity cost depends materially on the selected return.
- Cost per use depends on an uncertain usage estimate.
Reference tests
Numerical checks
| Case | Inputs | Expected result |
|---|---|---|
| Cash purchase | £10,000 price; £1,000 costs; £3,000 resale | £8,000 direct net cash cost before opportunity cost |
Evidence