Calculation Methodology

The Equal Resources Principle

A common flaw in online financial calculators is comparing two choices that start with different money or demand different monthly budgets. For example, comparing a cash purchase to a loan without accounting for what the cash would have earned, or comparing a loan to cash without investing the avoided loan payment.

Across all Does It Pay? calculators, we enforce an equal starting resource framework: both sides of the comparison start with the exact same cash and commit the exact same monthly budget.

Two-Way Cash Flow Reinvestment

When one option has lower monthly outlays than another, the difference does not disappear. The household deposits the avoided payment into liquid savings or a diversified portfolio. We model this cash flow differential every month, ensuring fair multi-year comparisons whether renting or buying, paying cash or financing.

Interest Rate versus APR

We strictly distinguish note interest rates from annual percentage rates (APRs). Amortization schedules and monthly principal and interest math always use the contractual note rate. Financed fees and upfront charges are factored into fee-inclusive estimated APRs to provide honest Truth in Lending Regulation Z context.

Adverse Stress Testing

Projections that rely on eternal energy price inflation or permanently low interest rates can mislead homeowners. Our models include flat-rate sensitivity tests and variable rate shocks (+1.5% and +3.0%) so you can see whether an investment still pays if future conditions turn out less favorable than vendor marketing claims.