How this calculation works
Convert the effective annual discount rate into a consistent monthly rate. Discount each end-of-month installment and add the amounts paid now. The difference measures extra present cost under that rate assumption.
Extra present cost = down payment + upfront fee + installment × annuity PV factor − cash priceA worked example
A ₹50,000 cash price compared with ₹10,000 down, ₹1,000 upfront fee and twelve ₹4,000 installments has ₹9,000 extra cost at zero discount.
Good to know
A payment-timing comparison, not loan approval, a legal APR or a household-budget decision. No missed-payment charges, taxes, rewards, insurance or differences in the purchased item are included. The discount rate is an entered assumption.
Reference: OpenStax: present value and annuity timing (opens in a new tab) ↗
Write down every payment before comparing
The installment offer includes the down payment and fee at time zero, then equal end-of-month payments. The cash alternative is one purchase-price payment now. At zero discount, comparing present costs is the same as comparing their nominal totals.
The default plan totals 10,000 + 1,000 + 12×4,000 = ₹59,000. Against the ₹50,000 cash price, its extra cost is ₹9,000 at zero discount. Ignoring the fee or down payment would understate the plan’s cost.
The loan payment budget calculator solves a payment-compatible principal; this page compares the present costs of a specific purchase offer.
Later payments have a time-value assumption
The annual effective discount rate is converted to a consistent monthly rate. A positive rate reduces the present value of later installments, but it does not reduce the actual rupees contractually payable. Both nominal total and present cost are displayed.
The effective annual rate calculator illustrates how monthly and annual rates relate. The loan payment budget calculator asks what principal a given payment could support; this page compares a particular purchase offer with its cash alternative.
Equal present cost is not equal affordability
The matching-installment figure solves the monthly amount that would make the two present costs equal under the chosen discount rate. It is not a lender quote, an approval or a statement that the plan fits a household budget.
A payment holiday, variable installment, tax difference, reward or missed-payment charge would change the offered stream. Include only comparable goods and explicit costs; the form does not assign value to differences in the purchased item.
A few questions, answered
What does a positive extra present cost mean?
The installment plan is more expensive under the entered timing and discount assumption.
Why use an annual effective rate?
It converts consistently to a monthly growth factor through the twelfth root rather than simple division by twelve.
What if down payment and fee already exceed the cash price?
No non-negative monthly installment can make the plan’s present cost equal the lower cash price.