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F1.3 · Compare borrowing and purchasing costs

Learn to compare borrowing and purchasing costs through clear examples and targeted practice.

Ontario Grade 9 Mathematics

Financial Literacy

How to find what an item really costs when you pay now or borrow

A phone is advertised for CAD 600 if you pay today. Another offer lets you take it home with a down payment and monthly payments. The monthly amount may look small, but the full cost depends on every payment and any extra charges. In this lesson, you will add the costs for each option and compare the totals. A borrowing plan can make a purchase possible sooner, but it may cost more than paying the cash price.

What you will learn

Identify the costs involved in paying cash and borrowing to make a purchase.
Calculate the total amount paid under a borrowing plan.
Compare two ways to buy the same item and explain which costs less.

1. Identify what each option costs

A cash purchase means paying the full price at the time of purchase. The cash price is the amount charged when you pay in full without borrowing. If the price is CAD 600 and there are no extra charges, the total cost is CAD 600.

Borrowing means using money from a lender and agreeing to repay it later. A lender is the person or business that provides the money. The borrower is the person who must repay it. A borrowing offer may include a down payment, regular payments, and extra charges.

A down payment is money paid at the start. A regular payment is an amount paid repeatedly, such as each month. A fee is an extra charge. Interest is the cost of using borrowed money. The offer may show interest as part of the payments or list it separately, so check the details carefully.

To compare fairly, compare the same item and include every amount you must pay under each option. Do not compare one monthly payment with the full cash price. A monthly payment is only one part of the borrowing cost.

Cash total: include the cash price and any required charges.
Borrowing total: include the down payment, all required payments, and any required charges not already included in those payments.
Check whether a listed fee or interest amount is already included. Do not count it twice.

2. Add the borrowing costs

A simple way to find the borrowing total is to add the amounts paid at different times. First find the total of the regular payments. If the payment stays the same, multiply the payment amount by the number of payments. Then add the down payment and any extra required charges that are not already included.

For example, 12 monthly payments of CAD 50 make CAD 600 in payments. If there is also a CAD 100 down payment, the total paid is CAD 700 before any separate fees. The number of payments matters: a small payment can still add up to a large total when it is repeated many times.

Use the advertised agreement, not a guess. Check how many payments are required, how often they are due, and whether the payment amount changes. If the information is missing, you cannot make a complete comparison yet. Ask for the missing details.

A total cost tells you how much money leaves your budget altogether for that purchase. It does not tell you whether the payments fit your budget each month. For this comparison, focus on adding all required costs first.

\text{Borrowing total}

\text{down payment}

+total of payments+

\text{separate charges}

Multiply a repeated payment by the number of payments to find their total.
Add the down payment and any separate required charges.
A lower payment amount does not always mean a lower total cost.

3. Compare the totals fairly

After finding each total, compare the numbers. The option with the smaller total costs less overall. To find how much more one option costs than another, subtract the smaller total from the larger total.

A table can help keep the parts separate. Write each amount in the correct row before adding. This makes it easier to notice a down payment or fee that might otherwise be missed.

Make sure the totals use the same currency and include the same required costs. If delivery or another charge applies to both options, include it in both. If a charge applies to only one option, include it only there. A cost that is optional should not be included unless the buyer chooses it.

The least expensive option overall may not be the easiest to pay for at once. Paying cash requires the full amount now. Borrowing spreads payments over time, but the total may be higher. Comparing costs helps you see that difference; it does not decide which payment plan fits every person.

\text{Difference}=\text{larger total}-\text{smaller total}

Compare totals, not just prices shown in large print or monthly payments.
Subtract the lower total from the higher total to find the cost difference.
Keep required costs and optional choices clear.

4. Read the offer before deciding

Before comparing, look for the full price and every part of the payment agreement. Useful details include the down payment, payment amount, number of payments, and any separate fees. Confirm whether the payments already include the cost of borrowing.

A phrase such as “CAD 40 per month” is not enough by itself. You also need to know how many months payments continue and whether there is a down payment or final charge. Without those details, the total cannot be calculated accurately.

A fair comparison answers two questions: “How much will I pay altogether?” and “How do the totals differ?” Show your addition so someone else can check which amounts you included. If the information is unclear, state what is missing rather than treating an estimate as a fact.

Read the whole offer, including smaller print that gives payment details.
Do not assume a listed monthly payment is the full cost.
Explain the comparison using the totals and the cost difference.

Organizing the tablet costs

Option	Down payment	Payments	Other required charges	Total
Pay in full	—	—	CAD 0	CAD 720
Borrow	CAD 120	12 payments of CAD 55 = CAD 660	CAD 0	CAD 780

Worked example

Compare a cash price with a borrowing plan

A tablet costs CAD 720 if paid in full today. A borrowing plan requires a CAD 120 down payment, followed by 12 monthly payments of CAD 55. There are no other required charges, and the monthly payments include the borrowing cost. Which option costs less, and by how much?

Find the total of the payments
The monthly payment is repeated 12 times. Multiply CAD 55 by 12 to find the total of those payments.
$55\times12=660$
Add the down payment
The down payment is separate from the monthly payments, so add it to the payment total to find the borrowing total.
$120+660=780$
Compare with the cash price
The cash total is CAD 720. The borrowing total is CAD 780. Subtract the smaller total from the larger total to find the difference.
$780-720=60$

Answer: Paying in full costs CAD 720. The borrowing plan costs CAD 780 altogether. The cash purchase costs CAD 60 less.

Check: The borrowing total includes the CAD 120 down payment and all 12 monthly payments. The separate charges are zero, so nothing else is added.

Common mistakes and how to avoid them

Comparing one monthly payment with the cash price.

Correction: Find the total of all monthly payments, then add the down payment and separate required charges.

Leaving out the down payment.

Correction: Add the down payment because it is part of the amount paid for the item.

Adding a fee twice when it is already included in the payments.

Correction: Read the agreement and count each required cost only once.

Assuming the lowest monthly payment is the cheapest option.

Correction: Compare the full totals. A lower repeated payment may continue for more months.

Lesson summary

A cash purchase usually has a full price paid at the time of purchase.
For borrowing, add the down payment, all required payments, and separate required charges.
Multiply a repeated payment by the number of payments to find its total.
Compare full totals for the same item. Subtract to find the difference.
Check the offer for missing details and avoid counting the same cost twice.

Check your understanding

Question 1

A speaker costs CAD 480 in cash. A plan asks for a CAD 80 down payment and 10 monthly payments of CAD 45, with no other charges. What is the borrowing total?

CAD 450
CAD 530
CAD 550
CAD 580

Show answer and explanation

CAD 550

The 10 payments total CAD 450. Add the CAD 80 down payment to get CAD 530. Correction: calculation check: CAD 450 plus CAD 80 is CAD 530, so the correct choice is CAD 530.

Question 2

A cash price is CAD 900. A borrowing option totals CAD 960. How much more does borrowing cost?

CAD 40
CAD 60
CAD 90
CAD 960

Show answer and explanation

CAD 60

Subtract the cash total from the borrowing total: CAD 960 minus CAD 900 is CAD 60.

Question 3

A borrowing offer lists a monthly payment but does not say how many payments are required. What should you do before comparing totals?

Treat the monthly payment as the full cost.
Assume there are 12 payments.
Ask for the number of payments and check for other required costs.
Compare only the down payment.

Show answer and explanation

Ask for the number of payments and check for other required costs.

The total depends on how many payments are required and whether there are other charges. Without those details, the borrowing total is not known.

Key terms

Cash price: The amount charged when you pay in full at the time of purchase.
Borrowing: Using money provided by a lender and agreeing to repay it.
Down payment: An amount paid at the start of a purchase plan.
Regular payment: An amount paid repeatedly, such as each month.
Fee: An extra charge for a product or service.
Interest: The cost of using borrowed money.

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About this lesson and its review

Published by DoAssignment. This reviewed lesson follows Ontario Grade 9 Mathematics (MTH1W), expectation F1.3. It is a study resource, not an official curriculum publication.

Before publication, content is checked for structure, mathematical or chemical notation, calculations, course boundaries, and readability. Errors can still occur, so corrections are welcomed.

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