Cash Is Best

“ Price Equals Value Plus Terms ” ( JofA , Dec.04, page 67) is one of the most comprehensive articles on CPA practice pricing I have ever read. However, the comment, “Low interest rates have encouraged many recent buyers to borrow the money to make a large down payment and thereby reduce the purchase price,” defies accepted wisdom.

Those who charge their purchases often pay far more than those using their own cash at closing—and so, too, have many CPAs, plied for decades with bankers’ accommodating credit.

James McKeown, CPA
Cicero, New York

Author’s reply: I agree wholeheartedly with the writer’s point regarding cash up front. The article was citing a trend, not my opinion, regarding this subject. However, your comment is based on the assumption that the buyer has the cash available without the need for an external lender, which is definitely not the case in every situation.

Also, if a buyer can reduce a multiple to, let’s say, 0.75X instead of 1X with additional cash, that may be a greater savings than the interest factor.

Joel Sinkin
J. Sinkin Consulting
Happauge, New York