Opportunity Cost
Planning & BudgetingThe value of the next best alternative you give up when making a decision — the true cost of every choice.
Example
Example: You use $40,000 cash to buy a car instead of investing it. If that $40,000 earned 8% annually in the stock market, it would grow to $86,000 in 10 years. The car, meanwhile, depreciates to $12,000. The opportunity cost of buying the car with cash is $74,000 ($86,000 - $12,000) over 10 years. This is why many financial planners recommend low-interest auto loans over cash purchases.