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Although I don’t have a personal computer, my common sense tells me that S. J. Diamond has been woefully misled.

Diamond contrasts two methods of buying an \$8,000 car: paying cash versus investing the \$8,000 in a savings account and borrowing another \$8,000 to finance the car. She speciously argues that because the loan’s (large) interest rate is applied to a declining balance while the savings account’s (small) interest rate is applied to an increasing balance, the consumer comes out ahead financing the car and investing his \$8,000. Diamond neglects to mention that if the consumer invests his cash and finances the car, he will have to make monthly payments totaling more than \$2,700 a year.

To make a fair comparison, the consumer who opts to pay cash for the car should also make monthly payments to a savings account. I calculate (roughly and conservatively) the interest thus earned in 48 months to be \$1,862. Add this to the \$10,846 paid into the savings account and the consumer now has \$12,708, or \$1,374 more than he would have by following Diamond’s advice. Where does this \$1,374 otherwise end up? In the hands of smooth-talking bankers?

CHRIS JONES