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Marginal Cost Of Funds. The incremental cost of borrowing more money to fund additional asset purchases or investments. In its simplest calculation, the marginal cost of funds is simply the interest rate on the new loan balance.
With zero-percent financing from an automaker's loan company, borrowing $31,000 over five years would cost $516 per month. But if interest rates rise to say 5 percent, the payment jumps to $585. That could cause buyers to cut features to keep the price down.