the Modigliani-Miller theorem says

Does how you pay for a car matter if you can always borrow money?

Imagine you're buying a car and you can either pay upfront or borrow money. You're confused because you thought borrowing money would make you poorer.

In a perfect world, the cost of the car doesn't change whether you pay with cash or borrow money. The technical term is the Modigliani-Miller theorem.

Example

If you buy a car for 20,000, paying with cash or borrowing 20,000 doesn't change the car's price.

Remember this

The way you pay for something doesn't affect its value in a perfect market.

Text adapted from Wikipedia, licensed under CC BY-SA 4.0.

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Educational content, not financial advice.

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