Buying a Car: An Excel™lent Adventure

car lot

Which car?

used car lot

New or Used?

Look! Financing available!


Hummer: Lease or Buy?

Lease or Buy?


For sale by ownere car

Keep or Sell?

PT Cruiser: Selling your parents

Making the Case


Keeping or Selling

      Now that you’ve used the spreadsheet to compare used vs. new and leasing versus buying, you have one more task to do. If a person leases a car all of their life, how much does that cost compared to someone who buys a car every, say eight years? Over a lifetime, what would the difference be?

Begin by reading  the article at Kiplinger’s on keeping the old clunker. In that article, you find the following chart:




Mileage at end of four years



Total car payments



Gas and oil



License, registration, taxes






Repairs, maintenance, tires



Resale value at end




Total expenses



(minus resale value)



Total costs






Source: Runzheimer International

Make a spreadsheet for three families:

  1. Family A buys a new car every eight years. The years that they don’t have car payments, they invest what they don’t pay in additional maintenance at 5%. (Historically, stockmarket returns have been about 7%; looking to the future, experts now say that 6 or 6 ½ % may be more realistic.)
  2. Family B buys a new car every four years.
  3. Family C leases a car and invests the difference between purchasing and leasing.


You have the figures that you came up with, so for our example of how to go about this comparison, we’ll have to make up a hypothetical case. Let’s have each new car cost $18,246 listed above, although if historic inflation holds true, the prices of future cars will probably go up. We’ll have the car buying and saving go on over a 40 year payment. Family A will have five cars and Families B and C will have ten cars over that period. We’ll fill in the dates so that we can keep track of where we are over time.

      Here’s what the spreadsheet looks like in the beginning. The assumptions made appear to have made leasing the favorite. The maintenance, gas, oil, and insurance have been added to the lease cost calculated at the Bankrate for 4 years. The difference has been multiplied by the 5% interest rate (divided by 12) and compounded monthly, with the previous month’s accumulated interest having the money saved over purchasing added to it. The formula cell I88, for example, is =I87+J87+99.15, where I87 is the accumulated principal with interest from the cell above with the new interest calculated for I87 added in and the savings of $99.15 added in.

Family B makes a monthly payment to “own” their car for 40 years, so the savings and interest column have N/A (not applicable) since they pay more than either the leasing family or the family who keeps their car for 8 years and then buys a new one.

Family A buys a car every 8 years has the same payments as B for the four years and then for four years their formula looks like this: =C52+D52+206.8125 . Since they have no car payment at all, their monthly car bill is the increased maintenance, gas ,and oil for driving an older car, which is much less than the lease payment. After 4 years, the payment resumes, but the money saved continues to collect interest monthly.

Finish your own spreadsheet.

Create a graph that represents the results.

Print it out and save it to disk..

In this scenario, leasing appears to beat out buying a new car every eight years, with no car payments for eight years, and buying a car every four years and trading it in. Analyze what factors could be changed in the scenario to come up with different results. Write your explanation.