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Spreadsheet: New Car Cost vs Old Car Cost, Version 1.0

Posted by Sean | Posted under Budgeting, Cars, Gas, Spreadsheets, Tools | June 4, 2008

Is It Worth It To Buy A New Car?
(Possibly a Fuel-Efficient Model?)

The goal is to make it easy for anyone to do an in-depth comparison of car costs.

Typically, this involves Old Car vs. New Car, although you could do New #1 vs. New #2.

Also, if you are curious about potential savings from fuel-efficient vehicles, I included the price-per-gallon of gas where a new car pays for itself. Of course, it only works if the vehicle you are considering is more fuel efficient than your current vehicle. If you are comparing two new (or used) vehicles, put the most fuel-efficient one on the bottom.

While the inspiration for this project came from all of the people doing gas-price vs. trade-in calculations, the spreadsheet is useful for fuel-neutral car calculations, too.

Instructions

  1. Select the appropriate spreadsheet format:
    Microsoft Excel is the native format. Zoho is the free online alternative.
    Microsoft Excel 97-2003 Workbook
    Zoho Sheet (beta) Online Spreadsheet

  2. Fill in the green cells (others will calculate)
    If you do not know all the numbers, use your best guess. After all, the length of time you will keep a car is an estimate, too, and it is the biggest variable. In many cases, the differences between vehicles is large enough that 100% precision is not required.
    (note: the first column includes comments with explanations and resources)

Questions

  • Why do I have to enter Payments -AND- Deprection and Interest?

    The depreciation and interest are necessary to determine the real economic cost at any point in time. This is especially important you might trade in the new vehicle before you are done making payments, and unrealized expenses become realized.

    The payments were included so you can track the actual cash flow for each year. Also, since it is easier, if there is a high probability you are going to hold a vehicle, you might want to use this instead of the more complicated method.

  • How Do You Factor In The Trade-In Value For The Old Vehicle?

    Currently, trade-in value does not factor into the economic equation for real cost. Why? Consider the following case. You make an extra $5,000 principle payment immediately before buying a new car. Thus, you receive $5,000 more trade-in value, but create no more gain (or lack of loss).

    However, for cash flow, it is assumed the trade-in value is rolled into payments, because despite the long-term economics, you still need to make the payments work every step of the way.

  • (More Instructions Are Commented Within The Spreadsheet…)

Disclaimer

The materials are provided "AS IS" with no warranties, expressed or implied. Further, the publisher does not warrant the accuracy, likely results, or fitness for a particular purpose.

Feedback

I am already debating several improvments. The trade-off is flexibility vs. simplicity. Tell me what is important and I’ll try and work it into Version 2.0 for everyone’s benefit.

Results?

Which cars did you consider, and how did they compare?

Elsewhere

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Comments

7 Comments so far
  1. Jeff@MySuper-Charged Life June 4, 2008 8:28 am

    Great resource! I love the idea of doing some detailed analysis before running out to buy a new car. This is a great way to help people realize just how much they are spending.

    Thanks for linking to my article!

  2. David Carter June 4, 2008 8:39 am

    Wow, I did a similar type post to figure out it it would be cheaper to buy a new fuel efficient car, but I didn’t make a spreadsheet or go as in depth as you. Nice article.

  3. Ben | Milk Your Money June 4, 2008 10:05 am

    Nice post…lots of good info. Consider it Stumbled.

  4. Sean June 6, 2008 12:29 pm

    Thanks, Ben! That was one BIG stumble. If anyone else wants to Stumble, Twitter, link in a Weekend Reading post, etc… I won’t mind, really. :-)

    What I’d -really- like is more people to “kick the tires” on the spreadsheet. Althought it is probably one of those things that is invisible until you need it.

  5. Ramesh June 9, 2008 9:15 am

    Hi, Thanks for using Zoho Sheet. You can get in touch with me at my email address for any assistance or suggestions.

  6. hank July 6, 2008 7:53 pm

    Also ran those numbers myself on my site; can’t say it’s quite worth it to switch to a new ride yet, but definitely worth crafting up… Stumbled. :)

  7. Randy July 17, 2008 5:26 am

    The next step would be to factor in the cost of the down payment, and all it affects in true cost.