The reason I included the spreadsheet was really to show the calculations and illustrate this example. It can also be downloaded if you would like to adapt it to run different scenarios.

@Keith

Thanks. I understand what you mean about the trade-in vs. retail numbers. To get the resale values I used, I went to Edmunds’ True Cost to Own tool, looked up the car in question, and summed up their depreciation numbers over 3 years. For the new car, the total depreciation was $22,514. For the 1 year old car, the depreciation over 3 years was $12,641.

Your comment did lead me to look at the resale price that I arrived at more closely, and I agree that it was high, because in the cases of the purchases I was only taking the depreciation into account as a cost and neglecting the taxes, interest, etc. When I made this correction, the cost per mile of the new purchase jumped from $0.63 to $0.76 and the used car purchase jumped from $0.35 to $0.39 per mile. Thanks for pointing that out.

My point is that whether you buy or lease a new car every few years, you would be much better off by doing something as small as looking at 1 year old cars instead. This is especially the case in expensive luxury cars like BMWs, which have depreciation which is steeper than most cars in the first year ($14,090 in this case, per Edmunds) because the demand for such cars on the used market is lower.

Leasing seems like an attractive option because the payments are lower, but in reality you are still going to pay for the big first year depreciation hit. I saw this often at the Mercedes dealership where I worked – salespeople would offer a lease if a customer said they wanted lower payments. I just wanted to show that this is very deceptive, and when someone is making a decision like this, he or she must take the total cost into account instead of just looking at the payments.

It would be more useful if you created fields to change the interest rate as well as adjusting the down payment to change the monthly payments and total cost.