2019 Model X Raven: Lease or Finance?!

[bewilderman]

Hey guys. Trying to decide between leasing vs. financing for the Raven X I have on order. I am leaning towards financing for the following reason.

2019 Model X Raven, Long Range, Midnight Silver, black Interior, 7 seater, FSD.

MSRP: 96,690 (inclusive of Destination and Documentation)

LEASE for 36 months @10K miles/year:
Order Payment: $2,500
Due at Signing: $710.44 (Lowest possible for me, to cover 1st month payment, title, registration, tax and fees)
35 monthly payments: $1,503.89 * 35 = $52,636.15
Disposition fee (at lease end): $395
Total cost of leasing the car for 36 months: $56,241.59

Residual value of the car at the end of 36 months: $59,889.00 (62.7%)

FINANCE @3.5% for 72 months:
Order Payment: $2,500
Due at Signing: $9,651.10 (Lowest possible for me, to cover 9% sales tax, title, registration and fees)
36 monthly payments: $1,452.26 * 36 = $52,281.36
Loan Payoff amount after 36 payments: $49,562
Trade-in value of the car after 36 months, same as the residual value on lease: ($59,889.00)
Federal Tax credit: ($1,875)
Total cost of owning the car for 36 months: $52,230.46

Bottom Line:
1) You are saving $4K+ over 3 years for the roughly $9K more you are paying upfront. But this also affords you $50 less on the monthly payment compared to lease.
2) 100% of the sales tax is already paid. ($5,400 value if you decide to keep the car vs. buying your car out at lease end, or if you live in a state that allows sales tax deduction for trade-ins).
3) The value of the car at the end of 3 years assumed here is the residual/trade-in value. The actual selling price today of 2016 (3 yrs old) Model X's with 30K miles on ev-cpo is close to $65K, price drops and range increases in the last 3 years considered. Thats another $5K+ value if you choose to take that route.
4) If you decide to keep the car for one more year until the warranty expires, the average cost of owning dips lower. The longer you keep the car, the lower the average cost, even after factoring in Extended Service Agreement.
5) You can trade the car in sooner than 3 years to take advantage of new model refreshes, erratic price drops, or take advantage of the free upgrades Tesla gives for Model S/X owners buying a new vehicle. Like some people just did to take advantage of the Free Unlimited Supercharging. You are still on the hook for the full 3 years' payment if you lease.

Please chime in with your opinions and/or insights:

 

[Krash]

Trade-in value has always ended up less than the lease residual at 36 months. Still, always better to buy and keep longer. Lease makes business tax sense.

 

[Scott Ales]

Leasing completely insulates the user from risk. If there is any type of event the brand, model, options, version you choose has a marketplace challenge, nothing changes for you. If you own it, you would suffer any negative market trends. If it swings the other way, simply buy it for the residual.

I did this back in 2006 with a Prius. Leased it for 1 1/2 years, the tsunami wiped out the Japanese plant when my lease was up...Retail values of 1-4 year old Priuses skyrocketed. I drove that car for free!

 

[rjdoc74]

I’ve purchased 2 MXs for cash. Last year Tesla had undergone lots of changes- significantly dropped prices, especially on expensive models, customer service became significantly worse, etc. If I had to do it over again- lease only. Do not buy, too much uncertainty with the company right now.

 

[DCGOO]

I paid cash also. Unemployed so figured finance or lease was not possible.

 

[Kenx008]

The cars on ev-cpo will have 4 years 50k warranty. Whereas yours will have 1 year left. You'll get more than trade in but might not be 5k as you estimated.

I ran through the same situation when I got my model s. Ended up leasing because of the uncertainty with technology. My buyback is 56k in December and I can find a similar equipped vehicle from Tesla for mid 40s now. Lease ended up working for me.

 

[unpollo2]

using your numbers for the lease calculator the money factor/APR is very high
money factor (lease garbage talk) .0036 equivalent to APR of 8.7%
i wouldn't borrow at 8.7% would you?

 

[rjdoc74]

Yeah, Tesla lease sucks. But it’s all about the numbers. These cars depreciate much faster than other cars with changing tech and Tesla cutting pricing (screwing existing owners). Normally, I would never consider a lease with such high MF, but for Tesla you have to run the numbers.

 

[bewilderman]

Full Disclosure: I have been an avid fan and an evangelist for leasing in recent years. The last time I financed my car was in 2001. All the 6 cars I have purchased since then (3 of them electric) have been leased. I have returned two, and bought back the two I really liked (or had too little miles on them, making them worth much more than the residual), and two are still on their leases. I usually get 15%-20% off of MSRP for expensive cars including rebates etc, and since you get to apply all of that on a 36 month lease term rather than a 72 month finance term (residual is pegged to MSRP and not your discounted selling price), this translates to a hefty discount in monthly payments that changes the equation quite a bit. I had also vowed to never finance an electric car because of the uncertainties in battery range degradation over time etc. But with fixed pricing from Tesla, the monthly payment on the lease is actually more than the monthly payment on financing as I showed above. So I am on the fence.

My buyback is 56k in December and I can find a similar equipped vehicle from Tesla for mid 40s now. Lease ended up working for me.

Wow! Good to know. This means that Tesla is losing big time on its bets and I worry about the survival of this company. Actually, it would be the banks that finance Tesla leases that would be losing. They auction off the lease returns and dealers buy them and up sell after detailing. Not sure why they would still participate in this program if this is true. Which bank are you making your payments to?

money factor (lease garbage talk) .0036 equivalent to APR of 8.7%

The MF quoted on the Tesla account page is 0.002283. So thats 5.4792% APR. You are right, still too high.
MSRP: $96,690
Residual: $59,889

Monthly Depreciation: ($96,690 - $59,889) / 36 = $1,022.25
Monthly Finance Charge: ($96,690 + $59,889) * 0.002283 = $357.47
Monthly Sales Tax @9%: ($1,022.25 + $357.47) * 0.09 = $124.17
Total Monthly Lease payment: ($1,022.25 + $357.47 + 124.17) = $1,503.89

I am getting 2.99% for 66 months from a local credit union, so the cost savings for financing is actually higher than what I showed in the original post. Not having to worry about clocking the exact miles allowed in the lease is another benefit. With Free Supercharging, I might be incentivized to keep this longer as well.

Its really the uncertainly about the company, quality of the car, and the true resale value after 3 years that I am worried about. Any empirical data as provided by Kenx008 above would be appreciated. You guys are awesome, Thank You!

 

[verygreen]

Lease worked really well for my second car. First car I ended up returning and that whole experience made me lease for the second one anyway - certainly helps to eliminate a lot of risk from the deal.

 

[Zorg]

First time leasing. 3 years from now, modelX will have a 120 KWh and the current one will be worth less than residual. Not taking that risk.

 

[bewilderman]

First time leasing. 3 years from now, modelX will have a 120 KWh and the current one will be worth less than residual. Not taking that risk.

Agreed. Just wondering why Tesla (or the bank) would take that risk and put the residual where it is, when they actually have a better visibility into the Tesla product roadmap than any of us. Institutions can't remain in business making obviously bad bets like that one. They will be essentially subsidizing everyone who leases at that point, at their own expense. Its usually the house that always wins in these situations...

Can anyone think of a theory how this gap would be bridged by Tesla...?

My Tesla salesperson told me that you just can't buy out a Model 3 at the end of the lease if you lease now, because Elon is planning to use them for his 'Tesla Shared Fleet' of autonomous taxi network he's planning to roll out in 3 years... May be he's paying top dollars for these return Model X's to use them as rovers on Mars...? But then... why can't he just buy them cheap on the market like a normal person?

 

[verygreen]

Can anyone think of a theory how this gap would be bridged by Tesla...?

same as price drops and such. It's just another way to bring in the sales, this time also showing good sales price for (imaginary) good margins (everybody does it with subsidized loan rates and such. Ever noticed how all those "get $XXXX discount on YYYY" always has a fine print of "discount or low finance rate"?)

 

[bayx]

Lease it, not worth the hassle if there are repairs (and there will be)! Elon is slowly trying to take away ESA too. Drive it for 3 years and by then there are bound to be better cars on the market with self-driving tech (Waymo, etc).

Tesla is cool now because of all its tech, which other car giants will catch up with and then Tesla is doneski.

 

[Zorg]

Lease it, not worth the hassle if there are repairs (and there will be)! Elon is slowly trying to take away ESA too. Drive it for 3 years and by then there are bound to be better cars on the market with self-driving tech (Waymo, etc).

Tesla is cool now because of all its tech, which other car giants will catch up with and then Tesla is doneski.

I doubt it. We have heard about better cars coming around the corner for years, and reality is..... crickets.

 

[bayx]

I doubt it. We have heard about better cars coming around the corner for years, and reality is..... crickets.

Cars are already better in terms of build quality with established companies, it's the tech that will determine the winner in this race. Not every Tesla driver is an environmentalist and so battery or no battery will not matter much once companies like Waymo start licensing out their tech to the highest bidding car maker. Customers will go with whichever maker has less build quality issues then.

 

[Kenx008]

My lease was through Tesla themselves, part of the reason the buy back is so high is they add the $7500 tax credit back into buyback price. One thing nice about purchasing though is you won't have to worry about miles. I still have 4 months left on my lease but I'm on track to be out of miles in 2 months.

 

[MXWing]

@bewilderman

You didn't add in CVRP or Utility rebate?

Honestly it drives me nuts when people discuss purchase vs lease here. No consideration seems to be put into the day after turning in a lease?!?

Gonna ride a bicycle now? Or sign another 3 year lease for $56K? (inflation adjusted of course). There's no respite for payments.

Having a car worth less than residual appears to be negative equity.
Making no payments while the car is still usable is positive equity.

If you want to play with new tech all the time, cycle in and out of Model 3's.

If you want to lose your ass in Model X depreciation (raw dollars not %) keep exchanging them via leases or trade ins.

 

[afdfog]

Hey guys. Trying to decide between leasing vs. financing for the Raven X I have on order. I am leaning towards financing for the following reason.

2019 Model X Raven, Long Range, Midnight Silver, black Interior, 7 seater, FSD.

MSRP: 96,690 (inclusive of Destination and Documentation)

LEASE for 36 months @10K miles/year:
Order Payment: $2,500
Due at Signing: $710.44 (Lowest possible for me, to cover 1st month payment, title, registration, tax and fees)
35 monthly payments: $1,503.89 * 35 = $52,636.15
Disposition fee (at lease end): $395
Total cost of leasing the car for 36 months: $56,241.59

Residual value of the car at the end of 36 months: $59,889.00 (62.7%)

FINANCE @3.5% for 72 months:
Order Payment: $2,500
Due at Signing: $9,651.10 (Lowest possible for me, to cover 9% sales tax, title, registration and fees)
36 monthly payments: $1,452.26 * 36 = $52,281.36
Loan Payoff amount after 36 payments: $49,562
Trade-in value of the car after 36 months, same as the residual value on lease: ($59,889.00)
Federal Tax credit: ($1,875)
Total cost of owning the car for 36 months: $52,230.46

Bottom Line:
1) You are saving $4K+ over 3 years for the roughly $9K more you are paying upfront. But this also affords you $50 less on the monthly payment compared to lease.
2) 100% of the sales tax is already paid. ($5,400 value if you decide to keep the car vs. buying your car out at lease end, or if you live in a state that allows sales tax deduction for trade-ins).
3) The value of the car at the end of 3 years assumed here is the residual/trade-in value. The actual selling price today of 2016 (3 yrs old) Model X's with 30K miles on ev-cpo is close to $65K, price drops and range increases in the last 3 years considered. Thats another $5K+ value if you choose to take that route.
4) If you decide to keep the car for one more year until the warranty expires, the average cost of owning dips lower. The longer you keep the car, the lower the average cost, even after factoring in Extended Service Agreement.
5) You can trade the car in sooner than 3 years to take advantage of new model refreshes, erratic price drops, or take advantage of the free upgrades Tesla gives for Model S/X owners buying a new vehicle. Like some people just did to take advantage of the Free Unlimited Supercharging. You are still on the hook for the full 3 years' payment if you lease.

Please chime in with your opinions and/or insights:

Very interesting conversation. I just ordered the same exact model. Also trying to decide which way to go. Buy or lease. (not a Business expense) Please post what you decide to do. Thanks……..Dave

 

[unpollo2]

the numbers don't work from what you stated. put them into any lease calculator:
96690 price
2500+710 downpayment
.002283 moneyfactor
35 months
59889 residual

monthly payment comes out to 1310
one of your numbers is off or you are factoring in taxes you didn't state