What's the over mileage charge for Telsa MX? Do you expect to drive more than 10K/year? Financing would give you more flexibility in the amount of miles you can drive. Also if you are leasing a luxury car like MX for business, not all lease payment can be written off. You need to calculate the inclusion amount based on the year the lease started, consult Publication 463 (2018), Travel, Gift, and Car Expenses | Internal Revenue Service for details.
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2019 Model X Raven: Lease or Finance?!
- Thread starter bewilderman
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- financing lease loan
IF your math is correct(I didn't check it, so can't confirm for myself), then you're essentially paying a little over $4k over 36 months for the option to return the car at that time with zero penalty to you. If you don't pay the $4k then you're at the mercy of whatever the market will bear for a 3 year old Model X if you decide to sell it at that time.
Only you can say whether that $4k option is worth it for you.
Only you can say whether that $4k option is worth it for you.
Hey unpollo2, Sorry if wasn't clear. The total drive off of $2,500 + $710.44 only covers first month payment and one time taxes and fees. So this would be $0 downpayment towards the lease. Thats probably why this is the lowest amount I can pay upfront. Attaching the complete breakdown of everything right from my Tesla account page here.
The derivation of the monthly lease payment amount I have shown in one of my previous posts is accurate, and the result matches with what Tesla is actually asking me to pay, to the last cent. Notice that I used MSRP amount in the formula to compute the monthly finance charge, and not a lower amount after a down payment. This implies that this is a $0 down lease. 'Lease calculators' do what I have shown manually above. You don't need them.
JamesBrown
Member
Teslas have very high (unrealistic) residuals. The buyouts on a 2016 90D leases were in the $70-80k range, since purchase price use to be in the $95-125k range (depending on options). Those same cars are now selling for $65k, or $5-15k less than residual. Your $60k 3 year trade in value for purchase is likely high.
With the constant upgrades, price drops, ect... it is extremely risky to buy a new Tesla.
With the constant upgrades, price drops, ect... it is extremely risky to buy a new Tesla.
The depreciation on your car is the same, regardless of if you lease or finance the car. Assuming that you trade in your car after 36 months (apples to apples), I find it difficult to believe that leasing allows you to somehow pass the depreciation to Tesla while you drive your car. The only person who is paying for your car is yourself. We just need to figure out the math.
I did not because those apply equally to both leased cars and financed cars (Bay Area).
If I understand you correctly, you are saying that part of that high lease APR may be going towards artificially raising that residual value above the actual market rate. Allows Tesla to boast a higher resale value for their marketing purposes, while making you pay for the actual depreciation on your car anyway. I agree thats possible, and may be the reason why people are seeing their trade-in values lower than their the lease residual.
That makes sense! It is standard to add the tax credit to the lease residual. This is how the lease company passes the tax credit to the lessee. That explains why you are seeing a $10K difference between your residual value and the market values. It also means that the govt. paid $7.5K out of that $10K anyway. This would be true of those who financed at that time too. So the real difference may be $2.5K, which may be due to the reasons @verygreen is suggesting above.
With Tesla price cuts absorbing the federal tax credit, I wouldn't think the equation changes much. Just that the money is taken out of the top line rather than the bottom line. But would it be possible to tell us what your MSRP (excluding destination and doc fee) was when you bought your car? Whats your configuration?
Also, I checked car gurus etc, I can't find a 2016 MX 75D with less than 30K miles on it for anything less than $60K. What site are you checking?
Assuming that you trade in at the end of 36 months, repairs/headaches etc under warranty don't change based on if you are leasing or financing. But I get your point. It boils down to what the car will be worth at that time.
Usually car/lease companies are pretty accurate on this, barring the very rare and unpredictable incidents like the Tsunami that @Scott Ales mentioned above. They do their due diligence and have complex financial models to predict this value. This value is usually conservative, so that it works out for them one way or another, and thats why they stay in business. But it is possible that they are doing math tricks like the one @verygreen is suggesting above. There's additional margin for the company if you lease, considering that your lease payments only cover 37% of the sales tax, as opposed to 100% with loan payments. So this may give them runway to inflate the residual by another few grands. I can see how financing would lose out in this scenario because you lost the sales tax you paid if you trade in (unless your state allows allowance for this). You only get the benefit of financing if you are keeping the car longer than 36 months in that case.
Only actual market values for 3 yr old MX's would shed light. And so far, I can't find them much below $60K asking, so assume $55K trade-in. But I agree that it could be worse if Tesla takes a turn for the worse.
Please keep your thoughts coming.
I did not because those apply equally to both leased cars and financed cars (Bay Area).
If I understand you correctly, you are saying that part of that high lease APR may be going towards artificially raising that residual value above the actual market rate. Allows Tesla to boast a higher resale value for their marketing purposes, while making you pay for the actual depreciation on your car anyway. I agree thats possible, and may be the reason why people are seeing their trade-in values lower than their the lease residual.
That makes sense! It is standard to add the tax credit to the lease residual. This is how the lease company passes the tax credit to the lessee. That explains why you are seeing a $10K difference between your residual value and the market values. It also means that the govt. paid $7.5K out of that $10K anyway. This would be true of those who financed at that time too. So the real difference may be $2.5K, which may be due to the reasons @verygreen is suggesting above.
With Tesla price cuts absorbing the federal tax credit, I wouldn't think the equation changes much. Just that the money is taken out of the top line rather than the bottom line. But would it be possible to tell us what your MSRP (excluding destination and doc fee) was when you bought your car? Whats your configuration?
Also, I checked car gurus etc, I can't find a 2016 MX 75D with less than 30K miles on it for anything less than $60K. What site are you checking?
Assuming that you trade in at the end of 36 months, repairs/headaches etc under warranty don't change based on if you are leasing or financing. But I get your point. It boils down to what the car will be worth at that time.
Usually car/lease companies are pretty accurate on this, barring the very rare and unpredictable incidents like the Tsunami that @Scott Ales mentioned above. They do their due diligence and have complex financial models to predict this value. This value is usually conservative, so that it works out for them one way or another, and thats why they stay in business. But it is possible that they are doing math tricks like the one @verygreen is suggesting above. There's additional margin for the company if you lease, considering that your lease payments only cover 37% of the sales tax, as opposed to 100% with loan payments. So this may give them runway to inflate the residual by another few grands. I can see how financing would lose out in this scenario because you lost the sales tax you paid if you trade in (unless your state allows allowance for this). You only get the benefit of financing if you are keeping the car longer than 36 months in that case.
Only actual market values for 3 yr old MX's would shed light. And so far, I can't find them much below $60K asking, so assume $55K trade-in. But I agree that it could be worse if Tesla takes a turn for the worse.
Please keep your thoughts coming.
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I don't know the technicality details but if I drive a model X for 9 years, buying would cost me 55K less than lease in general. Yes, lease get to drive a new car every three years where buy drives the same old MX for 9 years but the last 3 of the 9 years will be free. Would that make buying better since it can save about 55K from year 7-9 and another 55K from year 10-12? Of course, if you assume Tesla will drop the MX to let say 60K 6 years from now and to 40K 10 years from now, then leasing makes more sense.
Well, it was supposed to be the opposite.
With traditional manufacturers they don't give you as much of a cash discount upfront in exchange for lower APR/lease costs.
It is true Tesla's money factor is quite high that probably allows them to recapture some discount value back (since with Tesla you get the price upfront and then decide how to pay for it). But the importnat part is since they (and everybody else pretty much) understates depreciation, that leads to lower lease payments due to inflated residual value at the end of the lease. The end result is it's rarely making any sense to purchase the car when the lease matures and the lease structure makes it impossible to haggle with Tesla for a lower buyout price at the end of it to better reflect actual residual value.
Example is my lease. my "rent fee" (= interest paid) over two years were ~$8.7k for X100D with residual at the end of $75k. Of course even today, over 6 months from lease end the actual residual is quite a bit lower if you look at comparable cars. So in this sense the lease is a win for me. When it matures I just give them the car back and can either buy a comparable 2 year old model X for less money than $66k or I can lease (or buy) a new one for about $80k or so, it seems.
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Thanks for sharing actual data about your lease. This is really helpful. It was Mar 2018, so I am assuming that the $75K residual includes $7.5K federal tax credit. So its more like $67.5K, since those who financed at that time would have gotten a check for $7.5K from Uncle Sam. The total interest paid in my financing example (similar principal, 72 months @3.5% even though interest rates were lower back then) after 24 payments is $3,119. So your 'rent fee' has about $5,500 of fluff that can bring down the residual down to $62K. Plus, those who financed didn't pay the $695 acquisition or the $395 disposition fees. Thats another $1,100
On an unrelated note, looks like you paid $5K downpayment on a lease. I would advise against paying *any* down payment on leases since you lose that money if your car ever gets totaled. The insurance pays off the lease, and you get nothing.
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unfortunately it's impossible to change in case of a Tesla lease (or so it looked) as such I had no way to wiggle out of it.
You are correct that there are those extra fees and I did not get the $7.5k tax credit, on the other hand I also did not get to pay the sales tax on that $75k (at 7.25% rate or some such) which is almost $5.5k (+ 3.5% interest on it if you are financing on your terms, I think at the time it was actually more like 2.99 or 1.99 or some such).
And then my 24 months are not over yet and so the final actual residual is not yet known. For all we know it might drop another 20k due to a variety of reasons.
As you can see, this gets complicated and convoluted real fast
OP here, with an update. I took delivery of my Raven X on the 21st Sept. I finally decided to lease. Here's why:
Basically, what I found out is that all things considered, it worked out pretty even at the end of 36 months. May be buying is slightly ahead. But not much, may be half of the sales tax you paid. I know leasing looks more expensive in the beginning, but the catch is that Tesla won't pay you as much as the lease residual if you were trading in your own Model X. This means that part of that expensive lease payment is kicked back to you at the end of the lease.
Now if you plan to own for longer than 36 months, buying definitely comes out cheaper. But I backed out of that plan after reading on this forum about the durability issues, and issues with service and purchasing extended warranty that some people have experienced. Also, did some research and found that it could be pretty difficult selling a used Tesla to a third party or to companies that pay cash, without taking a significant hit on the price. So there's a lot of uncertainty about what your used Tesla will actually fetch when you put it in the market for cash or trade-in. And if you have had a fender bender, or other mishap on the Carfax, it could drop even lower.
Tesla is not like a traditional car. It is software heavy like a computer or smartphone. Sooner or later, your hardware is going to be too old for the latest software, just like smartphones or laptops. The owners of some 2016 Model X (currently 36 months old) have reported updates making their cars worse (reduced range, slower charging, or just lag etc), and opting to not connect to wifi to avoid updates. This could further reduce the appeal of your used Tesla.
In 3 years, theres going to be much more competition and the features are going to advance significantly (Robo Taxi). And if you are the Tesla buying kind, chances are that you would want to upgrade to the latest and greatest at that time.
Its highly likely that Tesla would have made another price cut, evaporating any equity advantage buying may have had.
To get the same monthly payment, buying was requiring almost $8K more in down payment. You could invest it elsewhere to further reduce the cost difference.
Basically, what I found out is that all things considered, it worked out pretty even at the end of 36 months. May be buying is slightly ahead. But not much, may be half of the sales tax you paid. I know leasing looks more expensive in the beginning, but the catch is that Tesla won't pay you as much as the lease residual if you were trading in your own Model X. This means that part of that expensive lease payment is kicked back to you at the end of the lease.
Now if you plan to own for longer than 36 months, buying definitely comes out cheaper. But I backed out of that plan after reading on this forum about the durability issues, and issues with service and purchasing extended warranty that some people have experienced. Also, did some research and found that it could be pretty difficult selling a used Tesla to a third party or to companies that pay cash, without taking a significant hit on the price. So there's a lot of uncertainty about what your used Tesla will actually fetch when you put it in the market for cash or trade-in. And if you have had a fender bender, or other mishap on the Carfax, it could drop even lower.
Tesla is not like a traditional car. It is software heavy like a computer or smartphone. Sooner or later, your hardware is going to be too old for the latest software, just like smartphones or laptops. The owners of some 2016 Model X (currently 36 months old) have reported updates making their cars worse (reduced range, slower charging, or just lag etc), and opting to not connect to wifi to avoid updates. This could further reduce the appeal of your used Tesla.
In 3 years, theres going to be much more competition and the features are going to advance significantly (Robo Taxi). And if you are the Tesla buying kind, chances are that you would want to upgrade to the latest and greatest at that time.
Its highly likely that Tesla would have made another price cut, evaporating any equity advantage buying may have had.
To get the same monthly payment, buying was requiring almost $8K more in down payment. You could invest it elsewhere to further reduce the cost difference.
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great thread here. Curious why nobody has brought up the advantage of buying and claiming Section 179 deductions on the Model X. I've been going back and forth on buying or leasing and since i have a business i can use the vehicle for at least 50% of the time the 100% deprecation plus bonus depreciation is very appealing for buying. Truth be told, i'm not 100% clear on the actual rules of Section 179 but what i've read and the brief conversation i had with a CPA it seems like its the better way to go if you need a big deduction in the first year of ownership
That topic is extensively discussed here: Model X IRS 100% Deduction “Hummer Loophole” - 2018 Edition
testarossa
Member
The section 179 "loophole" is an IRS red flag especially if you don't own a business which requires more than 50% use of the vehicle. Also, if you sell your vehicle too soon the IRS will hit you with depreciation recapture. Your accountant may be OK with this deduction, but the IRS may audit you for proof.
What’s the free upgrades you mentioned? What free upgrades does Tesla give to model x owners that buy? Thanks
And 5 months later, there is still nothing better than a Tesla out there. Mercedes can't sell it's EQC. Audi etron is a dud. I bet that fast forward and I will still be drawing the same conclusion.
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