I'm a little confused about how all of this works in practice. So if at the end of the lease term the market actually values the car at 40%, Tesla takes the car back and presumably has a LOT of used cars to sell. As of now, they don't even have a method for selling used cars at all. Presuming MS2 comes out in 3 years and Tesla incentives current owners to upgrade, what's their method of selling 5-,000 to 10,000 used cars (all the same model)?
Yes, Tesla would eat the difference. Selling the used cars is something they have done for years now with the Roadster.
In financial terms, it's not unreasonable to expect that the Model S will have residual value such that Tesla wont have to make up the difference. Real depreciation is largely a function of marginal cost of ownership. As capital goods age, their maintenance costs increase, which means that your marginal cost of ownership goes up. The faster that a product wears out the greater its depreciation.
But "wear and tear" is not the only factor. Marginal cost of ownership includes operational costs. Lower relative operational costs (aside from maintenance) also result in less depreciation. So a device which is more efficient will depreciate slower than a device which is less so. There are other factors in play, but that's the basic economics.
A 10 year old Toyota has a much greater value than a 10 year old Chevy because the marginal cost of ownership of the Toyota is much lower as it ages. This is because it's both much more durable and much more efficient to operate.
An 85kWh Model S is likely to be the most durable automobile ever made, from a mechanical standpoint, and even factoring in battery degradation (by far. Someone should do a study on this and become famous). It's also almost certainly the most efficient car ever made on a per pound basis. I haven't actually done the math, but the little electric econoboxes probably weigh ~3,000lbs while the Model S is ~4,800, while its maybe only 20-30% less on MPGe. The engineering in the Model S is just amazing in that respect.
Once the market figures this out (it might take a decade or more for the market to properly sort this out), a Model S class vehicle is likely to have amazing resale values compared to traditional ICE vehicles. This factor is really under appreciated when folks are talking about if or how the Model S will reshape the Market. Product replacement will be much more tied to fashion rather than actual need.
An ICE vehicle which has been driven hard (45k miles in 3 years) has used up ~25% of its economically useful life, and is on the verge of having to deal with rapidly escalating maintenance costs. This fact drives the basic 3-5 year replacement cycles we see in the auto industry.
For a Model S, the equivalent number is likely closer to 10%, and 5% isn't completely insane to contemplate.
