Affording a Tesla

[Scoopa]

Hello All,

I just took receipt of my 2017 silver metallic Model S 100D. This is my first Tesla, and my first electric car. I appreciate all of your posts, as information I gathered here was instrumental in my design of the car, as well as taking the plunge and going electric. I love this car!

One of the things I wanted to get a dialogue going on from you all is affording a Tesla. As we all know, there are more expensive cars we can purchase than Teslas, but these certainly aren't cheap cars. I wanted to hear some of your all thoughts for any financial budgeting adjustments, portfolio liquidations, additional income created, etc to purchase your Tesla. Below is my story. Hope it is helpful to some of you on the fence. I know I'm only two weeks into Tesla ownership, but I don't regret it for a moment.

So me being a financial planner by profession, I'm always interested in the finances of things. I'd never bought a new car before, typically opting for low mileage pre owned cars from brands that were highly rated for reliability, which for me ended up being mostly Lexus vehicles. Those were fine, until I test drove a new Tesla Model S at a colleague's suggestion. Ugh. My IS250 just wasn't that exciting any more. I thus began researching the Tesla car designs and the corresponding monthly payments (couldn't justifiably pay cash without sacrificing other goals, plus 1.49% is a low interest rate hurdle to hopefully overcome on my investments). I discovered I could swing the monthly payments, but just because I could didn't mean I should. I needed more info.

Shortly thereafter, while in chats with the Tesla sales guy in Boston, who was very helpful, he told me that the average first time Tesla buyer had previously never spent more than $40K on a car. Not sure if that's an official number, and certainly doesn't apply to everyone, but that was encouraging, because I fell into that boat. I also went online to study Tesla financial demographics, and I stumbled into a great survey on Teslarati.

According to the survey the average annual income for Model S purchasers was $267K, Model X purchasers was significantly higher at $503K, and Model S reservation holders at $160K. Good to know. At least I had a benchmark.

Finally, I wanted to see if I could adjust monthly cash flow to purchase a Tesla with minimal interruption to other financial goals (still max out 401k, pump money into kid's college savings plans, keep adequate slush fund, acquire investment real estate, etc). In short, I didn't want to drive a sweet car at the expense of where my kids would potentially go to college. Thus, I went through my budget, discovered I was spending an unconscionable amount of money on groceries and dining, as well as too high of a cable bill. My wife and I candidly now go to Whole Foods way less (almost never), are more conscientious about how often and where we dine out, and I beat up my cable company. This has freed up a good $800-$900/mo. Not enough for a Model S 100D monthly payment, but pretty close if I put a little down, which I did via trade in and deposit. Bottom line is that I'm now only $300-$400/mo more out of pocket than I was before I adjusted cash flow ($1,200/mo total car payment). And now I own a Model S. Pretty sweet!

The federal tax credit of $7,500 will help at tax time, and I just got approved today from the state of MA to get a rebate check for $1K. Not too shabby.

It also helped to get a referral code from a buddy of mine who has a Model S, as this saved $1,000, as well as get me free supercharging for as long as I own the vehicle. Score!

That's it for now. Let me know if any of you have any exciting stories to share or thoughts about making the car happen. Happy driving!

 

[gabeincal]

Great story, though what I'm hearing is a professional financial guy wasn't aware how much money he wasted for a long period of time that he could've saved before...

 

[Scoopa]

Great story, though what I'm hearing is a professional financial guy wasn't aware how much money he wasted for a long period of time that he could've saved before...

Very true. I was cash flow positive and saving what I needed, so I didn't sweat the grocery bill till I realized I could get a Tesla from sweating the grocery bill. Sometimes, financial professionals included, we all just need the right carrot dangled in front of us to get some extra motivation!

 

[Galve2000]

I'm sad you won't be eating out as much tho....

 

[Bruinfan]

most i ever spent on a car was 26k. bought modelS75 for $81k

put $30k down to get the monthly payment to $750... thought being: we were spending $250/month on gas, and $500/month was what we were looking at for a car

borrowed $10k from my savings, cuz i knew i would get that back from govt.
i would've put $5k down regardless.
so i was looking at spending $15k additional up front. so dipped into the savings.. and it is money well spent in my mind.

i currently drive a tdi, which i will sell back when i get my model 3: will get 24k back for a car i paid 26k out the door. (2013 jetta, 75-80k miles on it when i sell back)... so looking at a 19k check from them. so that factored into the decision. if i pay 50k for my model 3, and i get $10k back, plus my obligatory $5k down, plus the 19k: looking at a $16k loan at hopefully 1.5% 72 month: about $250/month, minus the $100 i spend on gas... $150/month for the model 3.

 

[Scoopa]

most i ever spent on a car was 26k. bought modelS75 for $81k

put $30k down to get the monthly payment to $750... thought being: we were spending $250/month on gas, and $500/month was what we were looking at for a car

borrowed $10k from my savings, cuz i knew i would get that back from govt.
i would've put $5k down regardless.
so i was looking at spending $15k additional up front. so dipped into the savings.. and it is money well spent in my mind.

i currently drive a tdi, which i will sell back when i get my model 3: will get 24k back for a car i paid 26k out the door. (2013 jetta, 75-80k miles on it when i sell back)... so looking at a 19k check from them. so that factored into the decision. if i pay 50k for my model 3, and i get $10k back, plus my obligatory $5k down, plus the 19k: looking at a $16k loan at hopefully 1.5% 72 month: about $250/month, minus the $100 i spend on gas... $150/month for the model 3.

Nice work, Bruinfan. You've got it all mapped out and the math looks good. Thanks for sharing and I hope it all works out!

 

[personthing]

I don't have my car yet, but my affordability justification is as follows:

~$25k CPO Audi ICE car (about my average)
$2.50/gallon gasoline (obviously varies, and depends on grade of fuel, but this is a pretty fair estimate)
~25mpg (about my typical car's average prior to model S.. I've mostly driven Audi vehicles prior)
~$0.10/mi
$10,000 for 100k mi, which is about as long as I typically keep a car

~$50k CPO Tesla Model S
$0.033/kWh (off-peak rate plan from xcel energy in MN)
~3 miles per kWh (seems like a fair estimate from reading forum threads on that topic?)
~$0.011/mi
$1,100 for 100k mi (ignoring that some of that will be free supercharging, to be conservative in my comparison)

$8,900 less in fuel cost alone.

Then factor the convenience / time savings of never having to stop at a gas station at inconvenient times, since your car is always fully charged in the morning (barring power outages, I suppose, but those are pretty rare, and I won't use anywhere near max range on a daily basis). Time is extremely valuable.

Then factor savings in never changing oil, transmission fluid, coolant, much more infrequent brake pad / rotor / fluid changes.

Then factor that unless I go to a third row SUV (which throws off the above fuel calculations greatly), no other car can fit 7 people (I have a 3 and 5 year old who are excited about the rear facing seats), and we often have our kids' cousins / other family over and need 2 vehicles to go anywhere.

Then factor free road trips (albeit a bit longer), which we really enjoy taking.

Pretty easy decision, and didn't require any major financial moves to justify.

 

[personthing]

Hit enter before I finished, oops. I enjoyed reading your reasoning / changes made to accommodate a new budget. From a CPO buyer perspective, the fuel cost alone can pretty easily drive the decision. Tesla undersells the fuel cost savings by using the national average electricity cost, when (I think?) most buyers have access to off-peak rate plans that are much better than the national average.

 

[bonaire]

I don't have my car yet, but my affordability justification is as follows:

~$25k CPO Audi ICE car (about my average)
$2.50/gallon gasoline (obviously varies, and depends on grade of fuel, but this is a pretty fair estimate)
~25mpg (about my typical car's average prior to model S.. I've mostly driven Audi vehicles prior)
~$0.10/mi
$10,000 for 100k mi, which is about as long as I typically keep a car

~$50k CPO Tesla Model S
$0.033/kWh (off-peak rate plan from xcel energy in MN)
~3 miles per kWh (seems like a fair estimate from reading forum threads on that topic?)
~$0.011/mi
$1,100 for 100k mi (ignoring that some of that will be free supercharging, to be conservative in my comparison)

$8,900 less in fuel cost alone.

Then factor the convenience / time savings of never having to stop at a gas station at inconvenient times, since your car is always fully charged in the morning (barring power outages, I suppose, but those are pretty rare, and I won't use anywhere near max range on a daily basis). Time is extremely valuable.

Then factor savings in never changing oil, transmission fluid, coolant, much more infrequent brake pad / rotor / fluid changes.

Then factor that unless I go to a third row SUV (which throws off the above fuel calculations greatly), no other car can fit 7 people (I have a 3 and 5 year old who are excited about the rear facing seats), and we often have our kids' cousins / other family over and need 2 vehicles to go anywhere.

Then factor free road trips (albeit a bit longer), which we really enjoy taking.

Pretty easy decision, and didn't require any major financial moves to justify.

Did you compute in winter energy usage for an electric car (rule of thumb is 30% less range on a charge if you like a warm cabin - you can do pre-heating at home but that draws extra power).
Also, no cost for annual maintenance? How many years will it take you to do 100k miles?

Best way to save money in driving situations is to go from office work to telecommuting and/or job working closer to home. In today's age, some people are trying to buy larger homes farther away from work and doing herculean commutes (like some 80-100 mile commutes in California and NYC areas). CPO is a smart way to go. The TCO of buying a Tesla new is well over $1/mile when all-in (insurance, depreciation, maintenance) for a new buyer of anything 100D or higher.

Off peak is not relevant in many states. Mostly in high-population areas or highly regulated and PUC constrained markets like California.

 

[SageBrush]

Thus, I went through my budget, discovered I was spending an unconscionable amount of money on groceries and dining, as well as too high of a cable bill

OK, I'll take the bait

How much were you spending on the cable TV bill (and how much do you spend now) ?

 

[oktane]

Don't think there's any way to financially justify owning a P100D. Or even a new S100D. Sorry to burst your bubble. CPO Tesla perhaps. If time is worth a lot to you then that's worth something.

 

[SageBrush]

According to the survey the average annual income for Model S purchasers was $267K, Model X purchasers was significantly higher at $503K, and Model S reservation holders at $160K. Good to know. At least I had a benchmark.

These are interesting numbers but I presume they reflect the sub-group that buys on credit and has to give out personal finance information.

P.s.
Typo ? Model 3 reservation holders ?

 

[Scoopa]

Hit enter before I finished, oops. I enjoyed reading your reasoning / changes made to accommodate a new budget. From a CPO buyer perspective, the fuel cost alone can pretty easily drive the decision. Tesla undersells the fuel cost savings by using the national average electricity cost, when (I think?) most buyers have access to off-peak rate plans that are much better than the national average.

Nice work. Time savings for not fueling up at a gas station is real. Barring car problems, there is a time saving as well for not having to do oil changes every 3,000 - 5,000 miles. I still am driving by gas stations and feeling like I need to fuel up because it's been two weeks, but then I look and see an almost full battery. Very cool. Thanks for sharing.

 

[SageBrush]

Time savings for not fueling up at a gas station is real.

Only if that time is spent on extra, paid for work.

How much more paid work do you do now that you own a Tesla ? In my case it is going to be zip

 

[Scoopa]

These are interesting numbers but I presume they reflect the sub-group that buys on credit and has to give out personal finance information.

P.s.
Typo ? Model 3 reservation holders ?

Yes. Typo. Model 3. Good eye. And financial numbers were from a survey of 500 Tesla owners, reservation holders and enthusiasts. Who knows how accurate it all is, but good for a baseline analysis. Link below.

New survey compares demographic of Tesla Model X vs. Model S buyer

 

[Scoopa]

Only if that time is spent on extra, paid for work.

How much more paid work do you do now that you own a Tesla ? In my case it is going to be zip

Time savings is case dependent. It's not life changing savings, but compounded over the lifetime of owning a car, if one gets paid for his or her time, it's something. Real savings, TBD, will be not having to go do oil changes every three months. But if my Tesla has issues and my time gets pulled for that, then time savings will either be neutral or worse.

 

[personthing]

Did you compute in winter energy usage for an electric car (rule of thumb is 30% less range on a charge if you like a warm cabin - you can do pre-heating at home but that draws extra power).
Also, no cost for annual maintenance? How many years will it take you to do 100k miles?

Best way to save money in driving situations is to go from office work to telecommuting and/or job working closer to home. In today's age, some people are trying to buy larger homes farther away from work and doing herculean commutes (like some 80-100 mile commutes in California and NYC areas). CPO is a smart way to go. The TCO of buying a Tesla new is well over $1/mile when all-in (insurance, depreciation, maintenance) for a new buyer of anything 100D or higher.

Off peak is not relevant in many states. Mostly in high-population areas or highly regulated and PUC constrained markets like California.

Good call @ winter energy loss. I did research that a bit but didn't calculate it here. So even if 100% of my driving was 30% less efficient (probably more like 30% or so, but let's be generous to the ICE again), $1,100 * 1.3 = $1,430, so about $330 over 100k miles. I can live with that.

I fully expect there to be inconvenient maintenance / tire changes / problems / etc, but other than the things I mentioned, I'm hoping anything else should be comparable to an equivalent ICE car, and therefore excluded from both calculations. There's not really any maintenance on an EV that isn't also on an ICE (correct me if I'm wrong), so I only excluded the maintenance on an ICE that isn't on an EV.

It will take me around 6 years to hit 100k miles. Though I suspect that might be shorter with free road trip charging, and my wife wanting to drive it more than her ford escape (at least until our model 3 reservation arrives to replace the escape as well).

So I'm learning @ off-peak. I guess I'm very thankful that off-peak rates are so cheap in MN!

All that being said, I should've included one cost that wouldn't apply to an ICE - the cost of adding a separate meter for the off-peak charging. But having an electrician father-in-law, and the materials being very cheap, that's pretty negligible in my particular case at least.

Nice work. Time savings for not fueling up at a gas station is real. Barring car problems, there is a time saving as well for not having to do oil changes every 3,000 - 5,000 miles. I still am driving by gas stations and feeling like I need to fuel up because it's been two weeks, but then I look and see an almost full battery. Very cool. Thanks for sharing.

Thanks! Absolutely agree on time. I'm looking forward to that more than anything. Not exactly fun stopping for gas with -30 windchill in MN, for example.

 

[SageBrush]

Time savings is case dependent.

You have not answered my question.

My impression is that people are either in fixed hour jobs, or they work at much as they want already.
I'm not including the fools that take on work to afford the monthly payment.

 

[Scoopa]

OK, I'll take the bait

How much were you spending on the cable TV bill (and how much do you spend now) ?

Ha! Cable, internet and phone was only about $70/mo savings.

 

[personthing]

You have not answered my question.

My impression is that people are either in fixed hour jobs, or they work at much as they want already.
I'm not including the fools that take on work to afford the monthly payment.

a) the value of time is not merely monetary. For example: having an extra 10 minutes to hang out with my kids before leaving for work is valuable. As is not having to stand in -30 windchill for 5-10 minutes.

b) why do you take on any work if not to afford things you want to buy? (aside from just enjoying your work, but that can't be said of everyone). There's nothing wrong with taking on more work to afford something you want.