Am I an idiot for going for a lease?

[Sagester]

So I could use a little advice here. I just pulled the trigger on a Model 3 AWD with autopilot. However, I'm hesitating making my decision regarding how to pay for it, i.e. finance vs lease.

I know the general opinion is that the Tesla lease doesn't offer great terms however my concerns are as follows:

1) I've only ever leased and usually change my car every three years
2)I am unsure what to expect from the residual value of the model 3 at three years so as a result, my calculations about whether or not it makes financial sense to lease vary by a wide amount.
3) if I finance and sell at 3 years, do the lenders Tesla use require you to pay off the rest of the expected interest for the term of the financing or just the principle?
4) is 4.25 actually a good car loan rate? I have excellent credit would have expected lower


Any advice would be appreciated... Thanks guys

 

[commasign]

No penalty for early payoff. If you’re gonna lease go with the $399 standard range plus offer. Otherwise I think it’s better to finance. Remember with Tesla, your car gets better over time so there’s less reason to upgrade after 3 years. It’s unlikely there will be anymore significant hardware changes for Model 3 in the next few years.

 

[eustachio]

I was offered 3.35% by my bank. Credit unions in the pinned sheet seem to offer even better.

On the lease, they do an analysis on leasehackr, by all accounts seems not a great deal. Financially you'd be better off financing and selling after 3 years.

But, that assumes you want to do that.

What's most important to you? Does the lease work for you?

 

[idealdreams]

Note that if you do lease, you do not have the option to buy the car afterwards. Tesla wants all Model 3 leases back for their ride hailing (?) program.

That being said, it’s pretty generally agreed upon that their leases are not good deals. But that’s okay, because most people leasing aren’t leasing for a good deal, they’re leasing for the luxury of never having a car that’s more than a few years old, that’s covered fully under warranty at all times, so on and so forth. Sure you can find a good deal every now and again, but again, at several thousand dollars down, the Model 3 lease is certainly not a good “deal.”

I have financed my last 4 vehicles and was burned by negative equity in my car each time. If you are planning on getting a new car at the end of the term and are OK with the cost to lease the vehicle, then go for it. I am leasing my Model 3 as I have a car on average for no more than 3 years and it makes more sense to avoid negative equity when I can simply lease to achieve the same thing.

 

[dmurphy]

I can't do the lease:finance value equation for your situation; only you know that .... a. few things I can say:

#1 - Tesla leasing will not let you purchase the vehicle at the end of the lease. I suspect that also means you can't sell it early during the lease term either, but I can't confirm that.
#2 - Residuals seem high from what I saw someone post (I can't find the actual thread...). north of 60% after 36 months, which seemed fairly generous to me.
#3 - Finance and sell - I used my own credit union. 60mos @ 2.5%. You don't have to take Tesla's financing - be sure to check the Tesla loan spreadsheet here: Tesla loan comparison spreadsheet - auto updates hourly

The final decision - only you can make... I've been leasing traditionally, but decided to finance my Model 3. Hoping to hold it for at least 5-6 years, and still have a little residual equity at the end. Worst case, my 12-year-old son gets one amazing first car.

 

[commasign]

Another point to consider is we really have no idea about how residual value will be affected by full self driving and the Tesla rideshare network. If you believe Elon, your Model 3 will be worth more than what you paid in 3 years.

 

[Sagester]

Regarding the full self driving and robotaxis, I do think it will happen within the next 5 years or so but my personal feeling is that it's unrealistic to expect it to happen during the term of my potential lease, Elon time is certainly a thing.

How does one get involved with a credit Union? I've never had any experience with them. Any other suggestions as to where to find good financing deals?

 

[notrhj]

Check the loans comparison spreadsheet referenced in an earlier post for rates.
Contact the Credit Union Directly.
You can only get a loan if you are a member.
Some let anyone join, Other are just for certain company or government employees.

You can Always do better then Tesla Financing as their loans are simple interest.
No penalty for paying early but you won’t save any interest.

 

[cbaaz]

So I could use a little advice here. I just pulled the trigger on a Model 3 AWD with autopilot. However, I'm hesitating making my decision regarding how to pay for it, i.e. finance vs lease.

I know the general opinion is that the Tesla lease doesn't offer great terms however my concerns are as follows:

1) I've only ever leased and usually change my car every three years
2)I am unsure what to expect from the residual value of the model 3 at three years so as a result, my calculations about whether or not it makes financial sense to lease vary by a wide amount.
...........
Any advice would be appreciated... Thanks guys

I ordered an M3 Performance and am planning to lease from Tesla. As long as I have a business use or otherwise want to limit the cost/term use of the car, I prefer to lease. This M3 will replace my existing leased business car.

As close as I can estimate, it looks like Tesla's lease program for the M3 is is equivalent to about a 62% residual and 0,0025 money factor (6%). Still a pretty high residual even if you lower the money factor to say 0.002 (4.8%).

I don't care about the lack of buyout since I do not ever buy a car at the end of the lease.. I specifically excluded FSD since my daily use would not really benefit and I do not plan on buying/reselling at end of lease.

I would be willing to wager that there will be plenty of end of lease cars either offered for buyout or placed in their used car sales pipeline.

 

[dmurphy]

I ordered an M3 Performance and am planning to lease from Tesla. As long as I have a business use or otherwise want to limit the cost/term use of the car, I prefer to lease. This M3 will replace my existing leased business car.

As close as I can estimate, it looks like Tesla's lease program for the M3 is is equivalent to about a 62% residual and 0,0025 money factor (6%). Still a pretty high residual even if you lower the money factor to say 0.002 (4.8%).

I don't care about the lack of buyout since I do not ever buy a car at the end of the lease.. I specifically excluded FSD since my daily use would not really benefit and I do not plan on buying/reselling at end of lease.

I would be willing to wager that there will be plenty of end of lease cars either offered for buyout or placed in their used car sales pipeline.

My only comment here is that a 62% residual bodes well for everyone - lessees and folks planning to sell a used Model 3 in a few years. That implies the financial actuaries except value to remain high. That’s positive news for all of us.

 

[jaffy23`]

Was going through the same decision myself, and decided to finance on an LR AWD this week. Tesla finance (automatically) came back at 3.99% rather than the advertised 4.25% I'd done my calculations on. Around here Chase offers 4.79% so that's better than I thought. I'm also looking forward to keeping the Federal tax credit rather than it going to Tesla Leasing.

 

[Sagester]

Thanks guys, the credit union spread sheet is very helpful.

Another question, how difficult is it to privately sell a Tesla? A quick Google search suggests people have had trouble selling their Tesla's for anywhere near the kbb value. If this is the case, is it really worth purchasing, if I can't get the theoretical value of the car during resale?

Anyone experience with how lenient Tesla is with wear and tear? Do they use a third party inspector?

 

[matthewkrieger]

No penalty for early payoff. If you’re gonna lease go with the $399 standard range plus offer. Otherwise I think it’s better to finance. Remember with Tesla, your car gets better over time so there’s less reason to upgrade after 3 years. It’s unlikely there will be anymore significant hardware changes for Model 3 in the next few years.

I'm struggling with this decision process now. The software gets better, but in a 3 year timeframe from now I would expect a new M3 to have more and better sensors and other upgrades that, unlike the FSD computer, are not upgradeable. In my opinion there's little reason to think that the car *won't* get significant hardware changes in the next few years. It's just the natural and normal pace of tech.

 

[matthewkrieger]

Financially you'd be better off financing and selling after 3 years.

I'm trying to decide this myself now. I feel there's more uncertainty in 3 years from now than there was 3 years ago. Particularly because:

- Many more EVs from other companies will be on the road
- Tesla will be more mature
- The M3 may or may not have upcoming hardware revisions (that are not upgradeable)

So to me there is a lot of uncertainty about the future value of an M3.

 

[matthewkrieger]

<< I suspect that also means you can't sell it early during the lease term either, but I can't confirm that. >>

That is correct - no getting out.

<< #2 - Residuals seem high from what I saw someone post (I can't find the actual thread...). north of 60% after 36 months, which seemed fairly generous to me. >>

Agreed! The residual on the lease workup that Tesla recently gave me for a LR AWD M3 was 64% on a 3 year, 15k mile lease. This is *very* generous in my opinion. I HIGHLY doubt if I bought/financed the car that I could sell it for 64% after 3 years, even with minimal mileage.

 

[matthewkrieger]

Was going through the same decision myself, and decided to finance on an LR AWD this week. Tesla finance (automatically) came back at 3.99% rather than the advertised 4.25% I'd done my calculations on. Around here Chase offers 4.79% so that's better than I thought. I'm also looking forward to keeping the Federal tax credit rather than it going to Tesla Leasing.

If you lease through Tesla they pass the tax credit to you - it increases the residual and lows your lease payment. But you do get it.

 

[bhzmark]

yes.

 

[matthewkrieger]

I hope I can add some value here as I am in this same thought process myself.

<< I know the general opinion is that the Tesla lease doesn't offer great terms >>

Relative to other car leases you are correct, HOWEVER, since you are planning to keep the car only 3 years then the question when considering lease vs finance is NOT how good the lease terms are vs other cars but rather how much you spend over the 3 year period on the Tesla with a loan vs a lease. It took me a while to get over that the M3 lease isn't great relative to other cars, but it doesn't matter because it's the costs vs finance which matter most (in your scenario, of keeping the car 3 years).

<< 2)I am unsure what to expect from the residual value of the model 3 at three years so as a result, my calculations about whether or not it makes financial sense to lease vary by a wide amount. >>

Just to be clear from a terminology point of view, leases have "residual" values and if you finance a car and plan to sell it at some point, it will have a "resale" value. The Tesla lease specifies the residual value. In my case it was 64% after 3 years in a 15k mile lease. The question of what would be the resale value of the car after 3 years of financing has uncertainty in my opinion. The 64% number seems optimistic to me - I doubt I would resell a M3 with reasonable miles in 3 years from now at 64% of purchase price. But that's the gamble.

<< 3) if I finance and sell at 3 years, do the lenders Tesla use require you to pay off the rest of the expected interest for the term of the financing or just the principle? >>

First, there's no requirement to go to lenders that Tesla uses, or that have any affiliation. Just go to your bank or credit union. ALL lenders will require you to pay off the balance of a loan, and that balance is comprised of interest and principal. You don't get a pass on interest just because you pay off early. You have to make good on the whole loan balance. Just look for a loan that doesn't have a prepayment penalty.

<< 4) is 4.25 actually a good car loan rate? I have excellent credit would have expected lower >>

Rates change all the time, and they vary with your credit score. Look at Bankrate.com or similar sites for the prevailing auto loan rates, then shop around and see what you get. It's impossible to say if your 4.25% is good or bad without knowing your details.

 

[matthewkrieger]

Another question, how difficult is it to privately sell a Tesla? A quick Google search suggests people have had trouble selling their Tesla's for anywhere near the kbb value. If this is the case, is it really worth purchasing, if I can't get the theoretical value of the car during resale?

I think the more relevant (and impossible to answer) question is how difficult will it be to sell in 3 years. If this is a concern, the lease protects you from that.

 

[Adam3]

I'm still considering a lease. When pricing out a P3D+ with 15k / year, in 3 years the car would have to be worth $37k to "break even" compared to the lease. Anything less than $37k and lease was more favorable. Will a 3 year old P3D+ with 45k miles on it be worth that much? Hard to say, but probably not. I could see the highest spec dropping in price another $5-8k over next few years, which makes it even less likely.

In 3 years there will be more EV competition by other manufacturers. There will also certainly be well over a million model 3's sold by then, so the used market could be flooded. Elon has said a "million mile" battery pack will be coming to Model 3 next year. Who knows what other changes we'll see, or won't see.

Porsche Taycan debut is tomorrow. Depending how that goes this may make leasing even more attractive for me. Even if pricing is outrageous, it's going to force Tesla to keep innovating.