Am I an idiot for going for a lease?

[Petrocelli]

If you plan on getting another car in 3 years, you should lease. The hassle of selling a car is not worth it. And if you trade it in, you will be low-balled.

 

[cgarcia0458]

My reason for leasing was lower monthly payments. I know in the long run, i’d Have some equity in the car if I chose to buy it, but I want to leave the door open Incase something else comes along.

 

[DopeGhoti]

i’d Have some equity in the car if I chose to buy it

From what I've been reading, if you lease a 3, you don't have the option to buy out at the end of the lease.

 

[cgarcia0458]

From what I've been reading, if you lease a 3, you don't have the option to buy out at the end of the lease.

I meant if I bought the car from the get-go instead of leased it.

 

[acarney]

Without being able to buy the Model 3 at the end of the lease I feel like the program is horrible unless you're a fleet operator or business. Tesla has a 4 year warranty so if you usually swap cars every three years because you like full warranty coverage then with the Tesla you might be happy enough to keep the car four years rather than three. I also doubt (based on the S/X) that we'll see any major upgrades during the next three to four years. Sure we might get a slightly longer battery pack, slightly more power, maybe a couple extra interior color options, but probably not much, especially if they're trying to share commonality between Model Y. If you're already getting a LR AWD then you're probably going to be at the top of Model 3 for awhile (unless you suddenly decided you wanted a P car).

Second, the battery and motor warranty is 8 years, so you really don't have to worry about major drive-ability issues for a long time.

Between the fact that the car has pretty good warranty coverage and likely won't have huge changes in features I think the constant new car cycle may not factor in with Tesla as much... or may result in you being disappointed when you take delivery of your next Model 3 after the lease is over and you wrote a big check all over again for a different paint/interior color and just a little more range.

Leasing also basically means doing anything with the car is out of question. Spend $1k tinting it? Stupid idea. Spend $1500 with paint protection film? Nope. Buy a second set of wheels to make winter tire changes easy. Probably shouldn't. Now you might think you don't want to do any of those things, but it brings up another interesting question... Tesla is known for soft paint/thin clear coat. I would be curious how forgiving Tesla is at the end of the lease if you have six or seven fairly large rock chips on the front end (or more!), or have started sandblasting off the paint behind the wheels on the lower body panel. Yes those are Tesla issues to begin with, but might they nail you with $500 to $1000 for "excessive ware" charges?

Go on step further and think about this... $6 or $7k for FSD would be a HUGE investment for 3 years of use... Now if Tesla offered a deal that you buy it once and if you lease again with Tesla or buy a Tesla at the end of your lease FSD would follow you to that car it would be darn good and smart on their part... but if you pay for the feature and then essentially have it loaned to your for 3 years, that's rough. Right now FSD doesn't really seem worth that price, and I don't care what Tesla says will happen in the coming months, FSD is really far off. However, I could see pretty large improvements to navigate on autopilot. I haven't personally been able to use it, but standard AP works really well on the freeway, so I could see NAV on AP getting really refined on freeway driving and this might be worth it to someone doing a lot of freeway travel for work or someone that does a lot of road trips.


*With all that said, I absolutely would NOT be surprised if Tesla turns around and offers customers the ability to buy out the Model 3 at the end of the lease. We won't have full self driving in 3 years, probably not even in localized areas.At most I could see a city working with Tesla to allow FSD but geo-limit areas where it didn't work; school zones, poorly/unmarked residential streets, etc. Maybe in 3 years you'll be able to drive the car three or four blocks to a main road, activate FSD, and have it drive you to a mall a few miles away with hands off the wheel the whole time, but I highly doubt you'll be able to go from driveway to destination hands off and highly doubt you'll be able to have an unmanned car go anywhere in 3 years. So.... would Tesla still want all those cars back, or would Tesla suddenly be open to people buying those cars? Again... totally won't be surprised if people end up buying out their lease...

 

[Dan203]

I decided to lease because the math was better for me. I don't know how others are figuring this out, but in most scenarios I've calculated leasing is cheaper than buying unless you plan to keep the car for longer than 3 years. I personally seem to trade in cars every 3 years anyway, regardless of how I pay, so for me leasing is the best financial option.

The lack of a buyout at the end seems to be a big hangup for a lot of people but I'm not sure why. If you plan to keep the car for more than 3 years then just buy/finance. The only other reason people like this option is because sometimes you can sell the car to a 3rd party at the end for more than buyout and make a little profit. But I don't think that'll be the case for a Tesla.

In my case the cash price of the car I'm buying is $58,190 and if I subtract taxes I'm paying $27,144.08 over the 3 year term. That means the residual value is $31,045.92. I currently own a 3 year old BMW 340i with 19k miles which was about the same price. I'm getting quotes in the $28-$30k range for it right now. So the likelihood that your Model 3 is going to sell for more than $31k in 3 years is pretty slim.

If you just like the idea of "owning" a car instead of "renting" it then go ahead and buy. But trust me if you decide to sell in 3 years you're going to lose money. I'm looking at losing about $10k on my current car given that I put $30k down and will only get about $20k back after I pay off the loan. If I had leased instead I'd be able to walk away clean and still have that $30k in the bank.

 

[Knightshade]

I decided to lease because the math was better for me. I don't know how others are figuring this out, but in most scenarios I've calculated leasing is cheaper than buying unless you plan to keep the car for longer than 3 years. I personally seem to trade in cars every 3 years anyway, regardless of how I pay, so for me leasing is the best financial option.

The lack of a buyout at the end seems to be a big hangup for a lot of people but I'm not sure why. If you plan to keep the car for more than 3 years then just buy/finance. The only other reason people like this option is because sometimes you can sell the car to a 3rd party at the end for more than buyout and make a little profit. But I don't think that'll be the case for a Tesla.

In my case the cash price of the car I'm buying is $58,190 and if I subtract taxes I'm paying $27,144.08 over the 3 year term. That means the residual value is $31,045.92. I currently own a 3 year old BMW 340i with 19k miles which was about the same price. I'm getting quotes in the $28-$30k range for it right now. So the likelihood that your Model 3 is going to sell for more than $31k in 3 years is pretty slim.

The likelihood of a BMW ICE cars resale being the same as a Model 3 is what's pretty slim.

For example-
Tesla Model S Resale Values = Best In Class | CleanTechnica

That's resale on the Model S vs full size luxury cars from other brands.

BMW lost 40% of its value after 50k miles.

The Tesla only 28%

In fact the only brand with worse depreciation than the BMW was Jaguar.... and everyone was worse than the Tesla.


If we apply that 28% number to your $58,190 Tesla you'd have almost $42,000 in residual value... meaning leasing will have "cost" you an extra $10,000 or so... (on top of costing you any tax credits buying would have gotten you)

Obviously we can't know if Model 3 resale holds up as well as the S has, but it's pretty damn likely it'll hold up better than BMWs resale

 

[Dan203]

The likelihood of a BMW ICE cars resale being the same as a Model 3 is what's pretty slim.

For example-
Tesla Model S Resale Values = Best In Class | CleanTechnica

That's resale on the Model S vs full size luxury cars from other brands.

BMW lost 40% of its value after 50k miles.

The Tesla only 28%

In fact the only brand with worse depreciation than the BMW was Jaguar.... and everyone was worse than the Tesla.


If we apply that 28% number to your $58,190 Tesla you'd have almost $42,000 in residual value... meaning leasing will have "cost" you an extra $10,000 or so... (on top of costing you any tax credits buying would have gotten you)

Obviously we can't know if Model 3 resale holds up as well as the S has, but it's pretty damn likely it'll hold up better than BMWs resale

Someone on YouTube took their Model 3 directly from the Tesla pickup to a CarMax and was quoted less than that. So there is no way a Tesla is holding 28% of it's value after 3 years.

Also my car has 19k miles on it, not 50k.

 

[Knightshade]

Someone on YouTube took their Model 3 directly from the Tesla pickup to a CarMax and was quoted less than that. So there is no way a Tesla is holding 28% of it's value after 3 years.

That's correct.

It was actually only 28% depreciation after 5 years.

Those numbers were based on thousands of actual used car sales

Not "one dude who drove to carmax"


I provided a link for the info- maybe try reading it?

 

[Dan203]

That's correct.

It was actually only 28% depreciation after 5 years.

Those numbers were based on thousands of actual used car sales

Not "one dude who drove to carmax"


I provided a link for the info- maybe try reading it?

Apples and oranges though. The Model S is an expensive and relatively rare car. They've already sold more Model 3s in the last 2 years then they sold Model Ss in the last 7+ years. Not only that the MSRP of the top trim Model 3 has dropped almost $15k since it's release. (The original Performance maxed out for $79k, now only $64k)

That being said we're all just guessing. You think it'll be worth more then buy and see if you're right. I think it'll be worth less so I'm going to lease. Both of us are gambling really. I guess that's why people like the buyout option on leases. It's sort of a way to hedge your bet.

 

[Knightshade]

Apples and oranges though. The Model S is an expensive and relatively rare car.

And so was every model of full sized Lux car they compared it to in the link

In fact, most of them were more rare than the S, selling in lower numbers.

And yet those others depreciated more.

Especially the BMW.

No reason to think that wouldn't be the case comparing the cheaper BMW to the cheaper Tesla.

 

[Dan203]

No reason to think that wouldn't be the case comparing the cheaper BMW to the cheaper Tesla.

There are plenty of reasons to think this wont hold true for the cheaper cars. They are completely different cars with completely different buyers. Not to mention there will be many more used Model 3s available which will skew the supply/demand curve in the buyers favor.

Also if you look at KBB right now. A 2018 Model 3 Performance with all the options, which originally cost $78k is coming up with a range of $50-$54k. That's already 35% of it's value in just 1.5 years. If you really expect your Model 3 to retain 70% of it's value after 5 years you're in for a slap in the face.

 

[Knightshade]

There are plenty of reasons to think this wont hold true for the cheaper cars. They are completely different cars with completely different buyers. Not to mention there will be many more used Model 3s available which will skew the supply/demand curve in the buyers favor.

But demand is much higher too. Tesla continues to sell the cars faster than they can physically build the things.... (hence why they're trying to get GF3 online, and massively increase battery supply which is the biggest constraint)

Also if you look at KBB right now. A 2018 Model 3 Performance with all the options, which originally cost $78k is coming up with a range of $50-$54k. That's already 35% of it's value in just 1.5 years.

Keep in mind the 2018 buyer got $7500 back from the feds, and 5k back from Tesla for the FUSC refund, on that purchase... (he also got free lifetime connectivity, homelink, and the a few extra adapters- none of which new cars get...) meaning he really only paid $65k for the car. (or nearer 60-62.5k depending what state rebates were available to them in 2018).

So it's nowhere near a 35% drop.

 

[Dan203]

But demand is much higher too. Tesla continues to sell the cars faster than they can physically build the things.... (hence why they're trying to get GF3 online, and massively increase battery supply which is the biggest constraint)

That's unlikely to still be the case in 3 years. Even now there are "inventory" cars available if you're not picky about specific specs.

If you want to believe that your car will retain 70% of its value that's your choice, but there is no data to back that up. Looking at the Model S numbers is bunk science though. They're vastly different cars, with different buyers, at a different time. The Model S was the only viable EV on the market for a long time and was highly coveted because of that. In fact I wouldn't be surprised if the wide scale release of the Model 3 didn't actually affect the resale of the Model S going forward. Now that there is a cheaper option that's more readily available the demand for used Model Ss will likely drop and the prices will to. It's basic economics.

Now maybe Tesla will turn out to be the magic brand that breaks the norms, but I doubt it. But if you're right and I'm wrong then so be it. Won't be the first time I've been wrong and certainly won't be the last.

 

[Teedub21]

I plan on leasing. We have 9% sales tax for one thing. I’d rather not pay that on the full price if I can help it. Payments are lower vs finance and I think there will be more EV offerings in the next 3 years that are more challenging to Tesla.

 

[Phlier]

I think there will be more EV offerings in the next 3 years that are more challenging to Tesla.

Well... I'm not so sure about that.

Popular opinion is that the other auto manufacturers are still trying to come out with an EV that's as good as a 2012 Model S. For the most part, I agree with that statement. In reality, the Model S has improved *a lot* since 2012; the 2019 Model S is a much improved vehicle over one from seven years back.

So Tesla has a huge lead over everyone else, and they're not standing still. They are most definitely a moving target.

Tesla's acquisition of Maxwell Technologies is, IMO, a bigger deal than what people think it is. Not only does Maxwell bring to the table a battery chemistry that gives a 15% improvement in energy storage capacity per kilogram of battery weight, their super capacitor intellectual property is huge, too. Especially when added to a BEV. Having a super capacitor buffer between the motors and the battery opens up a lot of possibilities.... less battery degradation, more energy recovery from regenerative braking, etc.

Sure, other manufacturer's EV's are going to improve over the next 3 years, but Tesla's will be improving right along with them. Who knows, three years from now, some other auto maker might actually bring out a car that equals a 2012 Model S.

 

[raptor5244]

I have leased a bunch of cars over the years but now I prefer to buy instead. I like the flexibility to trade in early, no worry about lease end disposition fees, wear and tear charges, worrying about going over mileage, having to install new set of tires before turning it in, etc.

Certain vehicles lease out great as they have low money factor and high residuals. The Tesla leases appear to require a lot of money down, have high money factors and no option to buy the vehicle at lease end. It all depends on what the true residual values wind up being in 3 years from now. While more EVs will eventually hit the market I just don’t see anyone catching up to Tesla in the next 3 years. The supercharging network alone is gold.

 

[SoccerMan94043]

Based on past history of both the Model S and 3, you can guarantee Tesla will devalue your car. From new hardware like AP 1.5, 2.0, facade changes and lowering prices for the same car every year, Tesla is consistently chasing quarterly revenue and provides deals. This will eventually work against the value of your car.

I wish a lease was an option when I purchased mine, but that wasn't in place yet (I missed it by a few months). Having bought and sold a Model S, it didn't hold the value anticipated by everyone here and was harder to sell than others thought as well (I know not apples to apples with the 3).

I'm starting to look at cars exactly like phones or computers which need replacing more often. ]For an additional 1K to 2K (the likely difference between buy and lease) it's a pretty good safety net and you'll get to compare and buy something better relatively soon.

If you can afford it, I don't see a major downside to the current lease and lots of upside.

 

[Adam3]

Lots of good points. If only we had a crystal ball. In 3 years the 2022 P3D+ may still be the "best" option. Are you OK potentially leasing the exact same car again? Specs/performance could be the same as a 2019 model, or it could have improved. What if something really cool comes out in 2023? You'll have to wait for the second lease to end (unless you can find someone to take it over). Big manufacturers are finally starting to make EVs - this will force Tesla to keep innovating, improving, and reducing costs. I wouldn't be surprised if the 2022 P3D+ is $45k and has 2.9s 0-60. There may also be larger Federal and State rebates at that point in time. This could drastically affect used car values.

 

[Dan203]

That is another reason why I'm leasing. The technology, pricing, and competition are evolving really quickly right now. There is a really good chance that in 3 years there will be better and cheaper options. Or maybe I'll just want a Y instead.

In that purposed scenario where we know something is coming in 2023.... Tesla offers a 2 year lease option too. It's not advertised but when you're filling out the "paperwork" after you place the deposit it's presented as an option.