jjh1234
Member
Tesla supposedly applies the federal rebate to the residual value. Seems sketchy to me since they determine the residual value as well.
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any reason not to do a lease?
- Thread starter k.electron
- Start date
I’ll add that a Tesla lease can be decent if you get the perfect storm of circumstances:
1.) Tesla forgives a ton of payments like 6-12 months to turn in lease.
2.) You get a huge reduction off an inventory car.
3.) You can get a 2 year lease to limit your payment stream exposure.
Businesses get better lease advantages than individuals but not as nice as buyout than depreciating out the asset. Though Section 179 on the X is unbeatable for businesses and Tesla ownership.
There is a difference due to retail arbitrage and asymmetric information.
The markets are not fully fungible.
A buyer expects higher residual than what is stated by a lease.
A buyer may know the market for their car more than the banks which cannot account for many variables.
That delta made it a no brainer to
1.) Lease my Volt (bank is getting shredded on the residual)
2.) Buy my Model 3.
Tesla retaining the Model 3 cars post lease is very bullish on their part. They must believe and know something we don’t. Or have some meta game that encourages the buy.
1.) Tesla forgives a ton of payments like 6-12 months to turn in lease.
2.) You get a huge reduction off an inventory car.
3.) You can get a 2 year lease to limit your payment stream exposure.
Businesses get better lease advantages than individuals but not as nice as buyout than depreciating out the asset. Though Section 179 on the X is unbeatable for businesses and Tesla ownership.
There is a difference due to retail arbitrage and asymmetric information.
The markets are not fully fungible.
A buyer expects higher residual than what is stated by a lease.
A buyer may know the market for their car more than the banks which cannot account for many variables.
That delta made it a no brainer to
1.) Lease my Volt (bank is getting shredded on the residual)
2.) Buy my Model 3.
Tesla retaining the Model 3 cars post lease is very bullish on their part. They must believe and know something we don’t. Or have some meta game that encourages the buy.
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money factor being offered is 0.002413 which is 5.8% interest.
i can probably get financing around 3.5% interest.
i can probably get financing around 3.5% interest.
I think you're saying what I was trying to, in slightly different words.
My point was that there isn't an inherent reason why a lease will always be cheaper - a lease can be either more expensive or cheaper than a loan that gets traded after the same period, depending on how well the people offering the lease estimated the market conditions ahead of time (or how much a manufacturer is willing to eat their own profit margin to drive sales with leases they know aren't built right.)
Speaking through my butt here, but my impression has always been that a lease is a good choice if you plan on replacing the car at the end of the lease period and you are willing to pay money to avoid the hassle of selling your old car when you're done with it. There are folks who buy a new car every three years and can afford the luxury of not having to bother with the whole struggle to sell it or haggle with a dealer over trade-in value. I hate the hassle of selling a car, but I generally keep my cars much longer than three years. I only had the Xebra for four years, but my other cars I owned for 12, 16, 15, and 8 years, respectively. I'm guessing 5 or 6 years for the Model 3, because I expect the technology to improve so much that I'll want the newest one by then.
SageBrush
REJECT Fascism
Then your path is clear. Enjoy the reduced depreciation of ownership after year #3.
I agree with your assessment that OTA updates are the cat's meow.
I went into the whole Tesla journey thinking I wanted to lease. I drive a bunch for work so inherently there’s an advantage to getting the most car for the smallest payment possible.
That said ... leasing didn’t work for me.
#1 - Tesla wasn’t offering 1st party leasing in early April. My time window to exit my previous lease was closing quickly. As MXWing said, I was able to play the residual value against the bank, exit my lease 6 months early by selling to a 3rd party, maximize the vehicle’s value, and take advantage of the EV tax credit as it stands today on my Model 3.
#2 - the math didn’t work. Even when they opened leasing (between my order and my delivery) - I didn’t like the numbers. The MF is quite high, there is no purchase option, and I was able to finance via CU at a very low interest rate (2.5%) which brought the monthly payment within a few bucks of the lease payment rate. With a greatly reduced operating cost on the Model 3, the work travel reimbursement will cover most if not all of that payment.
#3 - I expect to put a LOT more miles on the Model 3 than my previous car, because I enjoy driving it so damn much. I’ve got customers within the Northeast-midatlantic region that historically I’ve either flown to see, or taken Amtrak. Driving is now a viable option instead because of Autopilot. Hamstringing myself with a mileage cap on a lease didn’t make sense.
#4 - I expect Teslas as a rule to have better longevity than gas cars. I usually consider a gas vehicle on borrowed time above 100,000 miles. I don’t expect Teslas to be anywhere close to that. My son will be getting his drivers license in a little over 5 years. A well broken in Model 3 might just make for a very safe car for him ... if I can put it in “perma-Chill” mode. Sounds like an easy software feature to roll out in the next 5 years.
So, those were my reasons not to lease. Everyone’s situation is totally different so your mileage may vary (quite literally!)
That said ... leasing didn’t work for me.
#1 - Tesla wasn’t offering 1st party leasing in early April. My time window to exit my previous lease was closing quickly. As MXWing said, I was able to play the residual value against the bank, exit my lease 6 months early by selling to a 3rd party, maximize the vehicle’s value, and take advantage of the EV tax credit as it stands today on my Model 3.
#2 - the math didn’t work. Even when they opened leasing (between my order and my delivery) - I didn’t like the numbers. The MF is quite high, there is no purchase option, and I was able to finance via CU at a very low interest rate (2.5%) which brought the monthly payment within a few bucks of the lease payment rate. With a greatly reduced operating cost on the Model 3, the work travel reimbursement will cover most if not all of that payment.
#3 - I expect to put a LOT more miles on the Model 3 than my previous car, because I enjoy driving it so damn much. I’ve got customers within the Northeast-midatlantic region that historically I’ve either flown to see, or taken Amtrak. Driving is now a viable option instead because of Autopilot. Hamstringing myself with a mileage cap on a lease didn’t make sense.
#4 - I expect Teslas as a rule to have better longevity than gas cars. I usually consider a gas vehicle on borrowed time above 100,000 miles. I don’t expect Teslas to be anywhere close to that. My son will be getting his drivers license in a little over 5 years. A well broken in Model 3 might just make for a very safe car for him ... if I can put it in “perma-Chill” mode. Sounds like an easy software feature to roll out in the next 5 years.
So, those were my reasons not to lease. Everyone’s situation is totally different so your mileage may vary (quite literally!)
Dan203
Active Member
Not quite true. Leasing a maxed out (blue) model 3 performance costs $3,500 down and $693/mo. (10k miles) To get a 60 month payment down to roughly the same you'd have to put down $25,500 and after 4.5 years you'd still owe $4,200. Let's do the math....
3 leases....
3 x $3,500 = $10,500
108 x $693 = $74,844
Total = $85,344
2 purchases...
2 x $25,500 = $51,000
108 x $698 = $75,384
Total = 126,384
Meaning that each car would need to be worth $20,520 when you sold them just for you to break even with the lease. If you figure you could invest the downpayment difference and earn 6% you could earn about $9,000 over those 9 year. Meaning you'd have to sell each car for $25,000 just to break even with the lease.
Are you confident you could get $25k for a 4.5 year old car with 45k miles and no warranty?
It is best to lease EV. These things depreciate fast because of its nature - Federal tax credit + aging battery.
Daniel in SD
(supervised)
For other brands definitely but Tesla leases are crazy expensive. Other manufacturers subsidize their EV leases to meet CA ZEV requirements. Though lately it seems like the deals aren’t nearly as good.
SoccerMan94043
Member
Tesla has forced me to think about these cars like electronic devices (like an iPhone); they change so much so quickly it devalues the car more quickly (example: autopilot hardware 1, 2 and 3). I think leasing might just be a better option, even if it costs you an extra 2K or so (and no selling hassle... having sold a low mileage Model S 6 months ago, it wasn't as easy as many have you think).
Plus, in three years there will be a ton of credible competition.
Plus, in three years there will be a ton of credible competition.
vjason
Member
I think if you buy today and intend to keep the car the goal (to maximize your cash) should be to keep it until the battery tech refreshes (solid state or whatever). I suspect no one will be more screwed than those who bought within X months of that occurring, even if the car is still really good and they should just accept it,
I took delivery in Dec 19 so I've already suffered through my biggest depreciation hit. When the battery.next comes out I'll take another hit, but nothing like what will happen to those who bought just before it occurring. Thankfully I don't care either way as continuing to own the car makes depreciation discussions worthless.
Leasing can provide a little protection if you are about to buy and you think that the next big feature/capability around the corner.. Of course if you plan to keep the car depreciation isn't something you should stress about.
I took delivery in Dec 19 so I've already suffered through my biggest depreciation hit. When the battery.next comes out I'll take another hit, but nothing like what will happen to those who bought just before it occurring. Thankfully I don't care either way as continuing to own the car makes depreciation discussions worthless.
Leasing can provide a little protection if you are about to buy and you think that the next big feature/capability around the corner.. Of course if you plan to keep the car depreciation isn't something you should stress about.
Unless you want a car every 3 years or own your own business for write off or you have a car allowance from work; no point in leasing.
Dan203
Active Member
I tend to get a new car ever 3 years. The only one I ever kept longer than that (8 years) was my BMW 135i which I loved and only got rid of because it started to have expensive mechanical issues. Every other car I've ever owned I started to get the itch after about 3. And every single one I sold after just 3 I've lost money on. So unless you know FOR SURE you're going to keep the car for 5+ years a lease is a better deal. Take the money you would have put down, or paid toward a huge payment, and put it into an S&P500 index fund and earn money on it instead of losing money on a depreciating asset.
dabbler
Member
Leasing is like renting. Most of your payments are toward the interest on the amount leased. You have no equity in a lease. If you can't afford the loan payment on a new car, then buy a use one. Businesses lease cars for the write-off benefits.
It's really the same throughout the world of electronics tech. Cars have gradually evolved from purely mechanical technology to more and more electronics technology. Even gas cars are all computerized today, but with the big batteries of EVs and the technology involved in ever-increasing amounts of autonomy, the economics of cars is becoming more and more like the economics of computers.
A new computer is "old technology" almost as soon as you turn it on for the first time. We all know this, and we buy a new computer or a new phone knowing that if we want the latest and best we'll have to buy a new one every year, and for most of us, we know that two- or three- or five-year-old technology will still work just fine. My car will continue to do what it does now even after a new model that does more becomes available.
Maybe Tesla's lease prices are so high because Tesla doesn't want to take cars back and have to be in the used-car business.
Dan203
Active Member
Again it depends on context. With the Model 3 Performance the lease is $3,500 down + $695 acquisition fee + $693/mo for 36 months for a total of $29,143. The cost of the car is $61,990. Which means if you paid cash the car would need to be worth $32,847 in 3 years. Plus if you took that $32,847 and put it in a modest investment earning 6% you'd have made another $4,500ish in those 3 years. So really the car would need to be worth $37,347 at the end of 3 years just to break even with the lease. Now if you buy cash you do get the $1,875 tax credit, so that would lower it to $35,472.
So in 3 years do you think you'll be able to sell your car for 57% of it's original value? I doubt it.
If you're the type of person that keeps a car for 5-7 years every time buying might work out in your favor, but if you’re going to trade up every 3 years anyway you're just eating the depreciation for the next owner if you buy.
I have leased cars several times and I have never bought it at the end of the lease because I was tired of driving the same car.
Paying for the lease will be cheaper than paying for the actual depreciation in Tesla's case unless you keep it for maybe 6 years and the depreciation curve loses its slope a lot. Like you said...
Dan203
Active Member
Yeah I keep getting sucked in to buying because people tell me it's better, but right now I have a car that cost about $60k I put $30k down and have paid $585/mo for the last 3 years on a 0.9% loan. I'm looking at selling it to get a Tesla and it's only worth about $28k and I still owe $13k on the loan. So I'm not even going to get half my downpayment back. Bad investment. If I had leased I would have put like $2,500 down and the payment would have been less.
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