Are Model 3 leases expensive given cost of car?

[Petrocelli]

I have driven a c300 Mercedes for about 21 years. Every three years, I return my Mercedes and get a new one.

My lease end is approaching and I am considering a Tesla Model 3 versus a Mercedes C300 Coupe. The sticker on the Tesla is about $40,000. The sticker on the Mercedes is about $51,000.

Yet, with $2,500 down, the payment on the Tesla is $595, and the Mercedes is $625. I have always been told the general rule of thumb that on a 3 year lease, $1000 decreases the payment by $30 a month. In this case, there is a $30 difference in the lease price, and an $11,000 difference in the sticker prices.

Question: Are Model 3 leases too expensive given the price of the car? Why?

Thanks in advance.

 

[earthwormjim]

The lease terms seemed awful to me. A lease wasn't much less in monthly payments compared with outright buying the car, in large part because you do not get the government incentives with a lease. This is a big deal, especially in California. Supposedly they are factored into the lease, but I don't buy that, based on how expensive the lease payments were.

Come to think of it, I think the lease terms were about the same as a 5 year loan (1.9% interest, $6k down, essentially from subsidies) on my SR+. I ended up doing a 7 year loan (around 3.5% interest), and have lower monthly payments than the lease. Granted I do not get a new car every 3 years, but I have no mileage restrictions, and I still have the vehicle after 7 years, should I choose to sell it, and I get all the government incentives.

If I was going to specifically lease an EV, I would look at a BMW i3. BMW dealers around here are practically giving them away. Coworker's lease on her extended range 2017 model was around $200 a month. Less than what her gasoline fuel costs used to be with her prior car!

 

[TomT]

Some companies apply the federal credit against the lease. When I leased my Leaf, Nissan applied the $7,500 as a cap reduction on my lease.

The lease terms seemed awful to me. A lease wasn't much less in monthly payments compared with outright buying the car, in large part because you do not get the government incentives with a lease.

 

[jjrandorin]

I have driven a c300 Mercedes for about 21 years. Every three years, I return my Mercedes and get a new one.

My lease end is approaching and I am considering a Tesla Model 3 versus a Mercedes C300 Coupe. The sticker on the Tesla is about $40,000. The sticker on the Mercedes is about $51,000.

Yet, with $2,500 down, the payment on the Tesla is $595, and the Mercedes is $625. I have always been told the general rule of thumb that on a 3 year lease, $1000 decreases the payment by $30 a month. In this case, there is a $30 difference in the lease price, and an $11,000 difference in the sticker prices.

Question: Are Model 3 leases too expensive given the price of the car? Why?

Thanks in advance.

Yes, they are (tesla leases are awful compared to just about any other car company model). They dont want to lease it, they want you to buy it.

Also, companies like Mercedes / BMW /Audi subsidize their residual values. the higher the residual value they state in their lease the less of the car you pay for while you are renting (leasing) it. The less of the car you pay for while you are leasing it, the lower the payment. German car companies build all that into the cost of the car, so its my opinion that the price of the car (MSRP and invoice) is inflated for their model, which is leasing the car for 3 years, then having it come back to their dealer and becoming a low mileage sale.

They build into the price to sell every car twice. They also have their own captive finance companies, where they are making money on the interest rate / money factor, etc. Lots of reasons "why" a german car lease is more attractive than a tesla lease

Tesla doesnt want to do that. They have the residual closer to what the car will actually be worth on lease end, unlike merc / bmw etc.


TL ; DR version

Tesla doesnt want to lease cars, they only offered leasing on the high end models because they had to, as people did not trust them because they were a new company. They only offer them now, for those who can take advantage of it for business reasons. Its more expensive to lease a tesla because they want you to buy, not lease.

 

[run-the-joules]

The only people who lease teslas for individual side (thus ignoring people who use them for so called "business use") are either bad at math, make so much money they don't care that they're overpaying, or actively choose to overpay to not have to deal with selling the car.

 

[Petrocelli]

The only people who lease teslas for individual side (thus ignoring people who use them for so called "business use") are either bad at math, make so much money they don't care that they're overpaying, or actively choose to overpay to not have to deal with selling the car.

I generally agree with you. The lease numbers a very off-putting.

However, consider the following: What if, in the next 3 years, electric cars make a great leap forward, and the Tesla Model 3 is somewhat obsolete, causing unforeseen depreciation.

In order to properly analyze lease versus buy, don't we have to come up with some baseline number for depreciation?

So I guess that leads to another question: Any guesses as to how much a $40,000 Model 3 will be worth in 3 years?

 

[Petrocelli]

Here's a good article on depreciation of the Model 3:

 

[MTSN]

Great responses so far and agree with what’s been said. Tesla wants to sell you a car not lease, they don’t subsidize the lease unlike German car companies, and the math doesn’t pencil out in the lesee’s favor at all with Tesla. After my experience thus far owning a MR car for 5k miles and selling for what I paid for it essentially (even before the tax credits), I can’t see a way for the lease to work out better than buying.

 

[KenC]

I have driven a c300 Mercedes for about 21 years. Every three years, I return my Mercedes and get a new one.

My lease end is approaching and I am considering a Tesla Model 3 versus a Mercedes C300 Coupe. The sticker on the Tesla is about $40,000. The sticker on the Mercedes is about $51,000.

Yet, with $2,500 down, the payment on the Tesla is $595, and the Mercedes is $625. I have always been told the general rule of thumb that on a 3 year lease, $1000 decreases the payment by $30 a month. In this case, there is a $30 difference in the lease price, and an $11,000 difference in the sticker prices.

Question: Are Model 3 leases too expensive given the price of the car? Why?

Thanks in advance.

So, I went to the Tesla site and I couldn't recreate your lease pmt. I got the SR+ with white interior that stickers for $39,990. Changed the $3500 down to $2500 down, like you did. 36months/10k miles, the lease is $442. At 15k miles, the lease is $484 a month.

A 72 month loan, comes out to $610 a month. Were you looking at that?

 

[bigroo42]

This is the argument a colleague of mine made to me when it came to lease vs. buy. he said that in 3 years there will be so many other choices, longer range, etc that i will want to have the freedom to jump into the latest tech. I countered with the fact that i love everything about this car and even in 3 years i will still love it.

It's almost like a marriage. i married my wife 10 years later, sure there may be hotter, younger ladies out there but i am very happy with my catch. It's all about being content with what you have. my current car (picking up the p3d- on friday) is a 2012 acura tl v6. bought it about 2 years ago and i'm still happy with the car and the tech is 7 years old. i am confident that even in 5-7 years i will be happy with this car. in fact, i doubt ill buy another car until my 5 y/o is ready to drive in 11 years. this car will make a great starter car for her..... oh wait, nm, its WAY too fast for a 16 y/o to drive!!! HAHAH maybe by that time they will have a governer you can install to limit acceleration.

 

[terrywhite]

In 2017 I leased my 1st Tesla MS. Partly because it was my first EV and my first Tesla. I wasn’t sure if I’d be happy and wanted an easy out at the end of the lease. My lease is up in the fall of 2020 and I’m glad I leased. While it wasn’t the least expensive way to get the car, I’m actually looking forward to a new one. Why? Although I love my MS I missed the AP 2.5 hardware probably by a week. I’m already not getting features that newer Teslas are getting. What will it be like in a year? I do love my car and I’d actually buy it at the end of the lease if the hardware (cameras, MCU, etc) were upgradable. I have no regrets leasing. We bought the Model 3 in 2018 (2nd car). In 2020 I’ll decide which is best again.

 

[Petrocelli]

So, I went to the Tesla site and I couldn't recreate your lease pmt. I got the SR+ with white interior that stickers for $39,990. Changed the $3500 down to $2500 down, like you did. 36months/10k miles, the lease is $442. At 15k miles, the lease is $484 a month.

A 72 month loan, comes out to $610 a month. Were you looking at that?

I apologize. I was unclear on the lease. Rather than $2,500 down, I should have said $2,500 due at signing. In California, most of the $2,500 is eaten up by taxes, license, etc. The number I quoted is based on a written quote from the Tesla dealer, and includes California tax of 10% on each payment.

As for the 72 month loan, that amount also includes $2,500 down, but you have to add 10% tax, license, etc. to that number.

This thread has been very helpful to me. Here's what I have concluded: The cost to lease a Model 3 is $595 a month. However, with a 6 year loan at 3.49%, the monthly payment is only $70 more. When I figure fuel savings, tax rebates, and then add in the costs of installing a home charger, $650 for returning my Mercedes, etc., the cost of the Mercedes lease is about equal to buying the Tesla. That seems to favor buying the Tesla, as opposed to leasing the Mercedes.

The cost of the Tesla is even more competitive if there is some equity in it at the end of three years. There will be about $22,000 left on the loan. If I could even get $26,000 for the car, that would swing the numbers way in favor of the Tesla.

Does anyone think that the $26,000 assumption of the value of a base $40,000 model 3 in 3 years is too high or too low?

Thanks to everyone who has responded.

 

[KenC]

Just looking at the national advertised rates, since any deal is based around those depreciation rates and money factors, then Tesla's offer for 10k miles is going to TOTAL $19027 in payments after 3 years. When I look at a C300 coupe's nationally advertised offer, it comes out to a TOTAL of $23,008 after 3 years. Of course this doesn't include taxes, or any dealer contribution. If your Merc dealer is trying to get rid of C300 coupes, they might be contributing more than the nationally advertised amount, thus lowering the lease amount. They usually tell you when they're making a big cap contribution. But bottom line, the Tesla should be about $4k cheaper in total payments.

Now, looking at your finance scenario, will the Model 3 be worth $26k in 3 years? That's about 65%, which I think is at the high end for used car resale value. You might get that if the car's in mint condition with low miles.