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Biggest driver of Model S depreciation?

Discussion in 'Tesla Motors' started by Wshowell, Jan 17, 2015.

  1. Wshowell

    Wshowell Member

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    As a future buyer of a used Model S (I have a 15 year old that my Honda will pass to in just under a year), I am watching very closely what appears to be an acceleration of P85 depreciation. I see this mostly as a result of P85D deliveries. It seems that P85s prior to the announcement were selling in the mid 90-100 range and now can be had for mid 75-85k range. In trying to time my future purchase to capture the best car for the best price without waiting too long to,own my dream vehicle.

    I see three events over the horizon which I suspect will put further price pressure on the used market and I am curious as to what everyone thinks will be the net results.

    The events are:

    1. Actual delivery of the Model X. I imagine a very high percentage of the people that have put down deposits are existing S owners as early adopters that will look to sell their S's when they receive their X. This should add to the supply side of the equation and push prices down.

    2. The Tesla Resale Guarantee. I believe this was announced in April 2013 and owners that signed up for the program need to exercise this option between 36 and 39 months. This means that starting in May of 2016 we should see added supply as those folks decide to sell their vehicles back to Tesla and upgrade to a new S,X or just take the money and run (doubtful since Consumers found 99% would buy a Tesla again). How do you all feel this will effect the depreciation curve, increase or decrease the value of a MS that is not eligible to be repurchased.

    3. CPO program. I assume the vehicles Tesla will be buying back with go through a refurbishment process and then go online a Certified Pre Owned and come with a new warranty etc. A CPO vehicle will be far more attractive to a used buyer like myself especially if it comes with a warranty (if Tesla extends and already amazing warranty). How will a CPOrogram effect the value of a used S from a private seller?

    4. When model 3 is announced and people see what the next gen is like will they want the older technology or will they elect to buy the smaller cheaper version even if it lacks some of the higher end features of the S like the aluminum construction?

    5. Small point. Gas is under $2 in many states ($1.72 Denver, $1.47 Atlanta, $2.49 here in San Luis Obispo). If I recall, Tesla like to crunch their value proposition numbers using $5.50 per gallon. I honestly don't think most buyers think they are saving money by buying a Tesla for the fuel economy over a Prius etc so this point is weak but still one to discuss.

    What appears to be going on is analogous to iphone resale values. An iPhone 4 today in great shape can be had for under $100 on Craigslist because it was superseded by the 4S and the 4S for $125 because of the 5 and so on and so forth. The latest and greatest iphone 6 used still sell very close to what they cost new but the day after a future iphone 7 is announced the market value will take a 30-50% instant depreciation from what I have observed. It seems this is happening to the Model S. If my observations are correct for my first 3 points then I am assuming within a year's time I will be able to find a clean, low mileage, well loved 2013 P85 for under $50k, a S85 for under $45k and a S60 in low 30's (remember, they don't have the same warranty as the 85kwh version so used car buyers will be afraid to buy a higher mileage S60) which will put it right in line with the Model 3 if not lower.

    I would enjoy other people's opinions and ideas around this topic and better understand what current owners plan to do as the technology progresses and the value/performance equation further changes.
     
  2. Burt Court

    Burt Court Member

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    Dont' worry about all that small $hit, put the kids thru college, then get on with your life. The rest will fall in place.
    old geezer
     
  3. SebastianR

    SebastianR Member

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    The key drivers in my eyes are a) insurance and b) service & repair costs.

    The older a Model S gets the more it will be compared to any other (similarly old) car. The cheaper the upkeep of the Model S, the higher will be its value.

    If you think about a comparison with a Mercedes S-Class and a Model S. When they are both new, owners likely don't care so much about these costs as other factors (prestige, image, technology, speed, acceleration, comfort, convenience etc.) are the predominant factors. Many of these factors don't really play a big role for the used car market - which is the reason why a Toyota Camry keeps its value better than a S-Class. A 4 year old S-Class just "won't cut it any longer" following arguments similarly to yours above: technology, make, model etc. have moved on. A 4 year old Camry is likely to drive just as good as a new one and running costs like fuel, service costs and insurance all of a sudden emerge as relevant

    What I'm trying to say is that a Model S at point of purchase new is a bit like an S-Class. Tesla has no problem with fuel costs, so if Tesla manages to keep insurances and service & repairs low, I believe a 4 year old Model S will perform more like a Toyota Camry and less like a Mercedes S-Class which would be a good thing.
    Having said this, a top of the line performance car will always lose value (sometimes dramatically) if a new top of the line generation emerges. So what I said applies to S60/S85 not the fully loaded P85+ (or now a P85D).
     
  4. alohates1a

    alohates1a Member

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    Sure, by 2016 you may be able to " find a clean, low mileage, well loved 2013 P85 for under $50k, a S85 for under $45k" and in 2017 they'll be even lower.

    Its a car, a consumable, a plaything- depreciation is expected. To each his own on a car's value and acquisition price point which makes sense and fits a budget.

    Im sure most here are thoroughly enjoying their MS since acquiring it rather than looking in the rear view mirror at depreciation curves.
     
  5. Mnlevin

    Mnlevin Member

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    if it is really important to you, see a fortune teller. That may put your mind at ease, or not.
     
  6. Auzie

    Auzie Tree Hugger Member

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    Model S is up gradable over the air, that may have some softening effect on depreciation curve.

    Imo the biggest depreciation will come in waves, with new hardware.

    Auto pilot hardware, dual motor, improved battery density, and similar new features that get built into new cars over time may make older models look less desirable.
     
  7. Robert.Boston

    Robert.Boston Model S VIN P01536

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    Remember that the OP is trying to figure out when to buy a used Model S; he's not fretting owning a depreciating asset, but rather looking to see when he can buy one of these used gems most advantageously.

    On that point: the OP has the great benefit of being in California, where there are a lot of Model Ss and, so, a lot of used Model Ss coming onto the market. The combination of the D and AutoPilot had a marked effect in lowering offer prices for older Ss. I agree with the OP that the release of the X will have an effect, but I think it will be less dramatic because
    1. the Model X has been an option for a long time,
    2. there's a long backorder list, so unlike the D, you won't be able to get a new X in three months (unless you ordered one years ago) and
    3. the S and X are less substitutes for one another than the S and D.
    If I were looking to buy a used S and had flexibility with timing, I'd look to pick up one off the guaranteed resale program, assuming Tesla certifies and guarantees it. I would be very leery about owning an early VIN Model S without a warranty, as there were more component quality issues in those older vehicles.
     
  8. roblab

    roblab Active Member

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    In my "early VIN", my "component quality issues" were taken care of, replaced, repaired, re installed, at every least excuse. My car is better than it was when I bought it.

    One of the rumors we heard about our "early VIN" cars was that the stampings and castings were much thicker and stronger than they needed to be and several have been reduced in weight and size. Although I might not get the extra mile of range with my "heavier" car, the thought was, back then, that it was more likely to survive an accident.

    Sure, that's rumor. Probably couldn't get Tesla to say anything about it, true or not. But Some Things on the early vins were OK. I really don't think that buying a Tesla from an owner would be a scary issue. Most minor body work will not affect the drive, and an honest owner (You know where he lives, after all) will be just as reliable as Tesla.

    I wouldn't be afraid. Not as much as buying a used Mercedes or BMW from a dealer (You know what they are like!)
     
  9. Mnlevin

    Mnlevin Member

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    I bought my second MS recently. Took advantage of an owner who ordered one of the Newer versions and think I got a real deal. The car was in perfect condition, checked out by Tesla and got service records. The car only had 16k miles, still under 2 years of bumper to bumber and another 6 years on the battery. I had such a great experience with my other one, which we kept drove it 40k miles without a hitch I felt pretty confident in buying the used one. So in answer to the question of when, I would say right now, during this transition when some owners are looking to get rid of their cars before the new one arrives.
     
  10. ChadS

    ChadS Petroleum is for sissies

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    Wshowell, I see what you are doing and why. I agree with the supply-side factors you listed.

    But, there are also demand-side factors to consider. Tesla is getting more well-known, and this will increase demand for their used cars - especially as their prices drop, so I think there will be a floor to depreciation. Sebastian listed a couple of other factors that can affect demand one way or another. Plus there's the overall economy that affects car buying.

    Overall, I think it is extremely difficult to "time" the market. As alohates1a stated, owners are more likely to regret not buying sooner than paying too much, at least if they can afford it. If it's an affordability issue, yeah it's still a car so it's not a big deal to wait.

    I also agree with roblab - my early Model S had a few of the well-known issues (like pano squeak, door handles) but Tesla has been very proactive about fixing them so they no longer matter. I've had a wonderful experience with the car. In fact I think some of the early ones got inspected better, and we know Tesla has been trying to increase production rates and decrease costs so it's possible that not all later cars are better in all ways (this is well-known in the Roadster; changes to the Model S assembly line are more numerous, less batched and not as well-known). More features were added later, so you might want to buy a later car for that reason; but if an earlier car has the features you want, I personally wouldn't hesitate to buy one.
     
  11. Wshowell

    Wshowell Member

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    Thanks everyone for the thoughts (well most everyone). Since I won't be buying until we have a legitimate need for another vehicle, I will have the chance to observe how the values play out. The comments on earlier VINs is especially interesting to me and I see the pros and cons. There is one very clear prevailing theme I've seen thus far, no regrets from any owners. Whenever I buy and whatever I end up paying, sounds like a variable that will not be uncertain is satisfaction in the product.
     
  12. v12 to 12v

    v12 to 12v Active Member

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    Used prices might go up a bit when all the Federal Tax Credits are gone.
     
  13. ThortsMD

    ThortsMD Member

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    I think the biggest factor will be when the next battery upgrade is available. The price of a well loved used vintage model S with the now-smaller battery should take a hit at that point (esp. when the price of replacement batteries is revealed). That possible drop in price might coincide with your time to buy. YMMV.
     
  14. bluenation

    bluenation Member

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    if you are a truly financially rational buyer, you'd never buy a new car. that's been the rule for decades.

    and altho all manner of EV observers have theorized that an EV will keep its value longer than an ICE becaues 'there's less things to break', at least the tesla has proven that is not the case. and that's before we take into account instant depreciation from the introduction of new models, as you described.

    personally, the longer you wait, the better your purchase will be. there'll be more used teslas, of better fit n finish. i myself would never buy a first year tesla for obvious reasons, but you know...YMMV

    to me, the number 1 most important thing in a car is reliability. close second, is TCOO (total cost of operation). that automatically means a tesla is not even in my radar for purchase, for a couple more years. Reliability remains a question mark, and TCOO has proven comparable to, if not higher than its class competitors.
     
  15. wayner

    wayner Active Member

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    I personally think that given the steepness of the technology curve for Tesla vehicles you will see more depreciation. You have already noticed this with the D and Autopilot. Later this year or next they may come out with some other advancements that may be very attractive causing the P85Ds to drop in value. This is one of the risks that we run with such a leading edge vehicle. Of course this is somewhat offset by the lack of supply of vehicles currently and the lead time to order. Some floks want a car now and are willing to pay up.
     
  16. Doug_G

    Doug_G Lead Moderator

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    The biggest driver of Model S depreciation is... the driver.
     
  17. RobStark

    RobStark Active Member

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    It is not a theory but a fact. There are less things to break. Does not mean they can not break. Consumer Reports surveys show Tesla has average initial reliability. And Tesla 's defects per 100 vehicles score has improved from 2012 to 2013.

    Mercedes has below average initial reliability then very good long term reliability or what CR calls "dependability." And the difference is exaggerated with first and second year models.

    It appears Tesla is following this model. IMO Tesla had/has a manufacturing problem not an engineering problem. Once they figure out what went wrong in the manufacturing process and fix it the problem stays fixed.

    99/100 industry observers would have bet Tesla and Fisker reliability would be about the same. Very tough for a new manufacturer of such a complex product to have industry average or better initial quality. It is quite remarkable IMO Tesla is growing 50% plus per year in units delivered while delivering industry average reliability and improving their number of defects per 100 vehicles YoY.
     
  18. bredi

    bredi Member

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    #18 bredi, Jan 31, 2015
    Last edited: Jan 31, 2015
    Sweet $spot:
    I watched a well optioned 85kwh not sell at 78k for weeks, but then eventually drop to 65k on craigslist and sell within the day it was posted. I think there is a "break point" with the consumer who can't rationalize the purchase of a 70k plus car, let alone a used one. If you can afford a 75k car, wouldn't you get a new 83k car? Forgetting financial barriers, 50k and 60k is a huge mental, and emotional entry point over 70k. So I think they will stabilize in the 50k-60k range longer with market pressures and more buyers. There are way more consumers at 50k an 60k than there are 80k+ buyers. Keeping the sell point stable. Is a 50k 85kwh MS better than most if not all 50k sedan cars? Uh, yes.

    New battery, technology evolution:
    At some point the 60kwh will be gone. And an 85kwh may be standard. Dropping the price of the 60kwh big time.
    Autopilot- the safety features are pretty awesome. Eventually, autopilot cars will be on the used market and will bring the price down of non-autopilot cars.

    Battery Longevity:
    Time and mileage passed also means more charge cycles. So the older the battery, the less it (theoretically) can hold a charge. Range anxiety or even dead battery anxiety may kick in.
    There may be a break point in age where a battery can only charge to subpar levels. 150 mile range MS 60? The used price will drop off dramatically.

    All Wheel climates:
    Model S owners in climates that would benefit with the D. They are gonna get one and sell their existing MS.

    Upgradability? What if in 2017, you could upgrade a 60kwh MS with a new 125kwh battery, all the software upgrades and AutoPilot sensors? Bam. New car. Thus stabilizing the value of a used Tesla. Upgradability, unlike traditional cars may keep the used values higher. This is the potential beauty of EV's. 400mi Roadster anyone?

    2016/2017 Competition by other manufacturers:
    BMW will have an eDrive x5 and eDrive 3 series car.
    The i5 might be announced and shipping.
    The i3 may get a larger battery with 150+ range.
    The 2016 Volt is so much better looking that the circa 80's era looking variant.
    Other manufactures (Ford) will continue to sell better EV's.
    Manufacturers will offer longer ranged EV drivable "Hybrid's". CMax, Volt, i3REX, etc. City/short commute range battery operated ICE cars may become the norm. (Hope so!)

    Me personally? All the above considered, in 2016... I'd still pay 50k for a used Model S over a new 3series BMW or Audi A4. But it would have to be a P85! lol.
     
  19. RobStark

    RobStark Active Member

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    All of BMW's announced electrified vehicles are hybrids including the i5. Just don't see hybrids or plug-in hybrids as direct competition to Tesla.

    By the time LEAF 2.0 and Bolt arrive i3 BEV must have 150+ range to be competitive.

    There is nothing 80's about Volt 1.0. It has gone from distinct to conventional(to the point where the rear looks like a Civic).

    I did not care for the black belt below the window sill on the Volt 1.0 so I only liked the the car in black and really dislike the faux SS grill on Volt 2.0 but looks acceptable on a silver Volt.
     
  20. robby

    robby Member

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    I think the Roaster 3.0 is a result of Tesla wanting to do something nice for its earliest supporters. I wouldn't expect similar things for MS, MX, 3, etc. Other than batteries, indications are that MS won't receive significant hardware retrofits. Tesla has refused them for autopilot, and their design lead said in a presentation that changing consumer behavior to keep cars longer is not a priority right now.
     

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