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Check my math - guaranteed value and TCO

Discussion in 'Model S: Ordering, Production, Delivery' started by PatD, Dec 30, 2014.

  1. PatD

    PatD Member

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    First post, been lurking for a while. Trying to make the numbers work to pull the trigger on a P85d!

    Anyway, been looking at TCO for a P85d over four years and eight years (I keep cars for a good while, but also not sure I'd keep a Tesla for eight years - would probably need to upgrade!) Then I started crunching numbers on the guaranteed value.

    First let's start with our fixed variables -
    P85d with the options I want comes in at $120,670. Federal rebate is $7500. Sales tax is 6%. I drive approximately 9000 miles a year (Biz and pleasure). Electric rate is $.14kwh. For our purposes today, assume no down payment.

    Now let's calculate a four year purchase. Let's ASSUME I can get the good credit union rate of .6% (I have outstanding credit, which apparently doesn't mean a lot with the credit union, but anyway. . .) Loan will be 60 months.
    4 years of payments with interest ($2122.73) and include our $2500 deposit: $104,391
    4 years of electric: $1,693
    Tires: $1,100
    Business mileage reimbursement: $6195
    Fed tax credit: $7500
    Trade/sell (Here's the big variable - I would HOPE to sell privately): $60,000 (This might be high, play with it if you like.)

    Total cost of ownership over four years is $33,489; annualized it comes to $8,372; monthly is $697.


    Now let's calculate a three year "purchase" with our guaranteed resale value from Tesla. I saw someone had a good rate of 2.8% over five years.
    3 years of payments with interest ($2242.32) and include our $2500 deposit: $83,223.52
    3 years of electric: $1,270
    Tires: None?
    Business mileage reimbursement: $4464
    Fed tax credit: $7500
    Guaranteed value: $56,880

    Total cost of ownership over three years is $15,649; annualized it comes to $5216; monthly is $434.

    Here's the thing - I don't think you'd get BETTER than 50% value selling privately in four years. Maybe you would, but I'd be surprised. Based on my situation and numbers, the better way to go is to turn the car in based on the guaranteed value and that's that. Where I do get burned is if I want to keep the car. I'll pay an additional $7200 in interest over five years between the 2.8% and .6%.

    Last monkey wrench is if I keep three years a fixed variable, but stick with the credit union and sell the car privately after three years. Again - take a guess on the value, but. . .
    3 years of payments with interest ($2122.20) and include our $2500 deposit: $78,899.20
    3 years of electric: $1,270
    Tires: None?
    Business mileage reimbursement: $4464
    Fed tax credit: $7500
    Trade/sell value: $70,000

    Total cost of ownership over three years is $-1794; annualized it comes to $-598; monthly is $-50.

    So with all that said - my math HAS to be off. There's NO WAY I can make money on this car in the last scenario. I think $70k is a VERY fair private party number (If not low?) for a $120k sticker car with 30,000 miles on it. No?
     
  2. PatD

    PatD Member

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    I think I figured out one piece of the missing puzzle. The "value" of the money. For the sake of argument, let's take a "normal" car at $50k and do the same calc -

    Normal car cost: $50,000
    Sales tax: $3000
    Loan amount with nothing down: $53,000
    Monthly payment (1.61%): $919.96

    Total payments and interest in 36 months: $33,118.56
    3 years of gas (25 MPG, $3/gallon, 9k miles/year): $3240
    Business mileage reimbursement: $4464

    TCO for three years: $31,894

    Now take your TCO for the cars (Before trade-in/sale) and turn them into a monthly cost; for the normal car at a three year TCO, you're looking at $885/mo. The Tesla at a three year TCO of $68,205, your monthly cost is $1894. Difference the two and you have $1009/mo to play with. Put in an OK stock returning 6% and at the end of three years you have $40k.

    If you take your $40k, AND sell your "normal" car for 50% of it's original value, you have $65k in your pocket at the end of three years. The Tesla - you'll break even. But you DID have fun, right?!

    - - - Updated - - -

    And I'm also missing the pay-off for the loan in the calc. . . Duh.
     
  3. ljwobker

    ljwobker Geek.

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  4. cmorn

    cmorn Member

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    In these three secenarios, you made payments for the car for 3 or 4 years, but you can't sell the car and get the proceeds until you pay off the balance of the loan.
     
  5. Saghost

    Saghost Active Member

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    I think the problem is that you're applying the final sales value to the cost of payments, as if the remaining loan balance just vanishes. You have to pay off the remaining loan balance, too. There's no way that the second scenario should be better than the first, either - you're getting less for the car, and paying more interest, while using the car for less time.
    Walter
     
  6. PatD

    PatD Member

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    Yeh, I completely forgot the pay-off of the original note in the calcs. I realized that when I was finishing the post and added that back in. Killer first post eh? You know what they say about first impressions!

    - - - Updated - - -

    Love this, thanks for sharing. Never thought about doing this based on cost per mile. That completely changes the math and looks like the Tesla is the cheapest vehicle to "drive." Now I'm justified in buying one! :)
     
  7. ljwobker

    ljwobker Geek.

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    You're welcome - I did it primarily as a thought exercise, but what I learned is that the vast majority of people think about the operating costs in terms of fuel, but ignore the two things that actually drive the number, which are depreciation and maintenance. Which makes me think that a 2 year old Model S in good condition that has been substantially depreciated might be close to the cheapest car you could imagine. ;-)
     
  8. Ride Long

    Ride Long Member

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    Your worksheet was very helpful. Thank you. I think your assertion about the young, used MS is spot-on. What we all get to decide now is where we fall on the curve of economic versus non-economic return on investment! In my case I've put in an order for an S85D and will wait because the dual-motor/autopilot is just too f87*ing cool to pass up, and amortizing the difference in ownership costs over six years won't bother me. Another way to paraphrase is to say "buy exactly what you want: only cry once."

    Thanks again for the worksheet.
     
  9. EclecticCitizen

    EclecticCitizen House call doctor for families.

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    Well said....and with that being said, I'm selling my S 85, 21 months old, 22,400 miles, but only 8,000 on new drive unit. PM me anyone who is interested. I'll be posting it online for sale later today!
     
  10. REBroker

    REBroker Member

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    Pretty cool! I ran the math with a P85D at 125k on five years with 60% depreciation, ouch, certainly not the cheapest thing around. Even without counting property taxes, I'm in Florida, we're looking at about $1/mile. And that's after taking into account the tax rebate.
     
  11. ljwobker

    ljwobker Geek.

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    Yep. But there's no such thing as a cheap $125,000 car... Although it would be interesting to run it against "roughly similar" vehicles... or, maybe looked at another way - if you run the numbers on 80k miles for a P85D, what does that equate to? Is that 125k Tesla the "same total cost" as a 90k sedan? a 70k sedan?

    A big part of my experience was getting over the idea that "I'm not a car person". Prior to the model S, it was inconceivable to me that I would ever spend more than about $40-45k (2014 dollars) on a car. I just couldn't find where spending more than that got me anything I actually wanted. Then along came the Model S, and the total cost of driving that thing is very very close to what I'd spend on a 45k equivalent ICE.
     
  12. REBroker

    REBroker Member

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    Yeah, I'm not really complaining because I'm getting my dream car and a daily driver all in one. This is probably saving me tons when looked at it that way :)
     
  13. swengl

    swengl Member

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    +1 to that, it's hard to put a "monetary value" on pure enjoyment :tongue:
     
  14. PatD

    PatD Member

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    Surprisingly. . . A $122k P85D vs a $52k Audi S4 works out to (For me and my low mileage driving) $1.46/mile for the Tesla, and $1.08/mile for the Audi S4 over four years. Monthly cost for Tesla (Loan, maintenance, etc.) comes to $1096, while the Audi is $811.26. I need to do more driving for "work!"
     
  15. ljwobker

    ljwobker Geek.

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    This is (pleasantly?) surprising... can I see your data somewhere?
     
  16. REBroker

    REBroker Member

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    How can you have monthly costs of ~1k when the loan alone will easily clear that on a 122k car?
     
  17. PatD

    PatD Member

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    My data is just sitting in an Excel sheet. But here's the basics -

    If we assume a .61% loan for five years from Electric Credit Union, I'll have paid $105,556 over four years between principal and interest. Assume the pay-off of the note to be about $23,670. Electric for me over four years at current mileage rates will run $1693. Figure a tire change at $1100 in the four years. I have no other maintenance costs in here as I really don't expect to need brakes or anything else while under warranty.

    Based on my current mileage for work, I expect to get $6200 in mileage reimbursements from my company. Finally, I HOPE to privately sell the Tesla for $73,200 after four years (This is assuming a 60% residual, which I think is safe based on CURRENT sales I'm seeing, if not a touch low.)

    So -

    105556 (P&I)
    23670 (Pay off of note after four years)
    1693 (Electricity)
    +1100 (Tires)
    -------------------
    Gross cost over four years is $132,019.

    132019
    6195 (Mileage reimbursement)
    -73200 (Private sale after four years)
    ------------------
    Net cost over four years is $52,624. Divide it by 48 months and you'll be at $1096/mo. Divide it by my normal annual mileage (9000 miles) and we're at $1.46/mile.
     
  18. CmdrThor

    CmdrThor Member

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    After 4 years when the the next generation battery is out you are going to have a hard time selling your P85D for 60% what you paid for it. I would figure 40-50%.
     
  19. PatD

    PatD Member

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    Would you make the same argument for a P85 vs a P85D? I've seen several private sales of 2012 P85 cars that were 65-70% of estimated residual. Granted that's only 2.5-3 years, but I was surprised to see those numbers.
     
  20. ljwobker

    ljwobker Geek.

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    Note that the battery depreciation component should be capped/limited by the replacement cost of a battery, less the residual of the battery. I *think* it's safe to assume that if battery technology massively improves, there will be a drop-in replacement option.

    I have no idea how to accurately value this, but it seems to me like there should be a reasonable market at SOME price for used high capacity packs that are only capable of storing 60-80% of their original charge.... I know that given the right price, I would certainly love to have a home backup system that would hold 20-40kWh of energy, and just sit in the crawlspace. For home backup purposes, the volumetric and mass density does not matter anywhere near as much as it does for automotive applications.
     

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