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Debating the Resale Value Guarantee

Discussion in 'Tesla Motors' started by DJ Frustration, Jan 8, 2016.

  1. DJ Frustration

    DJ Frustration Model X Sig, Former Model S, Model 3 Res

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    We're a few months away from any owners taking advantage of the Resale Value Guarantee (RVG) that was first offered in March of 2013. With the impending purchase of our Sig X we have the option to finance through Tesla vs. a lower rate elsewhere. So my simple question is, what is the true real world value of the RVG? Is it worth paying an extra $800-900 in interest over a five year term just to get the RVG at 36-39 months?

    Our Own Data Point
    We owned our Model S from January 2013 until May 2015 (28 months) when we sold it privately. We financed outside of Tesla (no such thing as Tesla Finance or even folding mirrors back in the early days). In May of 2015 we sold it for $68,800 or 77.7% of what we paid for it (sales tax excluded) and 84.9% of what we paid for it if you factor in Federal Tax Credit of $7,500.

    Formula for the RVG: 50% of the base price of the 60kWh at time of original purchase (so 50% of $57,400=$28,700) plus 43% of all options including the upgrade to 85kWh battery.
    In our case, the options totaled $29,950 (so 43% of $29,950=$12,878.50).
    Had we taken advantage of a hypothetical RVG after 36 months, Tesla would have offered us $41,578.50.

    I don't see how the RVG makes sense when the spread between the private market and what Tesla offers is so large ($27k in our case).

    Are my numbers wrong? Am I missing something important in my decision making process?
     
    • Like x 1
  2. ggr

    ggr Roadster R80 537, SigS P85 29

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    I think you are missing the fact that hindsight is often more accurate than prediction. :)

    Three years ago, there was a real and perceived possibility that sales of the Model S would tank, the market would have decided that they weren't worth much, and the resale price guarantee would be very generous. It's a compliment to the quality of the car that that didn't eventuate. In fact the opposite; the cars hold their value very well indeed.

    Basically you took out insurance at the time. Now, with better knowledge, would you just self-insure? I would. Take the cheap finance.
     
  3. Zaxxon

    Zaxxon Member

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    I don't see a problem with your numbers. I think the main rationale for starting the RVG was to set a floor on resale value for those worried that resale would be terrible due to Tesla's quick iteration on new vehicles. I don't think Tesla's goal was necessarily to offer what they felt would be comparable resale pricing if the market held up pretty well.

    Edit - GGR beat me to it...
     
  4. MitchJi

    MitchJi Active Member

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    M3 and MY launches could have a substantial impact on MS and MS resale. I'm not saying that makes the RVG a good deal. I think I would take the savings now.
     
  5. DJ Frustration

    DJ Frustration Model X Sig, Former Model S, Model 3 Res

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    Another variable to consider in favor of taking the RVG is that, like the S was in March of 2013, the X is a new vehicle. We have no way to predict the residual values come 3 years from now. Use the crystal ball for a second and fast forward to January of 2019. Model 3 will have been selling for a year and a half (hopefully) and autonomous vehicles could be disrupting the whole owning a vehicle concept.

    With that future ahead of us, doesn't it make sense to pay the extra $800-900 in interest over 5 years and take the insurance of the RVG?

    You guys brought up good points about the Model S and hindsight being 20/20.
     
    • Like x 1
  6. Xpress

    Xpress Member

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    I think you'd be lucky to get much more than $55K if you had waited and sold it today. Prices for used Model S's have dropped dramatically in the last 9 months.
     
  7. ChadFeldheimer

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    The resale value guarantee allows up to 15,000 miles each year. As such, the resale value guarantee is probably most useful if your car is near 45k miles after 3 years. How many miles did you have on your S when you sold it at 28 months?

    Regardless, only incurring 15% depreciation over 28 months is quite good. I think you got the better end of that deal! Congrats!
     
  8. DJ Frustration

    DJ Frustration Model X Sig, Former Model S, Model 3 Res

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    Yes, I think we did get a good deal. We had 26k miles on it so we were trending below the 15k miles per year. I doubt we would get anywhere in the $60s nowadays.

    Even if we sold it for $60k back in May 2015, I still think the RVG wouldn't have been worth the extra interest.

    Tesla still has not finalized the terms of the RVG for the X. As such, I cannot make an informed decision on whether to finance through Tesla or elsewhere just yet.
     
  9. ChadFeldheimer

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    Lease residuals are much higher than the RVG, even after deducting the federal tax credit. This means the actuaries agree with you, and the RVG is not providing significant benefit: if one is worried about the value of their car in 3 years, the best option is to lease it.
     
    • Like x 1
  10. mf66

    mf66 Member

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    #10 mf66, Mar 12, 2016
    Last edited: Mar 12, 2016
    Just want to make sure my thinks is right here.

    i got a 2.09% rate through Tesla for my X for a 48 month loan. I am liking the idea of the RVG but as you point out its more of a backstop than anything else. Is there a minimum balance requirement to get the RVG or can you simply have a balance of any value to be eligible? Any idea when the actual payout amount of RVG will be released?
     
  11. mf66

    mf66 Member

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    Just got an email from Tesla about financing.


    The Resale Value Guarantee ended up being the same as the Model S, and I have attached the terms and conditions for your review.

    The document appears to be older. It does not mention Model X. It references 60kwh and 85kwh models..
     
  12. ohmman

    ohmman Maximum Plaid Member

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    I planned to pay for MX outright but then began to think that perhaps financing and going for the RVG would be a good "peace of mind" alternative. The main reason is that I believe MX will undergo a functional revisit in the near future - with folding seats as soon as this time next year, and quite a few tweaks along the way. Plus, with Model 3 and Y coming out, there's a chance that there's going to be a compelling functional CUV with many of the same features but at a lower price point. Depreciation is a concern for anyone who isn't planning to keep the MX for a long time.

    I think we'll keep it 4 years, but it's possible it'll be less. Things that'll affect our decision are the same thing that'll affect resale. That is, Autopilot 2.0, much better range, and a more functional interior. However, I still don't see a non-P 90, which is just over $100k, dropping to under $50k within 3-4 years. If it does, it probably won't be by much. I just don't think it's worth getting into a loan with interest and mileage restrictions for that trade-off.
     
  13. WesleyM

    WesleyM Member

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    It seems to me in the research I've done that RVG is basically a glorified lease. If you want that peace of mind, lease it and then at the end of the lease if you want to keep the car finance the residual. Otherwise, enjoy sub 2% interest and just finance the thing
     
  14. DJ Frustration

    DJ Frustration Model X Sig, Former Model S, Model 3 Res

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    My thoughts exactly. We got a 1.5% loan for 72 months. Much better than any RVG.
     
  15. brkaus

    brkaus Member

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    Did you happen to calculate the premium for the glorified piece of mind?
     
  16. ZachF

    ZachF Member

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    Compare it to it's main ICE competitor, the Mercedes S-Class, which generally loses a third of it's value just in the first year! German Luxury Cars™ hold their value about as well shares in Lehman Brother's.
     
  17. WesleyM

    WesleyM Member

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    Of course, its more than cancelled out by the fact that if you want to turn a car in at year 3 and less than 45k you should just lease it which also gives you the added bonus of the tax credit up front
     
  18. Rdainer

    Rdainer Member

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    do you mind saying from where you got such a great rate?
     
  19. DJ Frustration

    DJ Frustration Model X Sig, Former Model S, Model 3 Res

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    Suncoast Credit Union. Check out the thread about financing your X.
     
  20. BasementDoc

    BasementDoc New Member

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    Why not take the Tesla loan and then pay off most of it, keeping it active until 36 months for both low rates and the buy back guarantee?
     
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