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Debating the Resale Value Guarantee

DJ Frustration

Former Model X Sig, Model S, Model 3, Model Y
Jun 19, 2012
685
138
Miami, Florida
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?
 
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ggr

Expert in Dunning-Kruger Effect!
Supporting Member
Mar 24, 2011
7,016
28,212
San Diego, CA
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?

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.
 

Zaxxon

Supporting Member
Supporting Member
Dec 11, 2012
4,679
21,934
Colorado
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...
 

MitchJi

Trying to learn kindness, patience & forgiveness
Jun 1, 2015
3,989
9,173
Marin County, CA
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.
 

DJ Frustration

Former Model X Sig, Model S, Model 3, Model Y
Jun 19, 2012
685
138
Miami, Florida
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.
 
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Xpress

Member
Apr 16, 2015
121
32
Cupertino, CA
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?

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.
 
Oct 25, 2015
246
144
Chicago, IL
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!
 

DJ Frustration

Former Model X Sig, Model S, Model 3, Model Y
Jun 19, 2012
685
138
Miami, Florida
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!

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.
 
Oct 25, 2015
246
144
Chicago, IL
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.
 
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mf66

Member
Sep 3, 2013
41
12
Oak Park,il
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?
 
Last edited:

mf66

Member
Sep 3, 2013
41
12
Oak Park,il
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..
 

ohmman

Plaid-ish Moderator
Feb 13, 2014
10,203
18,739
North Bay, CA
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.
 

WesleyM

Member
Mar 26, 2016
23
9
Charlotte, NC
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
 

brkaus

Well-Known Member
Jul 8, 2014
8,097
6,650
Austin, TX
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
Did you happen to calculate the premium for the glorified piece of mind?
 

ZachF

Active Member
Mar 31, 2016
2,170
23,865
Park City, UT
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!


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.
 

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