Depreciation question

[AZ Desert Driver]

I have a depreciation question..In cars of my past I used fifty cents per mile. This cost was dominatbed by depreciation and insurance, with fuel next and then a small catagory for batteries, tires, oil changes, car washes...Maintenance stuff.
For my Model S, because there are so few 5 year old cars being sold...I cant seem to get a handle on the value of the options - or of the entire beast. This is further confounded by having my paid options now being part of included options. So...What is the depreciation of a Model S [refresh 75D]

 

[murphyS90D]

Go to

Kelley Blue Book | New and Used Car Price Values, Expert Car Reviews

and enter the details for your car to find out what it is worth today.

Depreciation is not linear. The value of the car takes a huge drop the instant you drive it off of the Service Center parking lot.

From your question you are asking about total cost of ownership, not depreciation. Insurance has nothing whatever to do with depreciation.

 

[ewoodrick]

You are in a market with fed tax subsidies, high technology, and lots of demand.
You get what you can get

 

[AZ Desert Driver]

So Yes I am asking about total cost of ownership. How much does it cost me to drive the next leg of a trip? In my ICE days, I would figure I could drive only 2 miles to save 4 cents per gallon. How much would a taxi ride be to the airport vs self drive?. I cant seem to get reliable figure for my tesla.

I have a sticker price, a $7500 rebate, a sales tax and registration to pay for. I also add in paint protection, window tinting, floor mats. So I know that the value of the car does not change in the first mile, but the resale price does. That's not the question...KBB does not have a big data base of 5 year old Teslas to establish a fair market value (yet). Is this the best source?

 

[f205v]

Hi AZ.
The total cost of ownership is usually calculated in money per distance (i.e. US$/mile in USA or Eur/Km in Europe - I calculate it in CHF/km as I live in Switzerland and we use the Swiss Franc as a currency).
I'm keeping a rather large spreadsheet where I annotate every single expence/cost I incur with my MS100D and from there it estimates the CHF/Km cost. It is an estimation because 2 main factors are yet unkonw: 1) how many years will I keep the car before selling it? and 2) how much will I get when I sell it?
Those 2 numbers are fundamental to calculate the REAL depreciation I will have to face with my car, and how much does it impatcs on a per year base.
Anyway, to make things short: If I put in my spreadsheet a 5 years tag, with a total loss of value (after 5 years I will simply throw away the car and not resell it), with an average of 35.000 Km each year (which is my historical average since 25+ years), my cost of ownership will be 0,9189 CHF/Km (it is more or less 1,49 US&/Mile).
If after 5 years I will sell my car for 30.000 CHF (reasonable expectation), my cost of ownership will go down to 0,7475 CHF/Km (1,21 US&/Mile).
So, when I have to calculate how much a given trip will cost me, I simply multiply the trip lenght with 0,83 (average of the above 2 values) and I get a fair extimation of it.

 

[whitex]

KBB does not have a big data base of 5 year old Teslas to establish a fair market value (yet). Is this the best source?

How could it. 5 years ago, there was just a few thousand Tesla's in the USA.

If you are looking for the cheapest mode of travel, Tesla is not it. Teslas are still in a luxury car market. For comparison use ICE cars in similar price range (for Model 3, assume LR+PUP is the bottom of the range, not $35,000), subtract gas savings unless you plan to keep it past warranty, then need to add some offset for expensive electronics ($700 per door handle for S, $3000 for center screen, etc).

 

[AZ Desert Driver]

Hi AZ.
The total cost of ownership is usually calculated in money per distance (i.e. US$/mile in USA or Eur/Km in Europe - I calculate it in CHF/km as I live in Switzerland and we use the Swiss Franc as a currency).
I'm keeping a rather large spreadsheet where I annotate every single expence/cost I incur with my MS100D and from there it estimates the CHF/Km cost. It is an estimation because 2 main factors are yet unkonw: 1) how many years will I keep the car before selling it? and 2) how much will I get when I sell it?
Those 2 numbers are fundamental to calculate the REAL depreciation I will have to face with my car, and how much does it impatcs on a per year base.
Anyway, to make things short: If I put in my spreadsheet a 5 years tag, with a total loss of value (after 5 years I will simply throw away the car and not resell it), with an average of 35.000 Km each year (which is my historical average since 25+ years), my cost of ownership will be 0,9189 CHF/Km (it is more or less 1,49 US&/Mile).
If after 5 years I will sell my car for 30.000 CHF (reasonable expectation), my cost of ownership will go down to 0,7475 CHF/Km (1,21 US&/Mile).
So, when I have to calculate how much a given trip will cost me, I simply multiply the trip lenght with 0,83 (average of the above 2 values) and I get a fair extimation of it.

Thank you for this method of evaluation. It reveals the problem I have- what will be the resale value at 5 years? Your base case - zero , Nada, throw it away - is rather extreme but does establish a boundary.
I can estimate tire replacement cost, fuel cost, insurance, car wash. With so few 5-year old Teslas out there on the market, I find appraising the Options I bought is fraught with uncertainty.
Perhaps I should just enjoy it - whatever the cost is. Drive this delightful beast until the wheels fall off, or my heart stops - whichever comes first. Perhaps the acquisition price dwarfs all the other unknowns.

 

[AZ Desert Driver]

How could it. 5 years ago, there was just a few thousand Tesla's in the USA.

If you are looking for the cheapest mode of travel, Tesla is not it. Teslas are still in a luxury car market. For comparison use ICE cars in similar price range (for Model 3, assume LR+PUP is the bottom of the range, not $35,000), subtract gas savings unless you plan to keep it past warranty, then need to add some offset for expensive electronics ($700 per door handle for S, $3000 for center screen, etc).

True- I never expected this to be the cheapest mode of transport. KBB is good for ICE - and I'm sure they will get better at Tesla as the data base is built. None of my performance cars were cheap to own, but they delivered value that is not measured in dollars.

I am expecting to see a flatter depreciation than ICE luxury cars. Don't know why, but it is intuitive that the wear and tear should be less with an electric motor instead of an ICE engine, the rusting would be less with an aluminum body. The frequent updates to the operating system to keep the car fresh and modern - all give some (measurable?) value. So the perceived value to a used car customer should be greater than an old smog bucket.
I'm resisting using an ICE depreciation model because this is something quite different - but I have no better analogy.

 

[D.E.]

Cars depreciate by age and demand, not really so much by mileage. The mileage will be a factor but it is the demand, age, and the condition that establishes the price of a used car. Luxury vehicles tend to depreciate more than inexpensive cars both in percentage of the new car cost and in absolute dollars.

You can figure cost of ownership by depreciation and ongoing costs, insurance, fuel (gas or electric costs), tires, then amortize that cost over miles driven if you want.

Starting with a cost per mile, though, isn't going to be an accurate estimate. If you try it, you'll produce a straight line of estimated depreciation over mileage/time and depreciation doesn't generally follow a straight line.

Teslas haven't been around for a very long time but they have been around for a few years. You should be able to find average used prices for the last 3 years or so. Once you see the initial depreciation rate you should be able to find another luxury car that has a similar rate of depreciation over the first 3 years. That other brand will have a much longer history. Once you find that other car, you'll be able to see how the Tesla is likely to depreciate over the longer term.

Demand is the wild card. Those of us who've been around through the times of gas rationing saw at the time the inexpensive small efficient cars maintain demand while the bottom fell out of the luxury “land yacht” car prices. If Tesla becomes a successful car company, prices will be higher than if Tesla goes under. The market isn't kind to orphans regardless of how good they are.

If depreciation and cost of ownership is the prime determinant in your purchase decision, you'll find the Tesla isn't really a cost effective option. The initial price is too high and the depreciation too great. The money saved in fuel costs will never balance the equation. If cost of ownership isn't your primary motivation, and if you don't mind paying quite a bit more for the experience, then the Tesla is a fantastic car.

 

[AZ Desert Driver]

Cars depreciate by age and demand, not really so much by mileage. The mileage will be a factor but it is the demand, age, and the condition that establishes the price of a used car. Luxury vehicles tend to depreciate more than inexpensive cars both in percentage of the new car cost and in absolute dollars.

You can figure cost of ownership by depreciation and ongoing costs, insurance, fuel (gas or electric costs), tires, then amortize that cost over miles driven if you want.

Starting with a cost per mile, though, isn't going to be an accurate estimate. If you try it, you'll produce a straight line of estimated depreciation over mileage/time and depreciation doesn't generally follow a straight line.

Teslas haven't been around for a very long time but they have been around for a few years. You should be able to find average used prices for the last 3 years or so. Once you see the initial depreciation rate you should be able to find another luxury car that has a similar rate of depreciation over the first 3 years. That other brand will have a much longer history. Once you find that other car, you'll be able to see how the Tesla is likely to depreciate over the longer term.

Demand is the wild card. Those of us who've been around through the times of gas rationing saw at the time the inexpensive small efficient cars maintain demand while the bottom fell out of the luxury “land yacht” car prices. If Tesla becomes a successful car company, prices will be higher than if Tesla goes under. The market isn't kind to orphans regardless of how good they are.

If depreciation and cost of ownership is the prime determinant in your purchase decision, you'll find the Tesla isn't really a cost effective option. The initial price is too high and the depreciation too great. The money saved in fuel costs will never balance the equation. If cost of ownership isn't your primary motivation, and if you don't mind paying quite a bit more for the experience, then the Tesla is a fantastic car.

I agree with this. Time is a factor...What year is your car? is the first question. A Model S is "timeless" - yes, there is nose cone and refresh and battery size and a AP1-AP2 version, but Year Built seems to be near irrelevant with the updates.
At 100,000 miles many ICE cars have enough wear under the hood that reliability and maintenance costs nudge the owner to sell it to someone who does not mind changing mufflers and shocks and other stuff. A smart used buyer can deduct these repairs from the offer price. What repairs would a used Tesla buyer need to anticipate/deduct?
I guess I don't really need to know what it cost me to own my MS, but the engineer in me is so accustom to calculating gas mileage and maint. costs and depreciation and insurance to figure cost/mile (average $0.46/mi) that I struggle with the softness of the available estimates.

 

[D.E.]

I agree with this. Time is a factor...What year is your car? is the first question. A Model S is "timeless" - yes, there is nose cone and refresh and battery size and a AP1-AP2 version, but Year Built seems to be near irrelevant with the updates.
At 100,000 miles many ICE cars have enough wear under the hood that reliability and maintenance costs nudge the owner to sell it to someone who does not mind changing mufflers and shocks and other stuff. A smart used buyer can deduct these repairs from the offer price. What repairs would a used Tesla buyer need to anticipate/deduct?
I guess I don't really need to know what it cost me to own my MS, but the engineer in me is so accustom to calculating gas mileage and maint. costs and depreciation and insurance to figure cost/mile (average $0.46/mi) that I struggle with the softness of the available estimates.

Year built isn't irrelevant, the computers differ, AP2 vs AP2.5, different options, springs vs air suspension, so there are differences that will generally cause the buyer to prefer the more recent build. The software updates are nice but they don't really make all the cars equal. Also there is the drivetrain warranty, that is a ticking 8 year clock for a second owner.

The FSD is a big unknown. Whether it will work with current hardware or require a change, then will that change be a zero cost option for a second owner. It would be nice if FSD could be simply disabled on the old car and transferred to a new vehicle. The expensive software options (ludicrous, autopilot, FSD) will depreciate fairly quickly so will affect cost of ownership. If a second owner can get FSD but only at a cost of $15k or so, that will affect the resale value.

The 100k mile lifetime used to be true for ICE cars decades ago but no longer. With scrupulous maintenance, fluid changes, timing belts, etc., current well made cars will go 250k or more. The Honda Civic at 1/4 the price of an S is likely the current champion of inexpensive transportation and perhaps also longevity.

The Tesla has far fewer components, an aluminum body, a less complex assembly, but long term reliability can only be a guess. There are some complex parts and repairs out of warranty are likely to be expensive. That, too, is going to be a factor in the secondhand market.

So there are a number of variables, many of which we assume but don't know. If you enter the fray, you'll want to keep these things in mind so you are less likely to be surprised later.

 

[AZ Desert Driver]

Year built isn't irrelevant, the computers differ, AP2 vs AP2.5, different options, springs vs air suspension, so there are differences that will generally cause the buyer to prefer the more recent build. The software updates are nice but they don't really make all the cars equal. Also there is the drivetrain warranty, that is a ticking 8 year clock for a second owner.

The FSD is a big unknown. Whether it will work with current hardware or require a change, then will that change be a zero cost option for a second owner. It would be nice if FSD could be simply disabled on the old car and transferred to a new vehicle. The expensive software options (ludicrous, autopilot, FSD) will depreciate fairly quickly so will affect cost of ownership. If a second owner can get FSD but only at a cost of $15k or so, that will affect the resale value.

The 100k mile lifetime used to be true for ICE cars decades ago but no longer. With scrupulous maintenance, fluid changes, timing belts, etc., current well made cars will go 250k or more. The Honda Civic at 1/4 the price of an S is likely the current champion of inexpensive transportation and perhaps also longevity.

The Tesla has far fewer components, an aluminum body, a less complex assembly, but long term reliability can only be a guess. There are some complex parts and repairs out of warranty are likely to be expensive. That, too, is going to be a factor in the secondhand market.

So there are a number of variables, many of which we assume but don't know. If you enter the fray, you'll want to keep these things in mind so you are less likely to be surprised later.

So with only a few cars old enough to be headed to the used car lot - and all the delightful detailed quirks of a Tesla you just enumerated....can you begin to estimate what a depreciation curve would look like? Like. your 75D - you paid $75,000 for all the installed options.....what will it fetch when its 5 years old? [and to do a good plot, what would it fetch at 1 year, 2 year 3,4, and 10 year points?]. { assume it is in good shape, just want something new}

 

[f205v]

Just for your reference, the car I had previous to the Tesla was a Mercedes GL SUV; I kept it 5 years and did 158.000 Km in it.
When I resold it I could finally have the TRUE cost of ownership for that car, and it was 0,743 CHF/Km.
So it was slightly cheaper than the TESLA, based on the expected costs I detailed above, but not so MUCH cheaper. And the Tesla is such a smooth ride and a joy to drive that the difference in cost is more than compensated with more enjoyable experience.

 

[AZ Desert Driver]

Just for your reference, the car I had previous to the Tesla was a Mercedes GL SUV; I kept it 5 years and did 158.000 Km in it.
When I resold it I could finally have the TRUE cost of ownership for that car, and it was 0,743 CHF/Km.
So it was slightly cheaper than the TESLA, based on the expected costs I detailed above, but not so MUCH cheaper. And the Tesla is such a smooth ride and a joy to drive that the difference in cost is more than compensated with more enjoyable experience.

I love the confidance that says a carefully measured GL can be compared to (slightly cheaper) Tesla depreciation. How do you calc a Tesla depreciation? That is the essance of this/my query?

 

[brkaus]

($700 per door handle for S, $3000 for center screen, etc).

The door handles have parts available now, so it isn’t always an entire replacement. The screen only is just under $1000.

Yes, there are expensive electronics. But the screen is on par with what I had to pay to repair the entertainment/nav system in my Acura. I most fear the DC-DC converter.

 

[AZ Desert Driver]

The door handles have parts available now, so it isn’t always an entire replacement. The screen only is just under $1000.

Yes, there are expensive electronics. But the screen is on par with what I had to pay to repair the entertainment/nav system in my Acura. I most fear the DC-DC converter.

So all things break eventually - do you have any clue as to how often a DC-DC converter needs to be replaced? one per ten thousand cars in the first three years? If I was to escrow for 10 years worth of repairs and had access to the probability of failure of the components, how big of an escrow account would I need. { There are warrantee programs that can be bought for ICE cars that embrace these costs and sell that escrow, plus commission} . I don't have a clue what to expect in future tesla costs. Here is where my faith in the good will of the Tesla management comes home. Will they take care of odd ball failure, regardless of the time?

 

[D.E.]

I don't think it is a wise move to bank on any car manufacturer making free repairs beyond the warranty period. You might reexamine your source of faith in the good will of management. I personally think it is a rationalization, largely wishful, and totally unrealistic. But please know that I am a curmudgeon and that I have spent a very long time cultivating and perfecting this curmudgeonliness.

 

[f205v]

I love the confidance that says a carefully measured GL can be compared to (slightly cheaper) Tesla depreciation. How do you calc a Tesla depreciation? That is the essance of this/my query?

As explained above, I use 2 different evaluation methods: the first one considers NO value for the car at the end of 5 years. The second one considers a residual value of 30.000 CHF which I estimate to be a fair value. My comparison with the GL is based on this second method.
Again, it is just an estimation, not something SURE. I'll have the final numbers in 4 years from now, when I will sell my Tesla.

 

[whitex]

The door handles have parts available now, so it isn’t always an entire replacement. The screen only is just under $1000.

Yes, there are expensive electronics. But the screen is on par with what I had to pay to repair the entertainment/nav system in my Acura. I most fear the DC-DC converter.

I think you are now comparing entertainment system in Acura to just an LCD screen in Tesla. The Tesla equivalent is $3,000 for the entire center entertainment system, or has that gone down recently?

 

[DMan]

I got quoted $300 for a door handle so the cost has come considerably down.