Depreciation / resale value

[GTHill]

I'm sure that this has been discussed before but I couldn't find it with search.

I'm looking at purchasing a new 85 and am looking at all costs involved. One of them is depreciation / resale value. I typically buy used high end cars and save a lot of money doing so. Searching for used Tesla's told me right away that there aren't a lot used out there which is great for resale value. Of course this will change as the market gets more saturated.

So my question is, does anyone have any thoughts on resale value over time? I currently drive an M5 so my gas savings are quite substantial. All I need is a bit more ammo to convince the Mrs. that this is the way to go.

Test drive in 2 hours.

GT

 

[Alywa]

Tesla is offering guaranteed buy back at 3 years for approximately 50% if you finance with one of their partners. I passed on this, as I think resale will be higher, especially with 85s and their unlimited mileage, 8 year battery warranty. I can envision a very active secondary market for people who desire a high end EV but can't swing the current new price. At some point the economy of gas savings becomes very significant in the overall cost of ownership compared to an ICE. I think 50k for a gently used 3 year / 40k vehicle is very realistic. We'll see.

 

[constraint]

In the short term, there is a pent up demand in the secondary markets for these cars which will keep that value up for the foreseeable future. There are no 3 year old Tesla S's out there so not a lot of people have given up their cars yet to look for the newest greatest thing. I can foresee were the secondary market for Tesla's will be strong for the next 3 years easy which will help depreciation like Alywa was talking about.

Now half the cost of the car is the battery pack so it pays to keep up with what is going on with battery technology. There has been a lot of talk around GM using Envia battery cells to get 400 wh/kg which is almost double the energy density of the S, but a lot of these chemistry tweaks are not holding up on things like cycle life so I dont see them as a threat for competition. Lithium Sulfur is kind of in the same boat where the cycle life doesnt make them suitable for EV's so I dont see any real breakthrough technology coming out any time soon. If I am wrong about this, then there will be significant depreciation of the cars because no one will want to be stuck with the old battery (when they make purchasing decisions).

The biggest threat right now to the depreciation question is other manufactures. Right now Tesla has 0 competition in usable long range EV's which allows them to retain their planed 25% margin while using expensive materials such as Aluminum. If Nissan decides to double their Leaf pack or come at Tesla with the Infinity brand, Tesla may have to start dropping the price of their cars to compete. Imagine a Leaf with double the capacity that can go 160 miles range for $35,000. While a Leaf is not the same as a Tesla how about a $50,000 Infinity Q50 EV sound?

Most new cars are more expensive then previous models which helps the secondary market cars from depreciating less. When your new models drop in price, the secondary market depreciates more. I think cars bought today should still have good resale mostly due to the pent up demand having 0 used cars on the market. Once serious competition starts getting going (most likely Infinity), I believe the depreciation may be slightly worse then other luxury cars.

 

[howardc64]

Looking at Nissan Leaf's plummeting resale value shows the following

- math to compute resale value is a little different than non EV cars and taking getting some use to
- EV car owner calculate the purchase cost including all the federal and state incentives. So $7500 and no state sales tax on new car in my state (WA)

- - - Updated - - -

Looking at Nissan Leaf's plummeting resale value shows the following

- math to compute resale value is a little different than non EV cars and taking getting some use to
- EV car owner calculate the purchase cost including all the federal and state incentives. So $7500 and no state sales tax on new car in my state (WA)

Oops, hit return before finishing.

- non EV car owners calculate the purpose cost usually without adding the state sales tax
- If manufacturer drop price on the newer year model like Nissan Leaf... this obviously hurts prior year car's depreciation... Model S with minimal competition and strong demand right now probably won't encounter this in the near term.

So depending on various factors... but it could drop fast depending on circumstances.

I was lucky to get a 5k mile used Tesla from a oversea's buyer that couldn't bring the car back to their country. I did the following math

- S85 with leather+sunroof package. Cost was probably $75k+ after $7500 federal credit
- Subtract 10% state sales tax which I would have to pay... this brings the car down to $68k or so
- Starting from $68k, we can figure out what used car, 5k mile depreciation plus any wear is worth. You can imagine getting to <= $60k pretty quick on this S85
- non EV car buyers would usually not consider the state sales tax reduction because the previous owner received no tax break.

Just FYI on what to consider when evaluating depreciation.

 

[donv]

I think the resale value will hold up pretty well until Tesla comes out with a significantly revised Model S-- maybe in a year or so, along with all wheel drive. Then you'll see a bunch of cars come onto the market as the early adopters trade up, and the resale value will take a hit. People who buy cars like this new are usually interested in the flavor of the moment, and once the current generation Model S is an "old car" it will take a big hit.

After that, I think it will more or less track other luxury cars.

One possible thing in favor of the Model S is that, based on the people on this site, a lot of people who are not traditional luxury car buyers seem to be buying them. Those people might not be so quick to trade up, and that might keep the supply down and the valuation up.

 

[David_Cary]

The people who have stretched to buy the Model S are not likely to sell. Does anyone have any idea what percentage of sales this is? Surely on a forum it is a higher percentage than in the real world.

The arrival of the Model X will bring about used inventory. It will be the latest and greatest and come around at the 2 year mark for a lot of buyers and be different enough to "justify" a new car.

The problem with the Model S and comparing to other cars is that it is probably hard for most people to go back to ICE. We can't have data on this yet, but on the Leaf forum, if people give up on the Leaf, they usually get a Volt or a Model S. You don't see people going to a Prius or a Camry. So how many people in 5 years will go from an EV to an ICE - not many. So the only trade up model is a Model X or a newer Model S (for now)

The Leaf's value dropped because they dropped the price of the new car. If you bought a 2011 Leaf for $35k, selling now has to compete with an after tax credit new Leaf at $21k. Even if that $21k is a stripped model, that is a big price drop. When people go around discussing resale, they always use the full retail price without tax credit. So for an inexpensive EV, the resale value did actually go down 25% (or 35% in some states) as you drive off the lot. So being worth 50% of new at 2 years is completely reasonable. And yes, the Leaf has some battery issues in hot areas that didn't help.

The $7500 + other state incentives means less to the overall value of a Model S. But of course, Tesla could pull a Nissan and drop the price several thousands of dollars. They are not shy about their margins and this could be cut to move cars if necessary.

 

[shn]

factor the cost of aluminum? - current fair market value of alum..therefor this should be added into the car.

Drivetrain/Motor, very easy to refurbish. Therefor can't compare to a 3-5year old ICE, as a 3-5 year old ICE would probably be in worn condition... Cost a fortune to repair whereas the Model S...recondition the motor....? car lasts a very long time.

huge factor in depreciation/resale value would probably be the battery & if there are newer/better looking model s redesigned models w/ newer features.

 

[Newscutter]

...
The arrival of the Model X will bring about used inventory. It will be the latest and greatest and come around at the 2 year mark for a lot of buyers and be different enough to "justify" a new car....

This is my current plan... despite what my signature says. Tesla has not come through with service centers or superchargers anywhere near my city or the routes I typically take for longer trips. That combined with no immediate need to replace or add to our stable of cars (and no new drivers for another year or so-- assuming good grades of course!) has already led to one canceled Model S order. Aside: TODAY would have been our earliest delivery date... yes, it still hurts, installed a NEMA and everything.
My current thinking is that we'll hang on to our MX reservation through the eventual test drives, early deliveries, etc. and then see where things stand. If an AWD MS appears (or is at least confirmed) then we'll reconsider the MX. Otherwise, I'm think we might actually try and score BOTH a new MX and a "trading up seller's" used MS around the same time.
I suspect the trend-buyers and wealthier owners who are not counting on the MS as a primary vehicle will be the first to sell. Those cars will mostly be highly optioned P85s and even with modest depreciation they'll end up cheaper than the lighter equipped new S85 we planned on. Nearly new but discounted those cars will offset paying "retail" for the MX.

 

[Rifleman]

The arrival of the Model X will bring about used inventory. It will be the latest and greatest and come around at the 2 year mark for a lot of buyers and be different enough to "justify" a new car.

This is also my best plan to put a Tesla in my garage at this point. When i cancelled my S reservation (as I finally accepted the fact I could not afford it) and leased a Volt, my plan was to be first in line for Gen III, and to turn in the Volt in September 2015, right around the time when my Gen III would be delivered. Now with Gen III being pushed back to 2016 at the earliest, I am going to find myself needing a car before then. If the 40 kWh Model S was still available, I would be buying a new one (the good news about cancelling my S reservation is I ended up hanging onto the money I had in TSLA that I was planning on using to buy it, making the 40 I had determined that I could not afford just within reach). As of now, my plan is to reach out to the pre-owned team at Tesla as soon as Model X starts rolling off the line, and giving them my specs and price point, and asking them to call me the second a Model S that is at least close to my specs and within my budget gets traded in. Hopefully they will play along, and help me finally bring a Tesla home.

 

[gglockner]

The people who have stretched to buy the Model S are not likely to sell. Does anyone have any idea what percentage of sales this is? Surely on a forum it is a higher percentage than in the real world.

Because the Model S is high-tech, I'm sure it is attracting technologists who don't normally spend this much for a car -- like people who are upgrading from a Prius or other green car that was cutting edge a few years ago.

The arrival of the Model X will bring about used inventory. It will be the latest and greatest and come around at the 2 year mark for a lot of buyers and be different enough to "justify" a new car.

With any high-tech product, there are people who always want the latest model and have the money to get it. I'm sure that will be the case when the Model X is released, and the timing of the Model X release seems about right to capitalize on that.

The problem with the Model S and comparing to other cars is that it is probably hard for most people to go back to ICE. We can't have data on this yet, but on the Leaf forum, if people give up on the Leaf, they usually get a Volt or a Model S. You don't see people going to a Prius or a Camry. So how many people in 5 years will go from an EV to an ICE - not many. So the only trade up model is a Model X or a newer Model S (for now)

I think a number of Model S owners are green/high-tech consumers who are upgrading from a hybrid car. In many cases, they may keep the hybrid as a second car when it is impractical to use the Model S. This is what we're planning to do - to sell our Volvo wagon, buy a Model S, and make the Camry Hybrid into the second car.

 

[neroden]

So my question is, does anyone have any thoughts on resale value over time?

There's two separate issues: short term and long term.

I believe that the Model S -- and successful electric cars in general -- will hold better resale values than gasoline cars in the long term due to the price trends of gasoline vs. electricity (with gas increasing in price faster). But I wouldn't expect it to be an enormous effect -- you're still going to see a lot of deprectiation. I bet the 10-year-old Tesla prices will be a few thousand dollars higher than 10-year-old gasoline cars of the same original price. The people buying them at that time will not even be considering the "latest and greatest" batteries, and will just be trying to get *an* electric car, being fuel-price-conscious.

In the short term, the supply constraints will serve to elevate the used prices slightly over what you'd expect for a gasoline car of the same original price, as there aren't enough Model S's on the market and impatient people in the "new" market are considering buying used. That should wear off in a couple of years: most of the people in the market for Model S can afford new cars and won't want to buy the "old, worse" models. In the medium term, the prices will probably drop the same way prices drop for a gasoline car, until they start hitting the price level where the buyers are very conscious of fuel prices, at which point they should start holding up a bit better (as noted before).

So my guess -- and we'll see whether this is true -- is that the worst time to sell is going to be around 5 years from now, when I suspect they will have depreciated just as much as a comparable-priced gasoline car, or even slightly more. Selling quickly (1-2 years) should get you better results (than a comparable gasoline car) and waiting 10 years + should get you better results (than a comparable gasoline car).

 

[howardc64]

Probably the biggest impact on resale is

- Additional new EV cars entering the market with high useful range that is competitively priced. The list of cars we know are
- newer model S
- model X
- I believe nothing else in pure EV? (Everything else is 26-28 kWhr batteries: LEAF, Golf, Escort... which yields very short range as we know and is ruled out of any interstate travel)

Hybrids are a different market. There is obviously a market for Pure EV/non ICE

So the biggest effect on resale value is going to be future Tesla pricing. Lets hope demand keep staying ahead of supply and give Tesla no reason to drop price

 

[gglockner]

As Tesla Motors gets more successful, other car companies will introduce competing vehicles. This may affect prices overall.

 

[Newscutter]

Remember too, that with deliveries becoming more timely the "impatience premium" on used cars will go away--- and that the $7500 Federal credit (plus state incentives) will become an additional and immediate factor in depreciation right up until the point that VIN 200,000 is delivered. Arguably that could hobble resale values more than an ICE car.

I'm not convinced that the used values will be better than an ICE anyway-- rightly or wrongly, I think used car buyers in general will remain cautious of used EVs because of concerns about battery replacement costs. Regardless of the math, shaking that kind of prejudice out of a conservative market is going to be difficult. Used car buyers just aren't known for being spendy early adopters and you'd be asking a lot of them to spend a premium on a the first generation of anything new. I should know-- the MS is the first car I shopped new!

 

[tander]

I'm sure that this has been discussed before but I couldn't find it with search.

I'm looking at purchasing a new 85 and am looking at all costs involved. One of them is depreciation / resale value. I typically buy used high end cars and save a lot of money doing so. Searching for used Tesla's told me right away that there aren't a lot used out there which is great for resale value. Of course this will change as the market gets more saturated.

So my question is, does anyone have any thoughts on resale value over time? I currently drive an M5 so my gas savings are quite substantial. All I need is a bit more ammo to convince the Mrs. that this is the way to go.

Test drive in 2 hours.

GT

I've seen some used model s on ebay going for more than they were originally purchased for, I'd say that answers the resale value right there. The other cool thing to think about is (and this is just speculation) that at some point I could see battery replacements say in five or ten years when the batteries are way more advanced. So there's a good chance that eventually a model s bought today could have a significantly higher range with a future battery.

 

[qwk]

The resale value will be awesome, just like used Apple products. It's pure fantasy that any existing automaker will make anything as good as a Tesla anytime soon or ever.

 

[gglockner]

I've seen some used model s on ebay going for more than they were originally purchased for.

I think this is the sellers trying to capitalize on the fact that you can't go into a Tesla dealer and buy a car off the lot. Even an inventory vehicle takes a few days to prep.

 

[neroden]

I'm not convinced that the used values will be better than an ICE anyway-- rightly or wrongly, I think used car buyers in general will remain cautious of used EVs because of concerns about battery replacement costs. Regardless of the math, shaking that kind of prejudice out of a conservative market is going to be difficult.

I think that caution will be largely gone in 10 years. Hence my belief that the resale value will be better-than-ICE for a couple of years, worse-than-ICE for several years, and then better-than-ICE again around 10 years.

 

[ecarfan]

?..at some point I could see battery replacements say in five or ten years when the batteries are way more advanced. So there's a good chance that eventually a model s bought today could have a significantly higher range with a future battery.

I agree. It seems highly likely that in 10 years we will be able to buy a replacement battery for our cars that will cost half of what it costs today and the energy density will be significantly higher. Given how long electric motors last, a new battery in 10 years will really help the resale value.

 

[derekt75]

The resale value will be awesome, just like used Apple products. It's pure fantasy that any existing automaker will make anything as good as a Tesla anytime soon or ever.

Was that said facetiously?
A four year old iPod Nano is worth about 25% of what you would have paid for it 4 years ago.
That would be lousy for a car.
Maybe Apple products hold up better than competitive products, but the values plummet because Apple (and its competitors) keep on coming out with better stuff.

I hope it will be similar for Tesla: I hope my car will lose value quickly because Tesla is coming out with cars that are that much better than mine.
Of course, that doesn't just kill the resale value of my Model S, it should also hurt the resale value of an M5. Who would want an old M5 with a transmission that does 0-60 in 4.3 seconds, when you can have a refined fixed gear EV from Tesla that does 0-60 in 3.9s?
Today, there's a lot you can get with the M5 that you can't get from Tesla: adaptive cruise control, lane change warning, a certain amount of experience in designing a solid cabin, etc. (although the "park" button on the M5 is much less intuitive than the "park" on Model S).
Self driving technology might also drive down the value of used cars.
In 3 years, I hope that all the M5 will have on the Model S is an ability to quickly refuel at 100,000 places in the US. and despite what some people think, that's really not a big advantage.