Depreciation / resale value

[Newscutter]

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.

On the other hand, while a used EV could be revived by newer/cheaper/denser battery technology, that same benefit is what will undercut the residual value. Why? Quite simply, a NEW car will also benefit from the same technological improvements PLUS advances in the overall design. If the most expensive part of the car get cheaper, the WHOLE CAR gets cheaper. Imagine a 2nd generation MS with a starting price halved and with features and enhancements we can't even imagine yet... Upgrading a 5-10 year old car's battery would definitely reinvigorate that car's usefulness but replacement cost (for the new version) is going to be chasing that value down pretty hard.

NOT an equivalent product-- to be sure-- but would you replace the battery on your drill or laptop to get another 10 years out of it? Or does it make more sense to just get a new one with improved performance and charging capacity? Every drill I've owned was replaced because the battery improvements and prices dictated that getting a new drill with a new battery was the better deal. The drills themselves always worked fine if I had a way to get power to them.

As someone who typically drives a car into the ground (both our cars are over 10 years old) this kind of depreciation curve doesn't bother me-- but for someone concerned about depreciation and/or who bores quickly with their cars, consider this. Once the initial supply constraints are removed... no one really knows what will happen and the faster/cheaper batteries become, the steeper I think the depreciation curve will be.

 

[David Rhee]

A good place to start is the "guaranteed" buy back price after 3 years of ownershup Tesla offers on their financing program... It's about 60% of the original purchase price, or there abouts... Tesla's formula is kind of complicated.

 

[abasile]

NOT an equivalent product-- to be sure-- but would you replace the battery on your drill or laptop to get another 10 years out of it? Or does it make more sense to just get a new one with improved performance and charging capacity?

I agree. At least in some EVs, it might make sense to replace any failed battery cells/modules to keep the car running for many years. On the other hand, replacing an entire Li-ion battery pack on account of capacity loss will probably never be all that cheap. You'd likely be better off selling the car to someone whose range requirements are less than yours. For a Leaf/Volt/etc. driver, a used S85 with half of its original driving range would still be a major step up.

 

[Rifleman]

One factor that may also effect the resale value is the fact that there are relatively few S60's sold. Because so few are sold, fewer will be put up on the secondary market. Since there will most likely always be a shortage of "inexpensive" Model S's, and since the majority of buyers who buy used are doing so because they cant afford a new Model S, I expect that a stripped 60 will actually hold it's value significantly better than a loaded P85, as even with significant depreciation, a loaded P85 is still pricier than a new 60. This is unfortunate for someone like myself, who hopes to buy a used 60 with few options in two years when my Volt lease is up.

 

[J1mbo]

Interesting thread. I had heard that people value used EV's based on the expected remaining life of the battery, with the implication that after the 8 year warranty expires, the car is essentially worthless. How much would you pay today for an 8 year old Jag V8 that needs a new engine and transmission?

 

[JohnQ]

Interesting thread. I had heard that people value used EV's based on the expected remaining life of the battery, with the implication that after the 8 year warranty expires, the car is essentially worthless. How much would you pay today for an 8 year old Jag V8 that needs a new engine and transmission?

But an 8 year old EV doesn't require a new battery. If it has 80% of range left (number pulled out of thin air) then it simply has a smaller "gas tank." What would the price differential be then? It's just like any other car where the manufacturer's warranty has expired.

 

[MarkR]

In July I sold my original 85 Model S to a dealer for $80k when it was 7 months old and had 9k miles on it. It was sold for more than I paid for it after you figure in the $7500 incentive. I'm sure that my experience is rare, but it suggests a high level of interest in the car and a big desire on the part of some buyers to immediately obtain the MS rather than wait for Tesla to build one.

BUT, it is also true that larger dealers are going to be reluctant in the extreme to purchase a Tesla because their resale model includes a warranty that the dealer could not directly provide. Perhaps there will someday be a group of Tesla-trained mechanics in independent service centers, but I don't see it happening any time soon.

 

[montgom626]

Depreciation is depreciation

As someone who typically drives a car into the ground (both our cars are over 10 years old) this kind of depreciation curve doesn't bother me-- but for someone concerned about depreciation and/or who bores quickly with their cars, consider this. Once the initial supply constraints are removed... no one really knows what will happen and the faster/cheaper batteries become, the steeper I think the depreciation curve will be.

Depreciation is depreciation. Does not matter if you drive for 3 years or 10 years. You still take a loss in the first 2 years. If you buy a 2 year old car, you save money because someone else has taken a huge loss. If you buy a new car for 100K versus paying 70K at 2 years, that is a 30K loss if you buy new and a 30 K savings if you buy used. 30K will buy a second car.

Depreciation Infographic: How Fast Does My New Car Lose Value?


YMMV

 

[J1mbo]

But an 8 year old EV doesn't require a new battery. If it has 80% of range left (number pulled out of thin air) then it simply has a smaller "gas tank." What would the price differential be then? It's just like any other car where the manufacturer's warranty has expired.

Agreed, however, after 8 years, any serious battery issue is likely to cost a significant amount of money to resolve. This depends largely on Tesla, of course.

Right now, nobody knows how long a MS battery pack will last - it could be that 99% of packs survive at 80%+ capacity for 20 years. Until that longevity is proven, I would expect the 2nd hand market to factor battery life into valuation.

 

[Electroman]

I posted this in another thread and reproducing it here. My main hypothesis is that a 'High mileage' Model S depreciation is greatly dependent on its range as opposed to the miles on the Odo


Pre-Owned MS Pricing - Page 3

I think we are all playing this game with ICE mindsets. Consider a Model S85 with 3years / 100K miles / 200 mile range. It is this last parameter, 'range' the most significant parameter I would consider.

This is how I would price it:

A new 60 kWh has the same 200 mile range with $70K price tag. In essence I am getting the range of a new S60 with the wear and tear of other components, which in an EV should not be significant. So I would perhaps pay upto 60% of the price of a new S60, which would be $42K. Considering today’s EV market that is a great price. Now let us not confuse with Gen3 which may (or may not) hit the same price target and range, but that is a smaller car without the bells and whistles of an ‘S’.

In other words we could use this formula (I just made it up) for cars that are 50K miles and above on the odo:

Mileage penalty: $0.20 per mile
Range penalty: $250 per mile (from 265 EPA).

So a S85 priced new at $85K, with 100k miles on the odo :

-With 220 mile range would sell at: $48, 750
-With 200 mile range would sell at : $43,750
-With 180 mile range would sell at: $38,750
-With 100 mile range would sell at $18,750

$18K is a steal for 100 mile range EV. So we can perhaps tweak the range penalty with an additional factor to offset that so that an 100 mile range, 100K mikes Model S can be sold at 25K or above.

At the end of the day, it is all about range and less about the miles you have on the odo.

 

[JohnQ]

I think that's overly optimistic from a residual value perspective. My 10 year old A4 with 105k miles is worth 15-20% of its purchase price. There's wear and tear on the interior, drivetrain, etc. The technology is out of date … none of the bells and whistles everyone's looking for like parking sensors, iPod integration, navigation, etc.

I would be shocked (and pleased) if I could sell my S for even 30% of my purchase price after 100k miles. There's just too much potential change in the market and wear and tear on aged components. What may happen, though, is that it hits a price floor and stays there for an extended period of time.

 

[Newscutter]

I still think those numbers are way too high, at least on the higher range ones. It all goes out the window if/when battery range/prices improve (perhaps dramatically)

100K miles is still a lot of wear and tear on ANY vehicle. Teslas still have lots of electronics, leather, suspension components, bushings, etc. It seems silly to mention it, but I think people forget that every week another 500+ cars are built AND they plan to add another assembly line. You can't realistically expect pent-up demand to prop up resale values indefinitely.
Consumers won't get educated fast enough to recognize their ICE pricing prejudice either. The stigma of mileage and age will attach itself to EVs just as surely as it has to ICE cars. My point, in fact, is that it could be even worse as battery advances will render the new models/competitors cheaper than even the residual range we're talking here-- especially if Elon's disruptive approach really works and the automakers attack the segment with quality offerings complete with rear cupholders, visor lights, and all the other nit-picking I've read about. In 5 years, would most people pay a $15k premium for a 100K mile used MS over a brand new Gen III with the same range?

Now-- having said all that-- I don't want to be mislabeled a troll, so let me clarify my position. As a fan of Tesla and the low-maintenance/durability aspect of EVs, this is a no-lose scenario for people like me. I have no problem buying a new MS, knowing that I'd have it so long that depreciation is not a factor and/or handing it down to other family members-- it's an asset that has intrinsic value as long as it does what I need it to do (high depreciation or low depreciation, neither matters). I also have no problem buying a used MS, knowing that even as a commuter car (with 100 mile residual range) it is better and more reliable than a comparable ICE (high depreciation benefits greatly).
Low depreciation only matters, in my case, in that it would make it hard to go all-Tesla in my garage. High depreciation means I lose value on an MX (a loss I never realize if I never sell) but gain a used MS on the cheap at the same time. But fundamentally, in my plans, it doesn't matter.

However, for those for whom this is NOT a long-term asset you will drive for years and years.... or a car you are buying with compromised enthusiasm (want longer range, more features and plan to upgrade soon/often), I think the warnings about depreciation should be strongly considered. Used Tesla prices are a perfect bubble--for now-- but upgrading later might prove to be very costly.

 

[Alpha]

Once Tesla passes 200K new vehicles sold, a few years down the line, we should see a bit of a spike in resale value for used Teslas no? (due to the expiring federal tax credit.)

We'd probably also see a rush of buyers of new Teslas trying to get in under the wire as they approach that number...

 

[AmpedRealtor]

Then there is the technology factor... Imagine how dated the current Model S touch screen, displays, etc. will feel in 4-8 years. That represents multiple improved generations of display panels, touch technology, CPU speed, better and faster wireless connectivity, etc. My fear is that Model S will depreciate more like a high tech item and less like a car. In other words, it will depreciate even more. Outdated technology tends to call attention to itself.

 

[qwk]

Then there is the technology factor... Imagine how dated the current Model S touch screen, displays, etc. will feel in 4-8 years. That represents multiple improved generations of display panels, touch technology, CPU speed, better and faster wireless connectivity, etc. My fear is that Model S will depreciate more like a high tech item and less like a car. In other words, it will depreciate even more. Outdated technology tends to call attention to itself.

Still not as dated as 99% of vehicles manufactured today. Buttons are much more dated than a touchscreen.

 

[jbruce]

Still not as dated as 99% of vehicles manufactured today. Buttons are much more dated than a touchscreen.

I would actually argue the opposite. The pre-nav era cars (70s, 80s, 90s) I interact with don't draw your attention to old technology anywhere like cars from the early 2000s. I never get in an E30 M3 or my '85 M635CSi think about old tech. Great cars from those eras have simple mechanical swithgear and interfaces that still feel great. Now when I hopped in a mid 2000s AMG E55, that was an unwelcome blast from the technology past.

 

[Alpha]

On the other hand, if the US government succeeds at getting a 10K tax credit for EVs (as has been floated by the Obama administration various times in the past) then resale values on used Teslas would plummet!

Although this doesn't seem very likely any time soon in the current perpetually stalemated political environment.

 

[AmpedRealtor]

On the other hand, if the US government succeeds at getting a 10K tax credit for EVs (as has been floated by the Obama administration various times in the past) then resale values on used Teslas would plummet!

Although this doesn't seem very likely any time soon in the current perpetually stalemated political environment.

They would "plummet" by a whole $2,500. Wow.

 

[Alpha]

They would "plummet" by a whole $2,500. Wow.

You laugh, but that's enough to be a decision maker. A 10K difference of new versus used (not to mention the state incentive) is huge.

What I mean is it's more than just $2500, since it would affect demand, the price would likely drop more than that.

 

[rayng]

i drive a leaf every day and the wife the S. the reason why we are not holding out for any type of leaf with 120 or even 240 mile range is because the leaf is not a very good car. it is a very good first try, but there's such a long list of deficiencies and bad engineering and design that turned me off to the the nissan (or infiniti) brand. the model s is a tremendous bargain compared to my 2012 $35k OTD leaf. no car i've owned depreciated faster or more as a percentage than the leaf.