Estimated Depreciation after 3 Years

[kotykb]

I'm trying to do the math on the cost of ownership of the Tesla Model 3. I'm factoring a 10% depreciation per year from the price I paid for it if I put on ~7k miles per year. I plan to keep the car for about three years, according to my math it will be worth $36k around that time. I'd really like to hold out for the dual motors/white interior but I really want the $7500 tax credit, my delivery window is April-June and I don't want to risk losing the full credit.

What are your thoughts, am I too conservative or optimistic with the depreciation amount?

 

[ElecFan]

I've followed the depreciation of model S and X and from that evidence I think your first and second year numbers are pretty optimistic. I'd count on -25% over these first two years combined. Your low mileage may work in your favor, but $37.000 seems a more reasonable price after two years. Of course the hype of the model 3 is an uncertain factor. If the present popularity continues for the next three years, you might end up losing less than these numbers.

 

[Fusion]

Hate to say it but roughly 50% after 3 years.

 

[geometro]

Hate to say it but roughly 50% after 3 years.

Agree with this... similar to other cars in this price point, but without aggressive lease subsidies. 50% sounds right.

 

[juanmedina]

Hate to say it but roughly 50% after 3 years.

Nope

https://www.autolist.com/tesla#section=news&s=a

 

[ElecFan]

Nope

https://www.autolist.com/tesla#section=news&s=a

Interesting stats. However, linking depreciation to mileage only is a bit of an oversimplification. F.e. the price of a car depreciates directly considerably after having taken delivery without even having driven one mile.

Looking at the data for NL (Europe) at this site combined with this registry I found the following numbers for a three years old (2015) model S:
Mileage 43546 Price new € 95,200 --> price €80.000 or 84% (-16%)
Mileage 39540 Price new €113,000 --> price €90,000 or 80% (-20%)
Mileage 32814 Price new €109,550 --> price €77,500 or 71% (-29%)

Keep in mind these are selling prices. Trade-in prices will be lower. So I guess depreciation should be somewhere between 25-35%.

 

[NewTMSMan]

Generally I have found:
Year 1 - 20%
Year 2 - 12%
Year 3+ - 7%

This has been on ICE cars in this price area. Teslas seem to hold value better, but if you wanted a conservative model this seems like a reasonable one.

 

[adaptabl]

You are way low. Count on about 50% dep after 3 years.

 

[Chewy3]

If you ask all the people selling theirs on here and Ebay: Model 3s 'appreciate' in value the exact amount of their prospective owners' taxes +$5k in some cases

I would trust what people above me have already stated. Much more accurate.

 

[Fusion]

Nope

https://www.autolist.com/tesla#section=news&s=a

We can revisit this in 3 years. I hope you are more right than I am considering I will be a Model 3 owner also.

 

[kotykb]

I purchased a Model 3 in June, kept it for 3 years, likely there will be high demand for the Model 3 on the used market at that point. Hopefully the depreciation curve of the Model 3 isn't as steep as the Model S (~50% after 3 years) and maybe a little less. Additionally, the ones who receive the full $7500 tax credit have more "free equity" than others who won't receive the full amount.

 

[adaptabl]

I purchased a Model 3 in June, kept it for 3 years, likely there will be high demand for the Model 3 on the used market at that point. Hopefully the depreciation curve of the Model 3 isn't as steep as the Model S (~50% after 3 years) and maybe a little less. Additionally, the ones who receive the full $7500 tax credit have more "free equity" than others who won't receive the full amount.

The other wildcard is if Tesla will still be in operation in 3 years. There could be a purchase and/or bankruptcy in the future that would totally destroy resale values.

 

[kotykb]

Lets assume that Tesla stays in business for the foreseeable future to simplify things.

The biggest risk us early purchasers have with resale value is that we're buying a single motor, forced to buy the long range battery, black interior, and generally less options than Model 3's offered in the future.

I really don't NEED the Model 3, but want the Model 3. I figured it would depreciate less than my 2013 Audi Q5 3.0 but after doing more homework I'm likely wrong.

 

[ElecFan]

I hope depreciation will be 50% over the next three years, because I'm planning on buying one in 2021 and then would be able to get an LR for 25-30k. That'd be something!

 

[NewTMSMan]

Ran 6 2015 Model S cars through my formula I mentioned above where I could find the original sticker posted with the listing and all listed prices hit almost exactly at my formula, so 61% of original sticker price. Most had lower than expected mileage (20k - 25k).

 

[kotykb]

Ran 6 2015 Model S cars through my formula I mentioned above where I could find the original sticker posted with the listing and all listed prices hit almost exactly at my formula, so 61% of original sticker price. Most had lower than expected mileage (20k - 25k).

If you're looking at $100k MSRP Tesla Model S cars, the Model 3 will depreciate less due to the lower MSRP. If you buy early enough and with the current backlog, I don't foresee people selling for 12-20% off MSRP after the first year of ownership if under ~10k miles

 

[adaptabl]

If you're looking at $100k MSRP Tesla Model S cars, the Model 3 will depreciate less due to the lower MSRP. If you buy early enough and with the current backlog, I don't foresee people selling for 12-20% off MSRP after the first year of ownership if under ~10k miles

If Tesla can reach 5,000/week that's 250,000/year. That would pretty much eat thru the backlog. If the tax incentive is reduced or gone a 50% take rate on model 3 is realistic. Also the sedan market continues to lose sales each year. Why would anyone buy used if new is close in price? I can see depreciation higher than that.

 

[Qbenjamin]

Due to the low volume of 3's being produced at the moment, any type of projection that you come up with that's based on statistics will be skewed. As production ramps up, I believe that the 3 will move much closer in line with the S & X as far as depreciation is considered.

 

[ElecFan]

And S & X haven't seen a 50% depreciation in three years. At least not in Europe. 30-40% max judging the evidence in NL I presented earlier.

 

[kotykb]

To be conservative on a three year estimated depreciation, we have to assume production levels three years from now are where Model S/X are today. Customers can order a Model S/X now and receive out within two to three months. The $7500 tax credit is applied to the first year cost of ownership as it will hit my 2018 taxes as a benefit. I personally think that if the Model S/X depreciate 40% from MSRP over the first three years on a $100k MSRP vehicle, the Model 3 will depreciate less. At the three year point, likely the tech in the Model 3 will be the same as today, most cars built now will have the long range, premium package, autopilot etc. If you can buy a 20k mile, three year old car with these options for $35k, its should be a great value to buyers.

This is likely the formula I’ll use to financially rationalize the purchase of the Model 3.