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Finance vs Purchase?

stevenm3

Member
Oct 15, 2019
10
0
Orange Country, CA
Ordered a LR AWD on mid-October, got a call from Tesla yesterday asking me to fill out the payment information ASAP. Total cost of the vehicle after incentives is around $48,650. I have never financed a car yet.

Finance: got a 2.49% rate, and my bank doesn't care how much I put down and how many months I plan to finance. Since I plan to move out of this country in 3 years, I might do 30 or 36 months loan and borrow $30,000. This way I'm more flexible with the money and it helps building my credit, too. However, if I need to pay it off early, then I'm paying more for the interest. The bigger issue is I have to get full insurance, which is not cheap for under 25. I'm expecting above $200/mo for full coverage.

Pay in full: more flexibility on when to sell the car, more flexibility on insurance plans, but less flexibility with money, especially since the interest rate seems low these days.

I drive ~1000 miles a month and half of the time I'm in heavy traffic, makes me a little nervous if I don't get collision coverage when the car is worth something, but consider that saving in premium if I only get half insured though...

What do you guys think?
 

ewoodrick

Well-Known Member
Apr 13, 2018
5,285
3,735
Buford, GA
Is the reason why you have never financed before because you've had $30-$60k available for purchasing or because you've only had cheaper or parent provided vehicles?

Honestly, all of your reasons are completely contrary to the criteria that you should be using to determine if you can afford the vehicle. Even your insurance thoughts seem dramatically low for Orange county. You know that you can always call and get estimates?
And the cost of the vehicles after the incentives isn't the cost of the vehicle today. You've still got to pay the FULL price of the car today. The federal tax credit won't be available until probably end of February next year at the absolute earliest.

And OMG, even thinking about not getting collision? In the OC? ROTFLMAO!!! That's truly insane and a great example that you probably should be looking at cheap Hyundai's instead of Teslas. Sorry to be blunt, but you are showing a naivetes that shouldn't exist when buying moderately expensive cars. I'm suspecting that you are probably renting an apartment as well.
 
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m3-ricardo

Member
Oct 21, 2019
179
91
Seattle
these are guidelines -- but you know your finances better than we do ..

@2.49 i wouild finance 100% of the car .. its free money.

and i would not underinsure a new car. -- its like penny wise, pound foolish.

thinking more about this, i want to say that you're not really saving money by not insuring -- rather you are self-insuring .. in the case that the car is in an accident, then you are going to cover the costs. self-insurance is real and usually done when the risk is small compared to your assets.
 
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dandrewk

Supporting Member
Supporting Member
Jun 25, 2019
1,225
881
Marin County, CA
@stevenm3 Financially it seems a wash. The "cost of money" is nearly the same either way, as you could easily put the cash you -didn't- expend in a bank and get same/better rates than the loan.

And OMG, even thinking about not getting collision? In the OC? ROTFLMAO!!! That's truly insane and a great example that you probably should be looking at cheap Hyundai's instead of Teslas. Sorry to be blunt, but you are showing a naivetes that shouldn't exist when buying moderately expensive cars. I'm suspecting that you are probably renting an apartment as well.

I've driven in Orange County. It's really no better/worse than anywhere in California, and not much worse than anywhere else -in the USA-.

I'll submit that it's safer in a Model 3 than most other cars. The safety features are designed to avoid accidents. Using ACC greatly reduces driver fatigue. And if the worse happens, a major accident, there aren't many cars that will protect you better.
 

jonquiljo

Supporting Member
Supporting Member
Sep 26, 2019
1,064
499
SF Bay Area - Marin
Do not think of reducing insurance coverage - ever. I was sued for hitting a pedestrian when I was 18. He was not very injured, but he sued me for a lot. People are far more into litigation today. Stuff happens.

Be safe and not start your life with a mess of legal problems. Car insurance is there for a reason.

In general, I’m a bit more conservative than most about money. If you have trouble with the cost of owning a car -then you are extending yourself too much. If you are under 25, there is likely always another day. Unexpected expenses always come up to bite you in the butt. The last thing you want to do is have your whole life tied up in the cost of buying a car.

Whether you borrow money or use all the free cash you have - it’s all the same. Constantly checking your free cash flow is a PITA. Good luck. Really!
 
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huangm777

Member
Nov 3, 2019
133
152
Southern California
The way I approach car insurance is by taking the maximum liability insurance (ie how much they’ll pay for the other person getting wrecked and hurt), but take relatively high deductibles for collision and comprehensive. I make sure that I have enough savings to cover the deductible. I also don’t include roadside service since I have AAA. This usually results in pretty substantial savings.
 
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Velcade

Member
Sep 18, 2019
252
174
Midwest
2.49% is great. I'd finance most of it at that rate. Electric cars are not cheap to repair, I would not skimp on insurance. It's not worth it. If you really want to minimize your monthly payments increase your deducible but make sure you have enough set aside to cover it in case something happens.
 

jonquiljo

Supporting Member
Supporting Member
Sep 26, 2019
1,064
499
SF Bay Area - Marin
Insurance - can't answer for all insurance companies, but you might save by reducing liability in the car insurance and instead getting a larger "blanket" liability policy. Check with your agent for rates and feasibility.

Learn About Umbrella Insurance | GEICO
I don't know how much demographics change the dollar amounts, but my cars are all insured with only mandatory liability (you still need to do that - I think $100K worth). Umbrella policies (at least for me) run about $225 per million of coverage/year. The funny thing is that $2M is pretty much twice the cost of $1M, etc.
 

dandrewk

Supporting Member
Supporting Member
Jun 25, 2019
1,225
881
Marin County, CA
I don't know how much demographics change the dollar amounts, but my cars are all insured with only mandatory liability (you still need to do that - I think $100K worth). Umbrella policies (at least for me) run about $225 per million of coverage/year. The funny thing is that $2M is pretty much twice the cost of $1M, etc.

Yes, demographics apply. Besides giving umbrella coverage on car liability, it adds additional protection for the household as well.
 

jonquiljo

Supporting Member
Supporting Member
Sep 26, 2019
1,064
499
SF Bay Area - Marin
Yes, demographics apply. Besides giving umbrella coverage on car liability, it adds additional protection for the household as well.
Definitely. Got to be careful, though. Insurers are notorious on trying to avoid paying out in major lawsuits.

But umbrella policies help lots of people sleep at night.
 

ewoodrick

Well-Known Member
Apr 13, 2018
5,285
3,735
Buford, GA
@stevenm3 Financially it seems a wash. The "cost of money" is nearly the same either way, as you could easily put the cash you -didn't- expend in a bank and get same/better rates than the loan.



I've driven in Orange County. It's really no better/worse than anywhere in California, and not much worse than anywhere else -in the USA-.

I'll submit that it's safer in a Model 3 than most other cars. The safety features are designed to avoid accidents. Using ACC greatly reduces driver fatigue. And if the worse happens, a major accident, there aren't many cars that will protect you better.

I didn't mean to infer that it was better or worse than California, but it is more than most of the remainder of the country. Just the average California cost is the 6th highest at $1800 vs the lowest at $800. And I'd hazard to guess that the cost in Orange County is significantly higher than most of the remainder of the state. It's just based on the amount of traffic in the county. And with the number of specialized thefts and damage reported here, Tesla is going to probably be even more expensive.
 

stevenm3

Member
Oct 15, 2019
10
0
Orange Country, CA
Thanks for all the suggestions. Skipping collision coverage seems like a bad idea if the car is expensive to fix, thus will go with financing + full coverage.
For those people worrying about if I can afford the car - I don't buy cars that I cannot afford the full price + operating cost. I just don't like to spend money on the unnecessary stuff.
 

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