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RogerHScott
Active Member
Archduke
Member
I am shocked to learn that so many people financed/purchased their Teslas. I have been under the impression for several years that a very high percentage of cars around the $100K mark and above were lease vehicles.
I have always paid cash for or financed my vehicles except for a BMW I leased 15 years ago and a Prius I leased 10 years ago. I hated the process of paying every month for that BMW. And I hated the process of paying every month for that Prius (but not as much as I hated the Prius itself which is why I bought it off the lease program within months of getting it and sold it). I didn't think I'd ever lease a car again, but...
I chose to lease my P100D for several reasons.
I bought a Fisker Karma back in 2012 when the car was introduced and got stuck with an orphan car. It required probably around $35K worth of unanticipated outlay on my part because Fisker went silent for about a year before they eventually declared bankruptcy. Even though I think it *extremely* unlikely anything like that will happen to Tesla at this point, the company isn't established enough for me to want to take that particular risk again, so that put one point in the leasing column.
The thought of writing a check for $150K made me a little nauseated, so that put another point in the leasing column.
But the most important reason I chose to lease was that I was afraid that after 3 years Tesla or another automaker would have produced an EV capable of getting 400 or even 500 miles on a single charge and I would be stuck holding a car with around a 275-300 mile range which would look extremely unattractive as a used car. So that put another point in the leasing column.
So I leased. And now, reading this, I'm wondering if I made the wrong decision.
I have always paid cash for or financed my vehicles except for a BMW I leased 15 years ago and a Prius I leased 10 years ago. I hated the process of paying every month for that BMW. And I hated the process of paying every month for that Prius (but not as much as I hated the Prius itself which is why I bought it off the lease program within months of getting it and sold it). I didn't think I'd ever lease a car again, but...
I chose to lease my P100D for several reasons.
I bought a Fisker Karma back in 2012 when the car was introduced and got stuck with an orphan car. It required probably around $35K worth of unanticipated outlay on my part because Fisker went silent for about a year before they eventually declared bankruptcy. Even though I think it *extremely* unlikely anything like that will happen to Tesla at this point, the company isn't established enough for me to want to take that particular risk again, so that put one point in the leasing column.
The thought of writing a check for $150K made me a little nauseated, so that put another point in the leasing column.
But the most important reason I chose to lease was that I was afraid that after 3 years Tesla or another automaker would have produced an EV capable of getting 400 or even 500 miles on a single charge and I would be stuck holding a car with around a 275-300 mile range which would look extremely unattractive as a used car. So that put another point in the leasing column.
So I leased. And now, reading this, I'm wondering if I made the wrong decision.
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Leasing is just buying with an offer to sell back at a given price at the end of the term, or finish buying it if you prefer. There's a little bit of extra complexity on top but that's the basic arrangement.
Archduke
Member
I'd never thought of it in that way since I just assumed most people give the car up at the end of the lease. But now that you clarify it as such, I feel a bit better about it. Thanks!
I purchsed only because of the tax incentives on the X. My CPA calculated I would be able to write of 67k of the X this year which equates to about 22k of actual savings, plus the 7,500 credit. So instead of writing Uncle Sam a check for 30k in January for my final quarterly, I get a new car. I factored those numbers in when deciding to lease vs buy and it was a no Brainer. With leasing, you dont get the 25k tax bonus, nor do you get the 7,500 tax credit. This is just my situation, yours may be very different and leasing may be a better option for you. I would ask a tax professional as I am definitely not one.
The right decision is what's right for you. Resale value doesn't matter to me because I intend to own for 10+ years. It has more range than I need already. If the body is still in good shape I hope to just buy a new battery pack in the future when Tesla is 2 or 3 gigafactories deep. Yet to be seen if AP2.0 meets the bill but maybe 3.0 will be retrofittable to 2.0 since the "spinal cord" is in place.
Too many variables...enjoy the car you have!
Most do. I've seen both. People sometimes use leases to hedge what they will have to spend, then figure out they want to keep the car after all since they know the history.
My solution for recurring payments, whether it be a mortgage, car payment, cable bill or anything else, is to set up a separate account where all those recurring payments are paid out of automatically with an automatic auto-deposit into that account with just enough to make those payments such that the balance in the account never really goes up or down from month to month. That way you just set it and forget it. You never see the money going into that account and the payments come out automatically so it is like none of it exists if you do it right.
whitex
Well-Known Member
I agree, that's close. It's really taking 2 loans. The first loan is to be paid off completely and it is for the the depreciation of the car (a.k.a. capital cost = price - residual). The second loan is on the residual and it's interest only. A lease with $0 residual is practically a loan, though you have to check additional terms to be sure there are no gotchas (read on about Tesla leasing terms). There is also the small tax issue, since on lease you pay taxes on interest vs. loan you pay interest on taxes, but if your taxes stay the same, it's a wash (if sales tax goes up, lease costs more, if sales tax goes down during your lease, lease pays less taxes).
I've done both leases and loans in my history of getting cars, including one time a lease with $350 residual because the lease interest rate was lower than the loan. Believe me, it confused the hell out of the sales guy why I wanted such a low $350 residual. The finance guy understood once I had him calculate the loan vs. lease payments.
Current Tesla lease terms seem rather disadvantageous as compared to loans. First, the lease interest rate is much higher (e.g. 4.23% vs. 1.74% for well qualified buyers). That in itself adds potentially thousands of dollars in interest in the 3 year period. The terms also prevent you from paying down too much, which means you pay even more interest at the higher interest amounts. Lastly, the 7,500 federal credit is simply added to the residual, not subtracted from the price. So even though your capital cost is the same, the residual is higher to right off you pay about $950 in interest on that $7,500 over 3 years. Then, if you were to buy the car, you have to actually pay the $7,500 since it's added to the residual price. Lease definitely is convenient, but you do pay extra for the convenience of lower payment and not having to worry about selling the car.
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Garlan Garner
Banned
I wanted to lease, it tesla makes it impossible in my state.
Is it impossible to lease a Tesla in Georgia?
RogerHScott
Active Member
lol @ real estate being "safe". People forget the bubble. Some places still haven't recovered from the bubble.
Nothing is safe, there are just different levels of risk. I like to diversify my risk, which includes [rental] real estate, stocks, etc.
With rates being as low as they are, I had no issue financing the car. Even after tax breaks, my mortgage is more than 1.99%, so even if I had $80-150k cash sitting around, it'd still make more sense to finance the car and put that money towards the mortgage.
YMMV
Nothing is safe, there are just different levels of risk. I like to diversify my risk, which includes [rental] real estate, stocks, etc.
With rates being as low as they are, I had no issue financing the car. Even after tax breaks, my mortgage is more than 1.99%, so even if I had $80-150k cash sitting around, it'd still make more sense to finance the car and put that money towards the mortgage.
YMMV
Archduke
Member
You seem to know a bit about personal finance/money. Would it be possible for you to balance my checkbook?
whitex
Well-Known Member
I have neighbors who bought houses before 2008 crash, they are still under-water renting their homes hoping the market and/or inflation will catch up so they can sell and get out. It turned out that houses fell in 2008, but then again in 2010 after all the foreclosures kicked in from people who just walked away. Some have dropped to under 60% of peak value. I had one neighbor who bought at the peek, both lawyers, one day just packed up and left - bank foreclosed maybe 6-9 months later and sold at ~60% of peak value. Today the market is going up, but still not reaching the peak pre-crash values (still about 75%-80% of the peak prices, and that's >8 years later - at least people who bought after the first drop are even now).
