How I price a used M3

[Palmtree]

I've been looking at used m3's for a while now. I still feel like they are overpriced. Maybe I'm unrealistic or maybe patience will pay off. My formula is this:
New M3 AWD $47,000
I drive 20,000 miles a year (1667 per month)
$10k down whether I buy used or new.
$678 a month over for 5 years for a new car with all the obvious advantages that come with that.

I feel a used car should depreciate a certain amount to make it a smarter purchase than new. I'm not giving any value to the obvious advantages of a new car (I probably should but I don't know how to value it).
For example a used M3 with 30,000 miles on it has been used the amount of 18 months for me (1667 miles per month).
18 months of $678 payments is $12,204 of use on the car. $47,000 - $12,204 = $34,796. I have been searching for a M3 AWD that fits this formula. A used model 3 AWD with 30,000 miles for $35k. As you can imagine, I haven't found anything even close to this.

So who's crazy, me or the used Tesla market.

 

[Palmtree]

Interestingly, The least expensive used model 3 AWD from Tesla right now has 34k miles and is priced at $43,800 with FSD. If FSD is really worth $8k then Tesla values this car at $35,800 without FSD.
2018 Model 3 | Tesla

 

[D3R3K]

I like that you have your own formula, but that's not really how economics works ha

It's a supply vs. demand issue. Inventory of Tesla Model 3s is tight. When the car came out, there was considerable wait and tremendous demand. Now If you want to buy a new one, you have to wait up to 2 months. That gives an advantage to a used model that is available right away. Model 3s also suffer much less wear and tear compared to an ICE vehicle due to fewer moving parts and systems. As high level production continues from the multiple Tesla factories, supply of Model 3 will eventually catch up to demand and these crazy residual values will drop.

 

[vickh]

I like that you have your own formula, but that's not really how economics works ha

It's a supply vs. demand issue. Inventory of Tesla Model 3s is tight. When the car came out, there was considerable wait and tremendous demand. Now If you want to buy a new one, you have to wait up to 2 months. That gives an advantage to a used model that is available right away. Model 3s also suffer much less wear and tear compared to an ICE vehicle due to fewer moving parts and systems. As high level production continues from the multiple Tesla factories, supply of Model 3 will eventually catch up to demand and these crazy residual values will drop.

correct right now 3 used pricing is about the same as new.

 

[Bearlytiger2]

Interestingly, The least expensive used model 3 AWD from Tesla right now has 34k miles and is priced at $43,800 with FSD. If FSD is really worth $8k then Tesla values this car at $35,800 without FSD.
2018 Model 3 | Tesla

That car appears to have a salvage title, can’t really use it as an example.

 

[Akikiki]

OP, I agree with @D3R3K, but its also not about how you feel.

 

[Palmtree]

I realize and understand all of that. Obviously they wouldn't sell so high if people weren't buying them. The purpose of my post was to get opinions on my route of thinking. At this point (especially with the significant improvements lately) it seems like a much better financial decision to buy a new model 3 AWD. The only downside I see is a higher sales tax payment. Of course a new one is a few thousand more now but much better decision in the long run. It's not even close really, The 5-9 week wait doesn't bother me.

 

[Palmtree]

OP, I agree with @D3R3K, but its also not about how you feel.

That's funny. It is about how I feel. I'm the one trying to make a decision.

 

[jjrandorin]

That's funny. It is about how I feel. I'm the one trying to make a decision.

Actually, no "tesla used pricing" is not about how you feel, its about the actual market. The prices are what the market currently dictates. About once a week someone comes to this website and says "used teslas are overpriced!!!!" but they are selling for those prices currently so they clearly are NOT overpriced because people are paying it.

Just because "you feel" a used car should depreciate a certain amount to make it a smarter purchase than new, and because thats how it "normally happens" doesnt mean it happens like that for all cars all the time.

Its likely at some point the market may correct, but the only part that is "about how you feel" is that you feel that the prices wrong.. for YOU". Thats correct, because its about how you feel. Saying "the prices are wrong" isnt.. because that isnt about you.

 

[CapeOne]

Tesla adds FSD to pretty much every used inventory car possible. It’s too bad that they won’t remove it and offer some sort of discount; not necessarily the full $8k (soon to be $10k), but something. Not all buyers are interested in FSD and a little bit of savings could help move more inventory and get more people into the Tesla family. People that, if not scared away by potential quality and/or customer service issues, may eventually step up to a new one down the road. Tesla is willing to give new buyers the choice of FSD or no FSD, I think they should do the same for used buyers.

 

[CapeOne]

That car appears to have a salvage title, can’t really use it as an example.

How do you know it has a "salvage" title? Prior accident does not automatically mean salvage title and I really doubt Tesla would be selling a salvage title car.

 

[Palmtree]

It seems some of you are taking what I said differently than how I meant it. I'm not saying someone should sell me their used model 3 for less than they could sell it to someone else. That's silly. My post was less about how much people should sell them for, and more about how much people should pay for them. I think there are at least two factors at work here. The big one is that Tesla has lowered the prices so much that someone selling a 2018 model 3 is actually taking a pretty big loss even when they sell them for nearly the price of a new 2021. A seller of a 2018 M3P may take a $25k hit. Another factor that I fear is driving these high used prices is that many people want one so badly that they are likely buying a car they cannot really afford. If you are maxing out your budget, then it doesn't matter if you can get a newer, superior car for only $2k more. Maybe you simply can't afford another $2k.

 

[CapeOne]

It seems some of you are taking what I said differently than how I meant it. I'm not saying someone should sell me their used model 3 for less than they could sell it to someone else. That's silly. My post was less about how much people should sell them for, and more about how much people should pay for them. I think there are at least two factors at work here. The big one is that Tesla has lowered the prices so much that someone selling a 2018 model 3 is actually taking a pretty big loss even when they sell them for nearly the price of a new 2021. A seller of a 2018 M3P may take a $25k hit. Another factor that I fear is driving these high used prices is that many people want one so badly that they are likely buying a car they cannot really afford. If you are maxing out your budget, then it doesn't matter if you can get a newer, superior car for only $2k more. Maybe you simply can't afford another $2k.

You're not likely going to find too many M3 LR AWD models that don’t have at least some extra cost options, especially through Tesla, so your original $47k figure (should actually be $48,190) is starting too low.

As you mentioned above, Tesla currently has an M3 LR AWD with 34k miles and FSD for $43,800 which is about 76.5% of the current purchase price of a similarly equipped new one.

Compare to an ICE car. You can buy a new Honda Accord EX-L today for around $29k. 76.5% of that would be $22,185. I don’t think $22,185 retail is unreasonable for a 2018 Accord EX-L with 34k miles. KBB puts dealer retail at around $24k. Therefore $43,800 retail for the M3 example above isn’t that unreasonable. Some deals are going to be better than others but I don't know that the M3 market is that "crazy."

 

[cdswm3]

Interestingly, The least expensive used model 3 AWD from Tesla right now has 34k miles and is priced at $43,800 with FSD. If FSD is really worth $8k then Tesla values this car at $35,800 without FSD.
2018 Model 3 | Tesla

FSD adds far less to the cost of a used Tesla than is cost. Many of those looking for used are value buyers who would much rather have a lower price than FSD that doesn't work.

 

[Gasaraki]

It seems some of you are taking what I said differently than how I meant it. I'm not saying someone should sell me their used model 3 for less than they could sell it to someone else. That's silly. My post was less about how much people should sell them for, and more about how much people should pay for them. I think there are at least two factors at work here. The big one is that Tesla has lowered the prices so much that someone selling a 2018 model 3 is actually taking a pretty big loss even when they sell them for nearly the price of a new 2021. A seller of a 2018 M3P may take a $25k hit. Another factor that I fear is driving these high used prices is that many people want one so badly that they are likely buying a car they cannot really afford. If you are maxing out your budget, then it doesn't matter if you can get a newer, superior car for only $2k more. Maybe you simply can't afford another $2k.

OK... I'm still confused with your thinking.
If someone has a hard limit on 40K for a car then a used M3 would be an option because they can't afford a new one...

Actually, like you said if someone has a budget limit they should be buying what they can afford, a new SR+ or a used one or how about not buying a Tesla. It's like saying I really want a Lamborghini Aventador SV but i can only afford $100,000. Why is it still so expensive?!? I mean it's been out for years now.

 

[Booga]

Some have sold their used Model 3s for nearly the purchase price (adjusted for tax credits). Depreciation in an economic sense (including tax credits) has been limited and the new car prices have declined over time. I believe this is a temporary factor, because it benefits from more demand than supply. Subaru had a similar trend for many years and it's still held up. The point where it breaks down is where demand declines or supply growth exceeds demand growth. This is routinely seen in economic downturns when luxury car prices take a bigger hit or in fuel inefficient vehicles when gas prices go up. To forecast *market* depreciation, you need to have a view on both supply and demand sides of the equation. Personally, I don't have one, but like the person who asked the question, I have a feeling it should be a little bit more than is currently priced in today.

Given the amount of technological and manufacturing changes that occur with Tesla and impact the car (build quality, cold weather enhancements, etc.), I'd rather go with a new one unless the used market is giving me a price below what I would consider to be normal for a depreciated car in its respective condition.

Unless someone has access to years of market depreciation data by brand, model, etc., this is a generally difficult question to answer quantitatively. I'm not aware of public data sets that would help with the analysis except doing some anecdotal comparisons like you did of used and new car prices. I'm not currently (from a buyer's perspective) thrilled by the used Tesla market. For current owners, it's great - you can often get a great price for your car all things considered. I'd argue that if someone can get their purchase price, they should take it and buy a new one.

 

[ChadS]

A seller of a 2018 M3P may take a $25k hit.

I don't think that's the case. I have a 2018 M3P with FSD. I paid $72,500, but got back $7,500 from the federal tax credit, so my cost was $65,000.

A new one configured like mine would be $63,990.

Last month I asked Tesla for a trade-in value. They offered $47k, plus in my state there's a 10% sales tax waiver when you trade in a car, so that would net me almost $52k.

I've only seen one car like mine on Craigslist, and it was asking $53k. I've seen several similar to mine but without FSD that are asking in the $50-52 range. Obviously those are asking prices rather than sales prices, but assuming they also had trade-in quotes from Tesla, they may not have much reason to lower their prices much.

 

[Palmtree]

You're not likely going to find too many M3 LR AWD models that don’t have at least some extra cost options, especially through Tesla, so your original $47k figure (should actually be $48,190) is starting too low.

As you mentioned above, Tesla currently has an M3 LR AWD with 34k miles and FSD for $43,800 which is about 76.5% of the current purchase price of a similarly equipped new one.

Compare to an ICE car. You can buy a new Honda Accord EX-L today for around $29k. 76.5% of that would be $22,185. I don’t think $22,185 retail is unreasonable for a 2018 Accord EX-L with 34k miles. KBB puts dealer retail at around $24k. Therefore $43,800 retail for the M3 example above isn’t that unreasonable. Some deals are going to be better than others but I don't know that the M3 market is that "crazy."

76.5% of $48,190 is $36,865. That seems reasonable to me too.

 

[ChadS]

$678 a month over for 5 years for a new car with all the obvious advantages that come with that.

I feel a used car should depreciate a certain amount to make it a smarter purchase than new. I'm not giving any value to the obvious advantages of a new car (I probably should but I don't know how to value it).
For example a used M3 with 30,000 miles on it has been used the amount of 18 months for me (1667 miles per month).
18 months of $678 payments is $12,204 of use on the car. $47,000 - $12,204 = $34,796.

I agree that used Tesla prices are high, but I think your formula, while perhaps a reasonable place to start, is ignoring what the car will be worth once you are done making payments.

But either way, the prices are not based on that. I gave an example of my M3P above, but a closer example to what you are looking for may be my Dad's 2018 LR RWD with 26k miles and no autopilot. Last month I also asked for a trade-in value on his car. With the sales tax waiver, my Dad would net $37k for trading his car in. And it doesn't have AWD or autopilot, so I could see how cars with those would go for more.

 

[geekflyer]

I also agree that uses M3/MY prices are high, but your formula really doesn't make much sense and doesn't produce a good estimate of used car prices of any brand imo.

Your formula assumes that deprecation is somehow tied to your financing schedule, but that's simply not the case.
Deprecation is usually a flattening curve and not linear like a typical financing schedule, i.e. in the first few months the car deprecates much more per month (e.g. $800/month but over time it gets less and less per month, e.g. just about $350/month after 2 years). Look at this: https://retireby40.org/wp-content/uploads/2012/04/car_depreciation.jpg
Also as @ChadS already stated your formula ignores that the car still has residual value after you made all your payments.

Personally I found there is a high standard deviation in MY/M3 asking prices, and in order to get a fair price estimate for those cars I looked at some craigslist and cargurus postings, chatted with craigslist postings in the lower 30-percentile and determined their willingness to sell the car even cheaper. Frankly craigslist asking prices are often a bit inflated (especially with Teslas). You also see quite a lot of craigslist postings from people who like their M3/MY but simply want to upgrade to another Tesla, if they fetch a good price, but they're not actually committed to sell the car. You can also use the trade-in values from carvana to get realistic estimates.

Also fyi the real price of a new M3 is:
46990 base
+ 100 order fee
+ 1200 destination fee (might be more in other places, in California it's 1200$ tho)
===
$48290

You can use Tesla New, CPO and Used inventory which gives you a good overview of listings and how cheap/expensive they are compared to the other ones btw.