I am in...Ordered my 70D but need advice on next steps

[Nirenk]

I have been following TMC forums for past couple of months and have learned a lot by reading various threads. TMC has helped immensely in making my decision. I ordered 70D Solid black, Grey Next Gen, Pano roof, Autopilot, Premium interior, subzero weather package. I got VIN assigned yesterday. I am super excited and next 4 weeks are going to be painful. As I start looking at my financing options I am torn between Buy vs Lease (sorry ) options. I have read all the threads related to the subject but I think I am more confused about this decision than I was before I started reading

Here is my situation. I have a long 140 mile round trip commute in NJ. I drive about 28K miles per year. So over 3 years I add about 84K miles on the car. I have always been replacing cars every 3 years primarily due to the trouble that starts around that mileage with ICE cars. I don't think 84K miles would mean the same thing for Model S but I am kinda used to upgrading my car every 3 years now. My primary pull towards Model S was due to Autopilot considering my long commute. I know the current software does not fully utilize capabilities of the autopilot hardware and many more features would likely be released over time but reading on TMC it feels like an upgrade to Autopilot hardware is imminent over next few months/years. I love Model S as it is now but I think I will be very tempted to upgrade in 3 years if better Autopilot hardware comes out. So I ran some numbers to help me with my decision on buy vs lease. I made certain assumptions around resale value of 70D in 3 years with 84K miles on it. There are not comparable sales but I used high mileage P85 sales and adjusted for cost gap between P85 and 70D. Also note that I assumed I will pay for excess mileage at $0.25/mile.

	Buy	Lease
Car price	84,300	84,300
Title & Reg	1,200	1,200
Due at sign	10,000	7,000
Tax Refund	-7,500	0
Loan Amount	75,500
Monthly Payment	1,226	1,037
Miles driven/yr	28,000	28,000
Excess mileage cost	0	271
Total Monthly payment	1,226	1,308
Total miles over 3 yrs	84,000
Resale value at 3 yrs	30,000
Loan balance at 3 yrs	34,000
Walk away cost/payout	4,000
Total cost over 3 yrs	50,640	54,082

Based on these numbers, it appears lease is marginally more expensive than buy option over 3 years but gives me flexibility to upgrade to new Model S in 3 years. Please let me know if I am missing something obvious in my numbers.

Thanks in advance for your advice.

 

[jbcarioca]

One major issue is the mileage allowance for the lease. Please make sure you check that.

Another factor may be the purchase of the Prepaid Service and/or Extended Service Agreements. The costs of either or both of those are significant, although generally less than they would be for ICE vehicles.

As for residual values/resale values, a quick look suggests that your residual values may be high when considering mileage, but resale values so far have been above residual values. Will they continue to do so? Nobody knows, but my personal view is that they will decline somewhat when Tesla releases a significant upgrade to S, probably a range increase, maybe a cosmetic update, maybe something else. However, with the 70D you do have the new battery pack which might act to mitigate that risk.

Those are my thoughts. FWIW, I ended out buying mine outright, guessing I might just keep it a very long time. We'll see if I do...

 

[MorrisonHiker]

Oops. I didn't see your downpayment. Now I see how the numbers work out. Please disregard.

Good luck with your purchase/lease!

 

[jbcarioca]

I just want to point out that your loan amount figure is off. You would need to finance the whole amount and then (possibly) get the $7500 tax credit the following year. I plan on refinancing since I'll be getting $13500 back in Colorado and that will greatly reduce the monthly payments.

Does not the tax credit only apply to new cars? Maybe some state ones may not specify but the Federal one is only for the original purchaser, although I am aware of at least one person who claimed for a used one after confirming that the previous owner had not claimed the credit. It remains to be seen if that passes muster with the IRS.

 

[Maximus8]

Is the excess mileage cost you list ($271) an annual cost or the total after return the vehicle?

 

[MorrisonHiker]

Yes, the federal tax credit is for the original owner. Fortunately in Colorado, the state tax credit can be applied to used vehicles which are 'new' to Colorado.

Unfortunately, the state of Colorado won't allow you to register a 'new' car as new if it has more than 1500 miles on it. There was some discussion as to whether the federal tax credit would still be available. Frankly, I don't want to risk losing out on the $7500 so I've limited my potential inventory model search to <1500 miles, just in case.

- - - Updated - - -

Is the excess mileage cost you list ($271) an annual cost or the total after return the vehicle?

Hmm. Am I missing something or is that value way off? Shouldn't it be more like $4000 per year for excess miles?

 

[Nirenk]

$271 is a per month cost of excess mileage. 13k excess miles on top of 15k included in the lease per year will add $3250 per year or $270 per month to the lease cost.

 

[alexdav]

$271 is a per month cost of excess mileage. 13k excess miles on top of 15k included in the lease per year will add $3250 per year or $270 per month to the lease cost.

I'm in almost the same boat as you. I got a lease with the 15k miles allowance per year but I'm going to be driving close to 30k miles per year as well. You may want to ask about getting an increased mileage allowance that is closer to what you expect to drive. Other companies do negotiate that, it just totally slipped my mind when I signed my lease. Hopefully Tesla / US Bank will work with you on that!

 

[MorrisonHiker]

$271 is a per month cost of excess mileage. 13k excess miles on top of 15k included in the lease per year will add $3250 per year or $270 per month to the lease cost.

Doh! Thanks for the explanation. I forgot to convert to monthly.

 

[Nirenk]

alexdav, glad to know I am not in this situation alone. Will talk to Tesla and US Bank about such options in advance per your suggestion. Did you know that you would be driving 30k per year when you decided to lease ? If you were to go through the transaction again, would you opt for buy instead of lease ?

- - - Updated - - -

Good point on ESA. I assume US Bank might require me to purchase ESA.

 

[typhune]

Something else to keep in mind, in case you are not aware. the $7500 EV credit is not "cash" or a refund. It can only lower your tax liability by 7500$ to maximum of zero. So if your tax liability is only 3500, the credit is only worth 3500.

Certainly you can get creative with this, but just something else to think about.

 

[Nirenk]

Understood. IRS sucks lot of money out of my wallet. So I am not worried about that.

 

[rage_777]

You should also probably remember that a lot of people drive the MS a lot more once they get the car, so your total mileage might be even more. People seem to take longer routes, go to the grocery store, etc more than they use to.

 

[AndreSF]

I would probably be better off buying the car in your case. BTW $7500 is indeed for the first owner, which is in case of the lease is the financing bank, as far as I know, and part of the credit is passed to lessee.

Tesla Leasing | Tesla Motors

"The payment calculations are provided for informational purposes only and may reflect assumptions that may not apply to you or lease terms for which you may not qualify. Model S qualifies for a federal tax credit up to $7,500 which is already included in the payment calculations."

 

[gavine]

It sounds like you're comfortable with paying that amount per month for three years, but one advantage of buying is that you can get-out of it if something happens and you can no longer afford the car. Sure, you would take a hit when selling it early, especially with your mileage, but with the lease, you're on the hook for all 36 payments. At least, this is the rationale I'm using when deciding on lease vs. buy for the Model X.

 

[ReddyLeaf]

Wow I must be missing something here. Has anyone sold/bought a non-salvage 3-yr old Tesla for $30K? Even with that high mileage, I find it hard to believe. Maybe those vehicles just aren't being sold because the owners don't want to take the depreciation hit. The CPO consolidator doesn't list anything even close, all are above $60K and many fewer miles. If you can afford it, then go for it. If you want a new vehicle every 3 yr, then just do it don't worry about the $5K delta. Buying a CPO might save you some bucks, but the prices look pretty high there, and you certainly won't get a 70D, or 85D.

 

[Nirenk]

Thanks. There are no comparable sales so I used MB S550 sales with similar mileage and P85 sale with high mileage to base my numbers. Nobody truly knows how much value the car will hold after 3 years. In 3 years, Model 3 will be out and other manufactures would be trying hard to compete with Model S. So I was conservative in estimating resale value.

 

[DÆrik]

I have to agree. In 3 years I would think that a well maintained (even with 84k miles) would be worth more than 30k. Personally I would just buy it outright to prevent the overage fee on the miles. Buying it, like others suggested, would also give you a way out if need be. Getting out of a lease can be much trickier.

Thanks Erik