Is it actually smart to lease a Tesla?

[MXWing]

I would like to pose a question but set aside responses from two populations since the answer would be very skewed.

1 - Money is no object. If you can take a delivery of a 90P on Tuesday, and return it on Friday because the 100P came out I don't think question applies to you.

2 - If your business or tax infrastructure allows you to write off most if not all of the lease,this question would not apply to you.

My wife was telling me "you should have leased instead of bought the Model X because technology changes all the time". This was in response to the AP2.0 announcement yesterday.

I told my wife no because "THE LEASE IS FRIEKEN EXPENSIVE AND YOU HAVE NOTHING TO SHOW FOR THE FRIEKEN EXPENSIVE PAYMENT".

Model X 75D - Cash Price = 93,500

Lease for 15,000 Miles (Why wouldn't you drive this thing every chance you could get?)

5500 Upfront Cash
1400 every month * 35 = 49,000
Cost to lease for 3 years = 54,500

vs

Cash Price 93,500*(1.08 for tax) - 10,000 for Federal and California Rebate = 90,980.

Subtracting the difference, I cannot see the Model X being worth only $36,480 after 3 years. I can drive it for as little as I want and as much as I want for miles. Without seeing a lease contract the residual has got to be higher than $36,480 as well if you wanted to buy it out.

Hypothetically, If leased for 2 more years at $1,400 per month that would be $33,600. 54,500 + 33,600 = 88.100

For just two more years of payments, you'd own the car outright, have the equity and no car payment. You would have the option of driving it to the ground or still have some value > 0 after 5 years.

I can't see any kind of upgrades worth losing so much equity over.

On the other hand. I have a 36 month lease on a 2017 Volt Premier with all options.

$299 per month for 35 months, *0* money down. I can deal with 0 equity for the cost of $10,500 over 3 years for the right to exchange into a 2020 Volt if I chose to do that path.

Am I making sense.. or missing anything in my calculations?

 

[idealsol]

Perhaps the biggest unknown in the equation is the residual, tho I would guesstimate 54-60k, based just on what I've observed
The latest AP upgrade reminds us all we're driving a rolling piece of technology down the road and we're subject to how the market values our 3 YO car with perhaps some big technology upgrade or upgrades not present

Another factor is the rebate
This plays an important part in our overall acquisition cost and I would guess could be THE determining factor for some in a lease VS buy comparison
Here in California the rebate is now available again, tho they apparently changed the eligibility rules
There is now a maximum income level you need to be under
Eligibility guidelines

The federal tax credit is probably helpful to the vast majority of purchasers, but not to all

 

[outie]

Perhaps the biggest unknown in the equation is the residual, tho I would guesstimate 54-60k, based just on what I've observed
The latest AP upgrade reminds us all we're driving a rolling piece of technology down the road and we're subject to how the market values our 3 YO car with perhaps some big technology upgrade or upgrades not present

Another factor is the rebate
This plays an important part in our overall acquisition cost and I would guess could be THE determining factor for some in a lease VS buy comparison
Here in California the rebate is now available again, tho they apparently changed the eligibility rules
There is now a maximum income level you need to be under
Eligibility guidelines

The federal tax credit is probably helpful to the vast majority of purchasers, but not to all

A 60% residual after 3 years seems pretty standard for luxury cars. If one can trade in for that price it's actually not too bad.

 

[patrick40363]

Tesla leases are not good deals. You have to put too much money down which makes no sense. I bought my 85D and will trade in year 5.

 

[Heathman]

I am SO glad I leased. I can't imagine actually buying a Tesla as the technology in these vehicles changes so quickly. I picked up my Model S from the factory on July 8th of this year and look at the amazing upgrades that were announced Wednesday! I'm bummed I have to wait almost 3 years to upgrade. :-/

Sure, I had to put $7k down but I'm betting the resale on my car won't be the best. But hey, I won't have to worry about that! I'll be able to lease another and move on.

 

[Gig103]

I wish I was leasing but I can't convince my wife. The fanciest and newest Tesla every 3 years sounds worth it! I thought "hey, 8 years of software updates will soften the blow" but AP2.0 is new hardware, so yeah...

 

[ICETOO]

I am SO glad I leased. I can't imagine actually buying a Tesla as the technology in these vehicles changes so quickly. I picked up my Model S from the factory on July 8th of this year and look at the amazing upgrades that were announced Wednesday! I'm bummed I have to wait almost 3 years to upgrade. :-/

Sure, I had to put $7k down but I'm betting the resale on my car won't be the best. But hey, I won't have to worry about that! I'll be able to lease another and move on.

I absolutely agree. I was fortunate to get into a 24 month lease in September.

 

[MXWing]

I absolutely agree. I was fortunate to get into a 24 month lease in September.

May I ask what your total cost of lease would end up being? Upfront payments plus sum of the monthly payments?

Changing out cars every 2 years would be great but I am wondering what the average monthly fee of that would end up being?

 

[outie]

May I ask what your total cost of lease would end up being? Upfront payments plus sum of the monthly payments?

Changing out cars every 2 years would be great but I am wondering what the average monthly fee of that would end up being?

"The deals on the Model S (60) start at $593/month, but there is also $7,288 due at signing. The Model X (60D) start from $730/month, with $7,425 down. (Based on 10,000 miles driving/year. Add $27 on the S deal for 12,000, $54 to bump that to 15,000) "

So you can use that $593 figure for a base model with no extra option, +tax and downpayment.

 

[MXWing]

"The deals on the Model S (60) start at $593/month, but there is also $7,288 due at signing. The Model X (60D) start from $730/month, with $7,425 down. (Based on 10,000 miles driving/year. Add $27 on the S deal for 12,000, $54 to bump that to 15,000) "

So you can use that $593 figure for a base model with no extra option, +tax and downpayment.

Thanks. My MX is on order so theoretically I could make the switch to lease but the numbers don't ever seem to support what is paid out versus the market value at end of lease.

You really need 12k miles at the minimum, so I am wondering if this math then works out correctly.

Total cost of lease for bare minimum before what people usually have to add - AP, SAS, 6/7 Seats equals out to

757*23 + 7288 = 24,699 before tax and before "mandatory upgrades".

No Tax Credit, huge down payment and a monthly fee that feels like it is 4X the cost of what it should be given the purchase price of the vehicle.

 

[dohmer]

Based on this link:

Tesla Model S retains its value better than gas-powered cars in its segment, losing only 28% after 50k miles

The calculation doesn't include tax credit which i'm not sure how it compares with lease and purchase, but let's simplify things.

Tesla loses 28% after 50k miles. Assuming "average" person drives 12k miles/yr, according to the graph, the loss is roughly 15% for 24k miles (2 yrs of ownership).

The cheapest S60 starts at 66k. So 15% loss is 9,900.

Let's compare with lease payment. 5000 + $667*24 = 21008

I think the argument before to lease so we can keep getting new technology was assuming that luxury sedan like Tesla depreciates as fast as S class and 7 series. But with the latest report, that doesn't seem to be the case so the way I see it, it's cheaper to buy/finance then sell to get a newer version than to lease and return.

 

[jspayneii]

To me, they are just two different methods of financing. Both have their ups and downs. The benefit to a lease is that you have an agreed upon value for the end of the lesse, and you are only paying interest for the difference in value. If you finance, you are paying interest on the whole thing, and subject to the market value at the time.

 

[bro1999]

Leasing a Tesla is plain BAD in Maryland. In MD, you have to pay FULL SALES TAX on a lease (just like a purchase). So if you do a 24 month lease on a modestly-equipped S or X (let's say $90k), that's $5,400 in sales tax right off the bat, or $225/month. Then toss in the actual monthly payments + down payment, and you have a very expensive proposition.

Plus now that the $3k MD EV tax credit is dead, it's an extra kick in the nuts. Leasing in general is pretty poor in MD compared to most other states, unless you get a ton of dealer discounts (which Tesla doesn't do period).

 

[davidc18]

We purchased after looking at the total cost of the lease as I drive about 20,000 miles per year. At the time of purchase, the lease deal for 2 years and 10k miles was 912 per month, 6,000 down and .25 mileage over 10k. The inventory car started with a 24k discount. Clearly everyone is in a different situation and needs to look at both options.

 

[Saghost]

Buying the car will always be more flexible - with a lease you have to return the car close to the agreed on period, but you can trade a car you bought the month after or ten years later.

With a lease, you're betting the car will be worth less than the residual at the end, the company is being it'll be worth more.

Teslas have historically held up very well for their price class once you factor in the rebates I believe - but from what I've read that hasn't usually been reflected in the lease residuals.

I personally am not comfortable with leasing - always being responsible to someone else for the condition of the car, having to live within mileage limits (like most other new Tesla owners, I'm finding I drive it more than past cars,) and paying out money for years with no result to show for it, but if you understand what you're getting in to and it makes sense to you, great.

 

[Garlan Garner]

Thanks. My MX is on order so theoretically I could make the switch to lease but the numbers don't ever seem to support what is paid out versus the market value at end of lease.

You really need 12k miles at the minimum, so I am wondering if this math then works out correctly.

Total cost of lease for bare minimum before what people usually have to add - AP, SAS, 6/7 Seats equals out to

757*23 + 7288 = 24,699 before tax and before "mandatory upgrades".

No Tax Credit, huge down payment and a monthly fee that feels like it is 4X the cost of what it should be given the purchase price of the vehicle.

1. That's $1K per month for a 24 month lease. For the base model? I don't think so.

I would have considered leasing, however there is no mileage package that would fit my commute to work. I'm 50 miles from my job. That's 100 miles + every day.

 

[hmmm]

While I've both leased and bought cars in the past, I decided to lease my MS for a couple of reasons:

1) yes, leasing is usually more expensive than buying. For instance, the 2yr leases last Q were "priced" at 4.x% whereas you could get sub 2% money for a 60mo loan.
2) however, I think for EVs in general and Tesla in particular, this is the "insurance premium" you're paying to ensure that you don't find yourself with a car which could take a significant depreciation hit when new features come out, for instance AP2 if your car is not fitted with the HW.
3) They sometimes have leases that are a no brainer: last q, I secured a 2yr lease on a loaded inventory 2016 P90DL that was less than than a similar lease for a naked MS60. Not sure we will ever see such deals again though.

One thing re Tesla lease terms: it is sometimes cheaper (it was for my lease terms) to go with 10k miles/yr and pay the additional miles at the end of the lease vs. leasing for 12/15. Go figure.

 

[Terapin]

The other benefit of leasing is in how it affects your credit report. In Ontario, the lease may or may not show up on your credit report at all. My current Tesla lease does not. There is a lien registered against me, but that is it. There is no credit debt in the calculation of debt:income ratio. In other leases, the total amount of the lease payments has been registered as a debt against me. However, if I were to purchase, whatever amount I would finance would definitely show up as a bank loan - and in my own case currently that would be most of the value of the car. So with a Tesla lease it might be 40-50k debt with a lease, and 140k with a loan. That's a big difference against income. Sometimes places looking at your credit will balance out the equity of the thing you have the loan for against the loan, but oftentimes I find there is only a cursory look at the credit report and total credit taken out when they are evaluating your credit worthiness.

I have turned in many cars earlier than their lease expiry date- the hit is often negligible if the car is in good shape, and in some cases I have actually had positive equity in that the buyout amount is less than the current value of the car. That has been the exception, however.

 

[MXWing]

Thank you everyone for your replies, more food for thought. Some other considerations at least for me personally:

1 - The new upgrades like EAP and Full Self Driving are not free upgrades. By purchasing cars without them, you saved money upfront and any dollar towards a car is a depreciating asset. I don't know what people would want to ding a car for not having EAP and AP2 but for me personally that goes to #2.

2 - I'm driven non AP vehicles for over 20 years. I enjoy the physical aspects of driving and no matter the kool-aid I believe I am a better driver than any automated system. It makes me think if the car values actually DO drop a lot, I would want to look at older Model S with no AP at all.

 

[Rockster]

In general, my wife and I keep cars way longer, and drive them much farther, than would make leasing cost effective. This is even more true with a car the price of our Tesla.