Lease prices way too high?

[Forensic]

Does anyone find the lease prices of the Model 3 completely absurd?

My current lease is up in 3 months so it's about the right time to start looking at options. I really had my heart set on a Model 3 but the price they're asking for a 36 month lease without the option to buy at the end might completely price me out. Typically when leasing you want to aim for the 1% rule, as in a car with an MSRP of $48,000 should be around $480 per month, but the Model 3 isn't even close to this.

I know Teslas have historically leased horribly, but has there been any word or rumors of this changing? I've talked to other people who have also been turned off to Tesla because they can't see spending that much to lease a compact car especially one where the monthly payment doesn't correlate even close to the MSRP. For example, if you went to a BMW dealer you can probably get a significantly more expensive vehicle for less per month than a Model 3.

 

[HarleyW]

Does anyone find the lease prices of the Model 3 completely absurd?

My current lease is up in 3 months so it's about the right time to start looking at options. I really had my heart set on a Model 3 but the price they're asking for a 36 month lease without the option to buy at the end might completely price me out. Typically when leasing you want to aim for the 1% rule, as in a car with an MSRP of $48,000 should be around $480 per month, but the Model 3 isn't even close to this.

I know Teslas have historically leased horribly, but has there been any word or rumors of this changing? I've talked to other people who have also been turned off to Tesla because they can't see spending that much to lease a compact car especially one where the monthly payment doesn't correlate even close to the MSRP. For example, if you went to a BMW dealer you can probably get a significantly more expensive vehicle for less per month than a Model 3.

Never heard of the 1% rule. It all comes down to residual value. I guess they think the value in 3 years will alot less than what some people might hope for.

 

[SweetLou]

Probably a high money factor and as stated low(er) expected RV. BMW, for example, seems to estimate high RV in part to keep lease options attractive. They also like to sell cars twice, once at the start of a lease then often as "certified" once the lease returns. Like the Tesla finance numbers, they are not competitive with other dealers 0-0.9% incentives because they do not do in house financing.

For the same reason, Tesla does not offer incentives or discounts (other than the $1/mile off demo cars) they don't seem to be hurting to give cars away.

 

[DanCar]

Buy and selling will likely result in less cost for owning for x years rather than leasing.

 

[electracity]

With Tesla a lease transfers the risk of technological change to the lessor. Other car makers aren't developing technology fast enough to create that risk.

This is also why Tesla doesn't have a lease purchase option.

 

[CapeOne]

Typically when leasing you want to aim for the 1% rule, as in a car with an MSRP of $48,000 should be around $480 per month, but the Model 3 isn't even close to this.

I know Teslas have historically leased horribly, but has there been any word or rumors of this changing? I've talked to other people who have also been turned off to Tesla because they can't see spending that much to lease a compact car especially one where the monthly payment doesn't correlate even close to the MSRP. For example, if you went to a BMW dealer you can probably get a significantly more expensive vehicle for less per month than a Model 3.

If your talking $0 down payment leases, I don't think the 1% rule would necessarily work on a BMW e.g., a new 2020 330i xDrive AWD with an MSRP of $46,645 would be around $513/month (before taxes) with $0 down payment and that includes $1,000 loyalty/conquest and $750 lease credit.

 

[CapeOne]

This is also why Tesla doesn't have a lease purchase option.

On the M3 but they do have lease purchase options on MS and MX.

 

[CapeOne]

For the same reason, Tesla does not offer incentives or discounts (other than the $1/mile off demo cars) they don't seem to be hurting to give cars away.

Tesla has been known to discount new/inventory cars more than that. Also, they've certainly cut prices over the years including May's $5k price cut on MS and MX and $2k price cut on M3.

 

[SlimJim]

Well I leased.
I had financed a 2019 SR+ With about $8 k down. And that $40200 msrp car payment was $545 for 72 months.
I sold it after 1 year. I had $1200 equity. $3750 tax credit refund. $2750 downgrade refund from Tesla. Total $7700. So I lost $300 in the deal.

Then I leased 2020 LR AWD. Msrp $47000 + 1200 destination fee.
12000 mile/yr.
Fees and registration + first month payment + down payment about $4000 = $5000.
Monthly $577.
About $4000 less in down compared to SR+ Purchase and only $32/mo more.
After 3 years how much equity would I have if I had financed it with $4000 down?
I don't keep cars for very long.
If I keep cars for 7 years or longer, I would have financed it.

 

[jjrandorin]

Never heard of the 1% rule. It all comes down to residual value. I guess they think the value in 3 years will alot less than what some people might hope for.

That "rule" is something that leasers of german cars tend to shoot for (specifically BMWs, may apply to others), and is only a barometer for those specific deals. Has nothing at all to do with model 3s. OP says the "prices are absurd" because they are comparing leasing across brands. Tesla doesnt WANT to lease you the car, they want you to BUY it. Other brands have their cars priced to lease, with the MSRP similarly inflated, so they can give unrealisticly high, subvented residuals.

TL ; DR, Model 3s dont "lease all that well" because they want you to buy it, not lease it, unlike most german cars who have the fact you are likely going to lease it priced into the model.

 

[Uncle Paul]

Many manufacturers subsidize their leasing rates to help sell more cars.

Tesla has such strong demand that they have no incentive to subsidize their leasing rates.

Friend purchased a Rogue year or so ago, and the money factor was something like .001. Essentially a Zero interest lease. Nissan needs to do this as most customers are only buying Rogue's because of pricing compared to the completion. They cars would have little demand if Nissan charged market rates.

 

[nealh]

The problem with Tesla lease is the interest rate/money factor. The rates are 5.6%.

I have leased BMWs for 17yrs. Never heard of 1% rule.
The bottom line on leases is residual value, money factor and then negotiated car price. BMW in the past was very generous on the residual value.

leases as a general are not good financial investments. I have done them so I can change cars every 3 yrs.

If your looking for equity and saving money a lease is likely not the best option. I want to try a Tesla and a lease is short term way of trying the car. If I like it I may buy a future Telsa

also personally I never put a down payment on a lease. If the car is totaled you lose that money

 

[hakunamattata]

Same here not heard of the 1% rule, have leased BMW's, Audi's for the past 16 years. The money factor for Tesla is high and it depends on the model. However a higher residual value of around 65% compensates for that.

Tesla leases become very attractive if you are in a state like NJ where there are generous incentives like $5000 rebate till MSRP is under $55K and no sales tax. Effectively with zero down and after the rebate a base SR+ model would be $367 per month in NJ

 

[jjrandorin]

The problem with Tesla lease is the interest rate/money factor. The rates are 5.6%.

I have leased BMWs for 17yrs. Never heard of 1% rule.
The bottom line on leases is residual value, money factor and then negotiated car price. BMW in the past was very generous on the residual value.

leases as a general are not good financial investments. I have done them so I can change cars every 3 yrs.

If your looking for equity and saving money a lease is likely not the best option. I want to try a Tesla and a lease is short term way of trying the car. If I like it I may buy a future Telsa

also personally I never put a down payment on a lease. If the car is totaled you lose that money

Same here not heard of the 1% rule, have leased BMW's, Audi's for the past 16 years. The money factor for Tesla is high and it depends on the model. However a higher residual value of around 65% compensates for that.

Tesla leases become very attractive if you are in a state like NJ where there are generous incentives like $5000 rebate till MSRP is under $55K and no sales tax. Effectively with zero down and after the rebate a base SR+ model would be $367 per month in NJ

I spent a few years advising people on BMW leasing on what used to be what of the largest BMW boards on the internet (now since diminished). This "1% rule, was something that people used to target as a "quick" way to see how their lease numbers shake out. A lease had to be very aggressive to hit it (meaning a 50k MSRP leased vehicle for a monthly payment of 500 a month). I did not come up with it, and it does not preclude doing "the math", it was just a way that many used at simplifying a monthly payment target.

As I mentioned, it was an aggressive target, depending on money factor, etc etc, and it always assumed no cap cost reduction, but paying your drive offs in cash (since you both are familiar with leasing you know what I mean). To hit it, you normally not only had to have an aggressive deal, but usually, you had to use multiple security deposits as well, to lower the money factor lower than even the base rate (you also had to have a base rate deal with no markup to start with).

Anyway, you both are absolutely correct, it boils down to the things you said, I am just saying I have heard that statement the OP makes about "1% rule" many times before.

With all that being said, I find the original thread title statement to be somewhat funny, because exactly what is "too high?" OP is assuming that the payments are "too high" compared to what, exactly? There are no dealer public offers that EVER come close to that "1% rule" where the listed payments are 1% of the MSRP with only drive offs paid up front. Dealer offers almost always have cap cost reduction in them as well ("$3999 down"), so I am not sure where this OP is getting "too high" other than "too high for what I want to pay" which is a completely different statement.

 

[KenC]

Does anyone find the lease prices of the Model 3 completely absurd?

My current lease is up in 3 months so it's about the right time to start looking at options. I really had my heart set on a Model 3 but the price they're asking for a 36 month lease without the option to buy at the end might completely price me out. Typically when leasing you want to aim for the 1% rule, as in a car with an MSRP of $48,000 should be around $480 per month, but the Model 3 isn't even close to this.

I know Teslas have historically leased horribly, but has there been any word or rumors of this changing? I've talked to other people who have also been turned off to Tesla because they can't see spending that much to lease a compact car especially one where the monthly payment doesn't correlate even close to the MSRP. For example, if you went to a BMW dealer you can probably get a significantly more expensive vehicle for less per month than a Model 3.

Completely absurd? No.

Let's just look at your example. A pmt of $480x36 pmts is $17,280, total.

For a $48,000 vehicle, let's assume the lease factor is 0, so all those payments are depreciation. Even then, when you divide $17,280 into $48,000, the RV is 64%. That's very high. To get a RV that high, the mfr has to be subventing the deal. The Model 3 has the highest residual after 3 years, according to various reports, and the Model 3 has a RV of 62.5%, for 10k miles/yr.

So for the 1% rule to be met, you have to have a car with a RV of 64% and ZERO money factor. If money isn't zero, then the RV is higher than 64%. How many, in-demand vehicles are being pushed out at 64% RV and zero financing? Sure, there are vehicles that get subvented, but those are vehicles the manufacturer wants to move. You think the Model 3 needs to be subvented by Tesla, in order to sell?

Maybe your expectations are completely absurd?

A short while ago, someone else wanted to know what the SR+ lease deal numbers were, so I ran them:

For a $37,990 SR+
RV 62.5, for 10k miles/yr
MF 0.001246, ie 2.99% equivalent
Total $506, not including state sales tax, or fees, nothing down.

So, not 1%, but 1.33%. 62.5% is a decent RV. 2.99% financing is fair, not special, but not the high rate that others have mentioned. There's nothing wrong or absurd about this lease offer at all.

I was able to back into the RV and MF by looking at the Loan Finance rate of 2.99%. I put the equivalent in as the MF, 0.001246, then started adjusting the RV in order to get $506 as the pmt. It came out to 62.5%. I then calculated the figs for 12k and 15k miles, and got exactly the lease pmt figure on Tesla's site, so the 62.5% RV for 10k and MF are correct. The notion that Tesla's MF is high isn't right, unless everyone thinks the 2.99% equivalent is high.

Put $4500 down, and you can get your monthly pmt down to $381, and then you'll have your 1%.

 

[SlimJim]

Might as well lease a LR. Lease up. 5.3 vs 3.9 sec is night and day.

 

[CapeOne]

A short while ago, someone else wanted to know what the SR+ lease deal numbers were, so I ran them:

For a $37,990 SR+
RV 62.5, for 10k miles/yr
MF 0.001246, ie 2.99% equivalent
Total $506, not including state sales tax, or fees, nothing down.

So, not 1%, but 1.33%. 62.5% is a decent RV. 2.99% financing is fair, not special, but not the high rate that others have mentioned. There's nothing wrong or absurd about this lease offer at all.

I was able to back into the RV and MF by looking at the Loan Finance rate of 2.99%. I put the equivalent in as the MF, 0.001246, then started adjusting the RV in order to get $506 as the pmt. It came out to 62.5%. I then calculated the figs for 12k and 15k miles, and got exactly the lease pmt figure on Tesla's site, so the 62.5% RV for 10k and MF are correct. The notion that Tesla's MF is high isn't right, unless everyone thinks the 2.99% equivalent is high.

Put $4500 down, and you can get your monthly pmt down to $381, and then you'll have your 1%.

The lowest MSRP for a 2020 M3 SR+ would be $39,190 as $1,200 destination and doc also needs to be included. Therefore, LEV would be 61% assuming other factors are correct.

To meet the 1% rule (excluding tax) on this car for a 36 month/10k miles per year lease, it looks like someone would have to put down around $3,800. Acquisition fee and first month's payment would also be due at singing for a grand total of around $4,887.

 

[SlimJim]

The lowest MSRP for a 2020 M3 SR+ would be $39,190 as $1,200 destination and doc also needs to be included. Therefore, LEV would be 61% assuming other factors are correct.

To meet the 1% rule (excluding tax) on this car for a 36 month/10k miles per year lease, it looks like someone would have to put down around $3,800. Acquisition fee and first month's payment would also be due at singing for a grand total of around $4,887.
View attachment 560368

Sales tax included? is op including sales tax in his figures as well?

 

[Forensic]

Maybe your expectations are completely absurd?

There's been a lot of replies so I can't respond to everyone but just to address a few things, to say my expectations are completely absurd is very unreasonable. If you walked into any luxury car dealer and were looking at a vehicle with a MSRP comparative to the Model 3, and they offered you the same numbers that Tesla offers on the Model 3, any sane person would walk right out the door.

With all that being said, I find the original thread title statement to be somewhat funny, because exactly what is "too high?" OP is assuming that the payments are "too high" compared to what, exactly? There are no dealer public offers that EVER come close to that "1% rule" where the listed payments are 1% of the MSRP with only drive offs paid up front. Dealer offers almost always have cap cost reduction in them as well ("$3999 down"), so I am not sure where this OP is getting "too high" other than "too high for what I want to pay" which is a completely different statement.

$627 per month not including taxes and fees on a $48,000 compact vehicle is too high. Doing minimal research on forums like Leasehackr you can find deals on Mercedes, BMW, and any other luxury manufacturer you can name that have lease deals on vehicles that cost more than the Model 3 for significantly less per month.

Same here not heard of the 1% rule, have leased BMW's, Audi's for the past 16 years. The money factor for Tesla is high and it depends on the model. However a higher residual value of around 65% compensates for that.

Tesla leases become very attractive if you are in a state like NJ where there are generous incentives like $5000 rebate till MSRP is under $55K and no sales tax. Effectively with zero down and after the rebate a base SR+ model would be $367 per month in NJ

Can you elaborate on the rebate? I haven't heard of that before. I live in NY but I'm minutes away from NJ.[/QUOTE]

 

[hakunamattata]

Following is the link which explains the program Home | Charge Up New Jersey , you may not qualify as you have to be an NJ resident.

Also NY has a rebate of $2000, not sure if it applies to leases. Following is a link which identifies that Electric Vehicle & Solar Incentives