Lease vs. Own

[Prachatice]

I am new to the forum and the Tesla world but a little background. Currently own several ice vehicles along with a BMW i3 which we use for local excursions. I've enjoyed the "electric" world and have plunked down the deposit for a M3. I would also like to get a MS but am having trouble wrapping my head around whether to lease or buy. Car I would like to get is a 90D which costs roughly $90k to buy and around $1300/month to lease. Leasing comes out to around $46000 for 3 years or roughly half the price of owning. This seems insane to me. I fully understand that expensive cars depreciate quickly but not half their value in 3 years (believe me, I've owned them!). In addition, the beauty with Teslas is they don't seem to depreciate hardly at all when looking at used ones. In fact, they seem to be selling for approximately their value new minus the tax incentives minus a tiny bit of depreciation.

Is it me or does leasing make absolutely no sense? When I turn the car back to Tesla after three years and paying for half of it's original value, Tesla turns around and sells it for another $30 or $40K? It doesn't strike me as that kind of company. What am I missing??

 

[theslimshadyist]

I was faced with the same decision, went back and forth for about a week and I concluded that I would put $40K down and and finance the delta at the 1.49% rate that one of their lenders is offering. I'm currently in a 2014 BMW 550i, I have owned the car for 2.5 years and I just turned 17k miles. This is another reason why I decided to buy because with my low mileage habits, I'm confident that I can get a premium when I decide to sell the vehicle on the open market.

 

[buckerine]

I was faced with the same decision, went back and forth for about a week and I concluded that I would put $40K down and and finance the delta at the 1.49% rate that one of their lenders is offering. I'm currently in a 2014 BMW 550i, I have owned the car for 2.5 years and I just turned 17k miles. This is another reason why I decided to buy because with my low mileage habits, I'm confident that I can get a premium when I decide to sell the vehicle on the open market.

Nice. What's your rationale for putting 40k down?

Given that leases right now require same payments or MORE on a monthly basis compared to financing, it doesn't make any sense to lease. Especially if you're getting 1.49% on your loan. Leases can also be a bear to get out of as I'm experiencing now. And don't forget that once you get the car, you'll probably want to drive all the time. Those mileage limits on leases can be annoying.

 

[willcasp]

It depends on how long you plan to hold on to it.
I ran the numbers several times on the following three scenarios. My plan is to keep the car for three years: (Model 90D, with all options)
1) Buy car outright. Sell on the open market after three years
2) Buy car with Tesla financing, and get their buy back guarantee. Three year loan.
3) Lease car for 36 months.

Hands down, Leasing won. Even after factoring in the government tax credit of 7.5K. The lease residual was significantly more than the buy back guarantee. I did #1 on a Mercedes E500. Sold it after 4 years. Did the math, would have come out $10K ahead had I leased. Due to increased leasing popularity, there were many lease return cars on the market which was depressing prices.

The math here only works because I plan to keep the car for three years, and then get another one. I am doing this for the hardware upgrade. If I was going to hold the car for 5-10 years, I would just buy it outright.

 

[tstafford]

I leased because I was worried about the pace of change of the technology. I know myself I figured I would want the newest, coolest car periodically and figured that leasing put me on a schedule. Basically applying some discipline to myself. In retrospect I am so happy with the P85DL that I think I probably should have just bought it. However the guaranteed end of lease purchase price on my car ($69K) makes me comfortable that I still have that option down the road.

 

[Prachatice]

Thank you for your replies. They are much appreciated. But...... does the Tesla really hold 90% or so of it's original value after 3 years? The prices of the used ones make no sense to me since I can practically get a brand new one for the same money.

I agree with tstafford in that I also like to have the latest greatest technology every few years but paying for half the car in three years and then return it seems like a bad idea, even to a fiscally irresponsible person like me!

 

[Prachatice]

Also, should i wait for Autopilot 2.0 which sounds imminent and may not be a "software" upgrade but a hardware thing with the new models?

 

[theslimshadyist]

Nice. What's your rationale for putting 40k down?

Given that leases right now require same payments or MORE on a monthly basis compared to financing, it doesn't make any sense to lease. Especially if you're getting 1.49% on your loan. Leases can also be a bear to get out of as I'm experiencing now. And don't forget that once you get the car, you'll probably want to drive all the time. Those mileage limits on leases can be annoying.

It was just some random figure that I came up with, just a mental thing more than anything else.

 

[theslimshadyist]

Also, should i wait for Autopilot 2.0 which sounds imminent and may not be a "software" upgrade but a hardware thing with the new models?

Tesla is a technology company that happens to manufacture automobiles. When dealing with the latest and greatest tech, you gotta just pull the trigger when you are ready to buy or you will always be waiting for the "next best thing".

 

[theslimshadyist]

I leased because I was worried about the pace of change of the technology. I know myself I figured I would want the newest, coolest car periodically and figured that leasing put me on a schedule. Basically applying some discipline to myself. In retrospect I am so happy with the P85DL that I think I probably should have just bought it. However the guaranteed end of lease purchase price on my car ($69K) makes me comfortable that I still have that option down the road.

That was my original logic, tech always refreshing but...

 

[calisnow]

Also, should i wait for Autopilot 2.0 which sounds imminent and may not be a "software" upgrade but a hardware thing with the new models?

Only you can decide if it's worth the wait, but due to many reasons discussed in other threads, I believe a second generation hardware suite will be in the Model S by January at the latest.

I have a 2106 70D because i absolutely had to buy now - and I need a second one for a family member. But that one I am waiting until the end of the year to buy because of the odds that Autopilot 2.0 hardware will be released (though it's also likely that the software will not be tuned for some time after the hardware release).

As for lease vs buy just beware that you may drive wayyyyy more than you thought you would - I know I do. I went with a purchase for that reason - it was hard to turn down 2.5% money for 7 years - I will probably trade it in after 2 years for the next generation hardware but doing a purchase gave me the flexibility to just keep the car for the long term if I want to.

 

[theslimshadyist]

Also, should i wait for Autopilot 2.0 which sounds imminent and may not be a "software" upgrade but a hardware thing with the new models?

My strategy was putting the $2.5K deposit down last week with a December delivery. I purposely did this in case AP 2.0 was released and if not, oh well... I have a helluva nice P90D!

 

[llngoc]

For me, there are two reasons to lease vs buy

1. Both the hardware/software and battery technology are advancing at a very rapid pace. We got a pre-AP Model S 2 years ago. This is analogues to the iPhone/iPads from 5-6 years ago, whenever there is an annual update, you feel that you must get the newer model because of the number of new features. Also, the depreciation of the current EVs are probably worse than ICE for the exact same reasons. In my case, I think I will not be very happy to hold the Tesla 6-7 years from now when full-autonomous Model S with 500+ miles range is available for the same price.
2. If you own a business, leasing is probably a better option vs depreciation and/or mileage deduction. It is just simpler and easier for the accountant.

 

[CapeOne]

does the Tesla really hold 90% or so of it's original value after 3 years?

No! Tesla even sells new inventory cars for thousands below retail.

One example: Model S 90D 136026 | Tesla Motors

This car is priced $7K below the retail/order price of $102,200. Even new it’s already being offered for 93% of retail (before factoring in tax credits). It won't be worth anywhere near 90% of its 'original value' in three years.

 

[Prachatice]

No! Tesla even sells new inventory cars for thousands below retail.

One example: Model S 90D 136026 | Tesla Motors

This car is priced $7K below the retail/order price of $102,200. Even new it’s already being offered for 93% of retail (before factoring in tax credits). It won't be worth anywhere near 90% of its 'original value' in three years.

But if you if you look at the used MS's, they are very near their original invoice minus the incentives. I understand they may not sell for that, but those prices are across the board. In fact, right at the bottom of this page I have a Car Gurus ad for a '14 60 RWD for $55K. It must have retailed for around $70K almost three years ago no?

 

[CapeOne]

But if you if you look at the used MS's, they are very near their original invoice minus the incentives. I understand they may not sell for that, but those prices are across the board. In fact, right at the bottom of this page I have a Car Gurus ad for a '14 60 RWD for $55K. It must have retailed for around $70K almost three years ago no?

A 2014 isn't three years old and may have only been built/sold 18 or so months ago (December 2014). Asking prices don’t necessarily reflect the true market or actual selling prices or certainly trade/wholesale values.

I don't know which CarGurus ad you are referring to but a 2014 Model S 60 could’ve had an original sticker price much higher than $70K. There's a 2014 Model S 60 with 28K miles for sale at a Chrysler-Jeep-Dodge dealer in Massachusetts for $55,998. It sold new 4/2014 (around 27 months ago) with an original sticker price of $90,720 which still isn't a 'fully loaded' price. Even after tax credits, the retail asking price is far less than 90% of ‘original price’ and who knows what it will actually sell for.

Someone would be foolish to ask 90% of original price for a three-year-old Model S unless they have absolutely no interest in selling it.

 

[Humanji]

I chose to lease my p90d for the same reasons stated by others. This technology is changing FAST. And ALL luxury cars deprecate heavily-- at least 15% per year. The final factor is that I know 15k miles per year is right for me and the additional fees for extra miles are not that bad. Plus I don't want to modify the car at all. It's perfect the way it is.

I'm pretty good with numbers and financial strategy and I believe that for me I'll be ahead with the lease vs buy at month 36. Everyone's situation is different - run the analysis for yourself, but be sure to use 15% for annual depreciation.

 

[Bridor]

If you lease, you get the $7,500 rebate. I plan on leasing and then converting to a buy after three years. It is how I purchased the first three Nissan Leafs (2011, 2012, 2013).

 

[CapeOne]

If you lease, you get the $7,500 rebate. I plan on leasing and then converting to a buy after three years. It is how I purchased the first three Nissan Leafs (2011, 2012, 2013).

Not necessarily. If you lease through Tesla, the $7,500 federal tax credit is added to the residual instead of being deducted as a cap cost reduction and makes the LEV $7,500 higher and therefore that much more expensive to buyout at lease end. Tesla leases do not make good buyout options as you end up paying for the $7,500.

 

[mikec518]

If you lease, you get the $7,500 rebate. I plan on leasing and then converting to a buy after three years. It is how I purchased the first three Nissan Leafs (2011, 2012, 2013).

I have the 2013 Nissan Leaf. Wow what a car. If it only had a 40KWH battery I would buy another one. The reliability of the
leaf is amazing. People will be drive those cars forever and I am sure there will be after market batteries for the leaf down the road.