Leasing finance detail (residual value calculation and interest rate found in Source Code)

[daytonadweller]

I originally planned to lease my Tesla Model 3 Performance. I've since just decided to pay cash. Anywho... I stumbled upon the following in the order source code.

Looks like Tesla forecasts the residual value of a 2020 M3P w/ FSD in 24 months to be... $48,733.70. ("residualValue":48733.7) [side note: the all-in original price I'm paying is $64,200.00]

FYI that the interest rate baked into the lease is 5.3208% ("interestRate":0.053208)

That's a pretty crummy deal if they indeed properly forecast the residual value... and I'm guessing they did.

If you're dead set on financing the vehicle, then go with a loan. I've seen many priced from 3.0% to 4.0%. Obviously cheaper than 5.3208%!

 

[dandrewk]

AFAIK, there is no buyback options with Tesla leases. Lease payments are essentially rental payments. Financially, its advisable to pay cash or get car financed, especially because Tesla’s have excellent history of holding their value.

 

[M3FNATIK]

I originally planned to lease my Tesla Model 3 Performance. I've since just decided to pay cash. Anywho... I stumbled upon the following in the order source code.

Looks like Tesla forecasts the residual value of a 2020 M3P w/ FSD in 24 months to be... $48,733.70. ("residualValue":48733.7) [side note: the all-in original price I'm paying is $64,200.00]

FYI that the interest rate baked into the lease is 5.3208% ("interestRate":0.053208)

That's a pretty crummy deal if they indeed properly forecast the residual value... and I'm guessing they did.

If you're dead set on financing the vehicle, then go with a loan. I've seen many priced from 3.0% to 4.0%. Obviously cheaper than 5.3208%!

The residual value appears to be set at 76% which is pretty high. I guess the only way they can make money is bump up the money factor (i.e. interest rate) to turn a profit on the rental. Residual value doesn't seem to matter here other than for calculations since there is no buy out option. This is soley a play for those who can write off the lease as its structured to be less flexible than traditional leases. Basically they provided a lease option for folks who just want a short term rental or can write off the lease. At least that is my understanding. Maybe others who have more experience can chime in.

 

[sdorn]

. . .Tesla’s have excellent history of holding their value.

The purchase price for my 2016 P100D Model S was about $165,000. A fully loaded brand new P100D Model S now is about $50,000 cheaper. If I had bought that car instead of leasing it, I would have been royally screwed by the depreciation. I will likely never buy a Tesla. The risk is too high that they will do something unpredictable that will drastically affect the resale value. At least with a lease you know exactly what your out of pocket expenses will be no matter what Tesla does. I just leased a Model 3 and didn't even consider paying cash or financing.

 

[Robert A]

I would be curious to know the residuals that Tesla uses today for a Model 3. To me, the current M3 leases look pretty crummy compared to other autos in the same price range. Won't be so bad if there was a buy-out option so you're not stuck having to start over if you like the car.

 

[nealh]

Wow that residual seems high but that means lower amount your paying during the term of the lease. Too bad interest rate is so high but still seems like a good lease deal.

What’s the residual for 36 mo?

 

[OCR1]

The purchase price for my 2016 P100D Model S was about $165,000. A fully loaded brand new P100D Model S now is about $50,000 cheaper. If I had bought that car instead of leasing it, I would have been royally screwed by the depreciation. I will likely never buy a Tesla. The risk is too high that they will do something unpredictable that will drastically affect the resale value. At least with a lease you know exactly what your out of pocket expenses will be no matter what Tesla does. I just leased a Model 3 and didn't even consider paying cash or financing.

I would not draw any meaning from the depreciation on a car that sold for $165,000. At that price it’s an exotic car. A car priced at $50K is in a completely different class. Based on what we have seen so far the Model 3 has hardly depreciated at all. Some people are selling them used for more than they paid for them.

 

[dandrewk]

The purchase price for my 2016 P100D Model S was about $165,000. A fully loaded brand new P100D Model S now is about $50,000 cheaper. If I had bought that car instead of leasing it, I would have been royally screwed by the depreciation. I will likely never buy a Tesla. The risk is too high that they will do something unpredictable that will drastically affect the resale value. At least with a lease you know exactly what your out of pocket expenses will be no matter what Tesla does. I just leased a Model 3 and didn't even consider paying cash or financing.

Ok, "most" Tesla's hold their value real well.

I was referring to resale values of Model 3s. And in evaluating a car's ability to hold value, you can't anticipate price reductions from the manufacturer. It's all about demand, and used Teslas (especially Model 3s) don't last long in used car markets.

 

[dandrewk]

I would not draw any meaning from the depreciation on a car that sold for $165,000. At that price it’s an exotic car. A car priced at $50K is in a completely different class. Based on what we have seen so far the Model 3 has hardly depreciated at all. Some people are selling them used for more than they paid for them.

I got the Stealth last November. Given the new Model 3 choices, I wondering what it would sell for now as a used car. That's just curiosity, of course, because the only way I part with it is from my cold, dying hands.

 

[raptor5244]

I would not draw any meaning from the depreciation on a car that sold for $165,000. At that price it’s an exotic car. A car priced at $50K is in a completely different class. Based on what we have seen so far the Model 3 has hardly depreciated at all. Some people are selling them used for more than they paid for them.

Exactly. $165k is a different market segment altogether with low volume. The Model 3 is more affordable and produced in large numbers so there will a strong used market as well.

 

[NickFie]

Not much Model 3 depreciation yet since Nav HW 3 vs. HW 2.5 is the only major upgrade between 2020 Model 3 and late 2018 Model 3.

I expect steeper Model 3 depreciation when:
- Model Y production and availability ramp up. This will cut into Model 3 demand.
- Major improvements in Model 3 - possibly next generation battery with additional range, certainly an easier-to-manufacture design.
- Model 3 price reductions to reflect increased competition and lower battery & production costs.