Model 3 and what it means for the value of the Model S?

[OilSucks]

Hi all,

So I'm a leaser who is only 4 months into a 3 year lease. I love the car, I love the way it drives, and I have my issues with the AP system and it's parity with the AP1 car I test drove, but I am a very happy customer.

One thing that really worries me though is what the Model 3 is going to do the value of my car come time for me to turn my car back in and either purchase it or not. One thing I like/dislike about leases is the residual value that is placed within the lease agreement. I've had leases where the residual value is much lower than the cost of a similar car that is used, and once had a Hyundai that was much higher than the cost of a similar used car and Hyundai would not play ball and modify the residual value of the car so I was forced to just give it back to them. Even after I offered to just buy the car at the cost of a similar used car I had found. They had a person happy to buy the car but they still did not want to do it. Silliness if you ask me.

My worry is the Model 3 is going to cannibalize a lot of the Model S sales and value once a bunch of them are on the road in 3 years. Does anyone have any experience with a Tesla and it's residual value being higher/lower when your lease is up and what you went through? I know this applies to a pretty limited customer base but I just wanted to reach out to see if anyone has any experience.

Thanks!

 

[kvandivo]

Watching this thread. I'm considering getting an S but I'm concerned that depreciation is going to be much more significant than in the past because of the "glut" of 3's that are heading towards the road.

 

[cab]

Unless Tesla really "upscales" Model S (to differentiate it more from the 3), it isn't going to be pretty. Heck, I bought a 3 year old Model S last Summer and its value is still plummeting (I estimate about $1400/month - ouch). Basically, high end cars take massive hits in terms of real dollars and EVs seem to drop even worse. Tesla has been somewhat more immune that other EVs, but they are their own worst enemy here. It is what it is, but I wouldn't plan buying out the car.

 

[JPUConn]

I see the price floor of the non-AP cars falling out but don't see the depreciation on a 3 yr old model S going much below 50% of new unless tesla starts selling new 75D's for $50k (they wouldn't)

 

[Bebop]

I would bet money that the 3 will in fact affect the value of Pre-AP2.0/FSD Model S cars heavily.

Because why would I buy a non self driving capable Model S. When I can get the Model 3 that can? and for less.

So my options would be a used 2.0 Model S or a New Model S or a New Model 3.

So it won't affect new Model S sales for sure. I don't think. It will affect the used market a lot I think based on what I mentioned.

 

[idleuser]

I think prices will hold study until next year but you can bet once the 3LR with SAS+AWD becomes available, the value of the current Model S will tank. I'm expecting anything without AP1 to drop almost 50% in value once the 3LR comes out. Who would in their right mind buy a used 2013/2014 Model S 85/60 for 40-50k when you can get a new Model 3 for same price?

As for 2016/2017, the prices will stay study but still depreciate at the same pace as they are now. However, if the 3LR becomes too much of a good value proposition, the Model S prices will suffer even more. Tesla needs to improve the range+feature in order to not let the Model 3 cannibalize the Model S.

Just my .02.

 

[OilSucks]

I think prices will hold study until next year but you can bet once the 3LR with SAS+AWD becomes available, the value of the current Model S will tank. I'm expecting anything without AP1 to drop almost 50% in value once the 3LR comes out. Who would in their right mind buy a used 2013/2014 Model S 85/60 for 40-50k when you can get a new Model 3 for same price?

As for 2016/2017, the prices will stay study but still depreciate at the same pace as they are now. However, if the 3LR becomes too much of a good value proposition, the Model S prices will suffer even more. Tesla needs to improve the range+feature in order to not let the Model 3 cannibalize the Model S.

Just my .02.

That was exactly what I was thinking too... I mean if the Model 3 LR has a quoted range of 310 miles and my Model S only has a top range of 255 (fully charged, not taking into account the degradation of the battery in 3 years) I think I'm looking at a car that no one in their right mind will buy.

 

[OilSucks]

I see the price floor of the non-AP cars falling out but don't see the depreciation on a 3 yr old model S going much below 50% of new unless tesla starts selling new 75D's for $50k (they wouldn't)

I see where you are coming from, but I think the big thing I'm really thinking affects my car's value at the end of the lease is the range issue. My Model S 75D gets 255 miles total when charged to 100%. The Model 3 with 310 miles will more than likely be out by the time my lease is up... That puts my car in a "No damn way would I buy that" category. I mean who in their right mind would buy a 2017 used Model S with a degraded battery that gets close to 60 miles less range than a brand new Model 3?

 

[mach330]

i think it depends what one values. Range/Features or speed/looks/etc. I for one am debating now over refresh new model s vs model 3. The used model S i want (that's fast will need to be the P version). I would pick a 2017 used model s 75 for example over a model 3 if I had a choice because it's much faster.

 

[lux_cars]

Based on anecdotal evidence, Teslas have seemed to hold up theirs value better than some other similarly priced cars. But I imagine this would change (though I'm not sure to what extent) once new and used Model 3s are readily available.

IMHO, once used/new M3s become plentiful enough, likely second half of 2018 for US, there is no justification for paying the price premium for a Model S, nearly 100% for a new MS. Tesla either needs to drop the price massively on MS so that it's competitive in the mid-size premium segment or make it a true flagship with lots of points of differentiation. Just self presenting handles and an extra $150 screen isn't going to cut it when someone can have a slightly smaller Tesla for ~ half price.

 

[Don85D]

I thought that we paid a premium for the Model S to have an EV with generous range now and to give Tesla the funds it needed to move the world to EVs. I'm still OK with our purchase of an 85D and plan to keep it for a long long time. Our solar panel array allows us to run on sunshine which is a big bonus that would be unavailable without an EV that has a big battery.

Our grandkids will get the lower priced EVs coming from all of the automotive brands. That's why we signed up.

 

[Zacster]

My guess is that the model S will always be a premium car over the model 3. Not having seen the model 3 I am expecting a smaller, less luxurious car even with the higher priced models. All car manufacturers produce cars at various price levels and they don't feed off each other. Some people will always want the larger car.

That said, there is a pretty big price difference here. If I can buy 2 model 3s for the price of a model S, well that's just hard to justify. It will end up more like the 3/5/7 series, each step at a premium, with overlap between loaded versions and the base version of the next. Of course, I've never owned anything more exotic than an Accord, so don't listen to me.

 

[kvandivo]

I'm figuring a 10 year hold. Assuming that both cars (S and 3) are worth 30% of original price, I'm coming up with a difference in cost of $22,875 for my use case. There are numerous assumptions that have made their way into my spreadsheet to get that value, but the one thing that could throw it off for me is if the S depreciates more rapidly than the 3.

 

[pjoseph]

i don't get OP's OP. Isn't the whole point of leasing NOT to worry about residual value?

Yes, the current MS resale values will be cannibalized in 3 EV years. Comparing it even to a LR Model 3 is an exercise in futility.

 

[reserves]

Based on anecdotal evidence, Teslas have seemed to hold up theirs value better than some other similarly priced cars.

I agree but also I think Tesla are manipulating the second hand market as a very high % of secondhand Tesla's are CPO's.

I don't know how long they can keep that going for, unless they destroy all the CPO's they are holding back from listing (there are loads over here in the UK)

Surely they cannot keep this up as more leases come to an end.

 

[Aieukl378]

There are other market forces you may want to consider. For instance, fuel prices(in the US at least) are at a all time low. If fuel prices spike the few used Teslas out there will be in high demand increasing value on these cars.

 

[Saimaannorppa]

Model 3 will open even more eyes of the general public on benefits of EVs, and the infrastructure is improving with the large population of Model 3s coming. These are drivers to also increase demand for Model S, for those who want a car in that class.

Tesla has to do careful positioning for Model S to remain as the remarkably better car.

 

[David_Cary]

While range is nice, it isn't everything. A 240 mile car is enough for most people. I have an S and a 3 reservation. My lease is up in May. I love the idea of a more efficient car but I like my AP1. Maybe when AP2 has parity, the resale values on the the AP1 will sink some but predicting 2020 values is pretty hard.

The model 3 will not be better in everyway than an S. It is lighter and will feel cheaper than an S. It maybe more nimble but will not feel like the tank that the model S is. It will be less reliable for some time. Then it will become common and will not have the exclusivity of the S. It will not be as fast. It will not.....

 

[FutureShock]

IMHO, once used/new M3s become plentiful enough, likely second half of 2018 for US, there is no justification for paying the price premium for a Model S, nearly 100% for a new MS.

Tesla either needs to drop the price massively on MS so that it's competitive in the mid-size premium segment or make it a true flagship with lots of points of differentiation. Just self presenting handles and an extra $150 screen isn't going to cut it when someone can have a slightly smaller Tesla for ~ half price.

That's overstating things a bit, but... yeah, it is pretty hard to justify the price difference between a loaded Model 3 ($50K for 310 mile range and AP2) vs $80-85K plus for a 250-260 mile range reasonably well-equipped MS 75 or 75D. Something has to give.

Word is that some of the 75kWh MSes of late are actually have 85kWh battery packs that are software-limited. If so, that is perhaps a hopeful sign, though I'm not sure how much more ppl would want to pay just to be able to up the range of their MS to equal the range of the LR Model 3. Much better to just make the 85kWh pack standard in the lower-end MS.

Of course, then the 100D starts to look suspect, since it's asking for a pretty big price premium over the MS 75 or prospective MS 85. So unless you can also boost the battery pack on the 100D somehow, or cut the price...

(And yeah, yeah, I know... Elon tweeted that they won't go beyond 100 kWh anytime soon. So what? He HAS to say that, or everyone would wait for the new models to come out, no one would buy the 100s anymore. Look up 'the Osborne Effect'. )
.

 

[Dcr3rd]

I think prices will hold study until next year but you can bet once the 3LR with SAS+AWD becomes available, the value of the current Model S will tank. I'm expecting anything without AP1 to drop almost 50% in value once the 3LR comes out. Who would in their right mind buy a used 2013/2014 Model S 85/60 for 40-50k when you can get a new Model 3 for same price?

As for 2016/2017, the prices will stay study but still depreciate at the same pace as they are now. However, if the 3LR becomes too much of a good value proposition, the Model S prices will suffer even more. Tesla needs to improve the range+feature in order to not let the Model 3 cannibalize the Model S.

Just my .02.

Some would ask who in there right mind would spend 40-60k plus for a car....

I am taking delivery of a late 2013 S 85 on this Thursday.

My S is cpo and will have a slighlty better warranty than the 3, DU is included and loaner provided.
My S includes supercharging for life, not an option for the 3.
My S is costing me a shade over 40K, A 3LR without EAP/FSD activated is still 10k more,
My S is going to be on the road this week. As a day one reservation holder my est delivery is 3-4 months away for the 3.
My S has double the cargo space of the 3.

As far as depreciation I think the S will remain on a steady course just like any other luxury auto. The 3 may or may not fair better than the comps. My reservation is still active and one day I may buy a 3 (once FSD is a reality). Until then I will enjoy driving the S. If it was really just about the value/money - A to B then I would just continue to dive the 3 year old 10K Leaf that is sitting in my garage.