Model 3 deprication estimate 1-2 year

[SabrToothSqrl]

So... I want the Model Y... (I'm an SUV guy).

BUT... My wife got a Model 3 and dammit I want that too.

Given the $7500 tax credit, and that owning a S, I may get one sooner than later... what will I lose total cost to own a 3 for 1-2 years while I wait on a Model Y.

thoughts? I don't want to miss the tax credit (I got my S used... so I never got that)...

But I prefer SUVs, and have high hopes for the Model Y, after seeing the model 3 and driving it.

But... I don't want to not drive Tesla for the next 1-2 years waiting after selling my S...

 

[Zaxxon]

My estimates:

Year 1: So much fun that you won't care.
Year 2: Still fun enough to not care.

Seriously, I can't imagine it depreciating any worse than average since the 3 will remain somewhat supply constrained for the next two years.

 

[buddhra]

My estimates:

Year 1: So much fun that you won't care.
Year 2: Still fun enough to not care.

Seriously, I can't imagine it depreciating any worse than average since the 3 will remain somewhat supply constrained for the next two years.

Agreed. In the first year, demand will far exceed supply and in the second year the loss of the federal tax credit will boost new prices and comparable used values.

 

[Swampgator]

Given the high demand and backlog for the Model 3, I would estimate depreciation to be very low. Probably 25% over 2 years.
SO a 60K car could still get 45K+ after a couple years of ownership.

 

[SabrToothSqrl]

55k new, 45k at sale = 10k loss, minus $7500 rebate = buy one!

Could one expect to get 45k for a 2 year old Model 3?

just realized I spelled "depreciation" wrong. ugh.

 

[Krugerrand]

Enjoy the 3.

 

[SoCalGuy]

$0 since someone putting in a reservation right now has to wait 1.5 years to get one. That $0 assumes no major damage or dents/scratches.

 

[voip-ninja]

$0 since someone putting in a reservation right now has to wait 1.5 years to get one. That $0 assumes no major damage or dents/scratches.

there is no way it will be $0 depreciation over 2 years.

Typically new cars depreciate about 20% as soon as you drive it off the lot and I don't see that changing now that Model 3 production is increasing and availability will be much improved in the next 1-2 years.

Availability of the $35,000 model, even with a wait will also dampen resale value of the LR version (for lease residuals base models always have strongest residual because secondary market buyers never value options as much as new buyers do).... also, Tesla continued improvements of their models also tends to hurt resale based on resale value history of early Model S.

The very best resale sedans in this segment have resale after 2 years of about 65% assuming normal mileage and wear and tear. Let's give Tesla the benefit of the doubt and say that it will be 75% due to high demand.

That gives resale value of LR model at $37500 after two years..... so, assuming federal tax credit of $7500 you could theoretically drive the car for 2 years for only $5,000. If you have autopilot I don't expect it will have 75% residual value after 2 years due to technology improvements but who can say.

In any event, I agree with the general sentiment that the Model 3, with current tax incentives is a pretty solid buy as long as nothing happens to Tesla as a company when it comes to resale value... I just don't think these wildly over-optimistic "your won't lose a nickel" posts are helping anyone.

 

[voip-ninja]

I should also point out that I'm in a bit of a similar situation. I should be getting my invite to configure sometime in the next month or so and have to make the decision to get the RWD initial LR configuration and maximize my tax benefit or should I wait.

The argument for getting an RWD car I would not normally get (I've been driving nothing but AWD cars now for about 18 years) is that the fading tax incentive makes a strong case for flipping the car in a couple of years and then getting the AWD variant when the model has further matured and Tesla have worked the kinks out.

Here's the math.....

$50,000 Model 3 LR
$5,000 auto pilot.
$1,500 paint.

Drive for 2 years and then trade for AWD variant or competitor auto.

Resale after 2 years....(I'm more pragmatic then most of the kool aid chuggers around here);

65% of the base car, 50% of options.

So,

$50,000 * .65 = 32,500.
$6,500 * .5 = 3,250.

For a total resale value after 2 years of about $35,750. Keep in mind that's resale to a motivated buyer, if I trade the car I can expect to lop another 10-15% off of that.

So, what's my total carriage for the 2 years?

$50K + $1,000 delivery charge + $6,600 in options
$56,500
plus
4.5% sales tax
= $59,042.5
plus
2 years of insane Colorado registration fees ($2,000)
= $61,042.5

less

$7,500 federal incentive
$5,000 state incentive.

So the final tally (cost to keep for two years)?

$61,042.5 - $12,500 = $48,542.5(total real cost) - $35,750 (resale) = $12,792.5

This number does not include interest payments or maintenance charges (let's assume I dump it right before the two year mark when it needs a brake fluid change and I choose not to do the $500 a year annual maintenance).

Suddenly the picture doesn't look quite so rosy.

On the flip side, the cost to operate my 340xi for 3 years will work out to be about $25,000 so the Tesla is still a helluva lot cheaper.

 

[SabrToothSqrl]

Well, crap guys... I just placed a reservation!

Let's see where the invite lands, and I'll write up the for-sale ad on my S...

I prefer AWD as well after having some AWD loaner S cars (and X) and living in PA (snow), but my 09 Tahoe is 4x4 and likes to bounce off things in the snow... so I'll just use that for snow days

Sometimes you need Teslas more than you need money... so... yeah...

If I can time the car to get the rebate, I'll buy the car. If not, I'll drive my gas sucker until I can see a Model Y.

 

[Swampgator]

there is no way it will be $0 depreciation over 2 years.

Typically new cars depreciate about 20% as soon as you drive it off the lot and I don't see that changing now that Model 3 production is increasing and availability will be much improved in the next 1-2 years.

Availability of the $35,000 model, even with a wait will also dampen resale value of the LR version (for lease residuals base models always have strongest residual because secondary market buyers never value options as much as new buyers do).... also, Tesla continued improvements of their models also tends to hurt resale based on resale value history of early Model S.

The very best resale sedans in this segment have resale after 2 years of about 65% assuming normal mileage and wear and tear. Let's give Tesla the benefit of the doubt and say that it will be 75% due to high demand.

That gives resale value of LR model at $37500 after two years..... so, assuming federal tax credit of $7500 you could theoretically drive the car for 2 years for only $5,000. If you have autopilot I don't expect it will have 75% residual value after 2 years due to technology improvements but who can say.

In any event, I agree with the general sentiment that the Model 3, with current tax incentives is a pretty solid buy as long as nothing happens to Tesla as a company when it comes to resale value... I just don't think these wildly over-optimistic "your won't lose a nickel" posts are helping anyone.

There is only 1 post that guesses you will not lose any money. Almost every other post is pointing to about 25% over 2 years, which happens to be exactly your estimate. I also thought you stated 3 weeks ago that you were out and were going to buy an Audi or BMW?

"Looks like another bmw or Audi for me"

 

[voip-ninja]

There is only 1 post that guesses you will not lose any money. Almost every other post is pointing to about 25% over 2 years, which happens to be exactly your estimate. I also thought you stated 3 weeks ago that you were out and were going to buy an Audi or BMW?

"Looks like another bmw or Audi for me"

More than one post, here's another one;

55k new, 45k at sale = 10k loss, minus $7500 rebate = buy one!

This person is estimating a loss of perhaps 18%, just as unrealistic as "zero".

I am possibly out if I can't get AWD as this is a bone of contention in my household (never another non AWD car). What would it possibly matter to you other than you get to run another person off with a pitch fork who doesn't slurp up the Tesla KoolAid and get them to stop participating here?

Thanks for the friendly stalker vibe though.

 

[SoCalGuy]

Not sure I agree with you...

Even with production ramp by end of summer, there's still going to be at least a 9 month wait if not longer for new reservations. Add to that a fading tax credit worth $3750 by end of year and probably $0 by the time a new reservation holder gets their car in a year's time, and you can see how the supply side of the market will constrain depreciation provided that the demand remains robust.

Put differently, a year from now, as a new car buyer, if I'm in the market for a Tesla Model 3 in January 2019, I have two choices:

1. Put in a reservation in January 2019 and pay $50K upon car delivery some time in the Sept 2019-Jan 2020 window with no tax credit for a brand new car

2. Pay $42-45K in January 2019 for a used Model 3 with the same features but perhaps 10-20K miles on it. It may have a few small scratches and the interior might not have that new car smell, but it will likely have all the same features and the latest software as a brand new car rolling off the line. Plus I'd get it 9-12 months earlier and potentially save $5-8K.

The only reason an economically rational buyer would choose option 1 is if they value the 'new car' premium more than the time value of 9 to 12 months plus $5-8K. For most people, option 2 makes more economic sense.

For a buyer today, they could resell their car in 1 year and get $42 to $45K plus the full value of the tax credit so they would basically be even/not lose any money.

 

[Swampgator]

It's just that in a lot of your posts you criticize other posters for being pro Tesla. This is a Tesla forum, so the fact that a lot of us are fan boys should not be surprising.
I'm assuming you have driven a Model S? What did you think? I know when I rented one for the weekend I came away from that experience vowing that Tesla was my next car, and that EVs were superior to ICE cars in driving experience. And I have driven and owned lots of nice ICE cars.
So, yes, I became a true fan boy, even though I personally think CAGW is a crock of crap and would disagree with most Tesla fan boys on that topic.
The driving experience sells it. BTW, there are lots of videos online showing RWD Model S in the snow. They handle snow and rain better than ICE cars, because of a quicker, digital level of torque modulation compared to ICE systems.

Now, as far as depreciation goes we do have Model S for some precedent, although demand for 3 is much larger. Model S loses about 28% of it's value after 50K miles. I would expect the 3 to do better than that, because of demand but also because the tax credit will be gone by the time you sell a 2 year old 3, leaving new 3 buyers paying significantly more.

 

[voip-ninja]

Not sure I agree with you...

Even with production ramp by end of summer, there's still going to be at least a 9 month wait if not longer for new reservations. Add to that a fading tax credit worth $3750 by end of year and probably $0 by the time a new reservation holder gets their car in a year's time, and you can see how the supply side of the market will constrain depreciation provided that the demand remains robust.

Put differently, a year from now, as a new car buyer, if I'm in the market for a Tesla Model 3 in January 2019, I have two choices:

1. Put in a reservation in January 2019 and pay $50K upon car delivery some time in the Sept 2019-Jan 2020 window with no tax credit for a brand new car

2. Pay $42-45K in January 2019 for a used Model 3 with the same features but perhaps 10-20K miles on it. It may have a few small scratches and the interior might not have that new car smell, but it will likely have all the same features and the latest software as a brand new car rolling off the line. Plus I'd get it 9-12 months earlier and potentially save $5-8K.

The only reason an economically rational buyer would choose option 1 is if they value the 'new car' premium more than the time value of 9 to 12 months plus $5-8K. For most people, option 2 makes more economic sense.

For a buyer today, they could resell their car in 1 year and get $42 to $45K plus the full value of the tax credit so they would basically be even/not lose any money.

What you're saying applies to pretty much any 2-3 year old car with good resale such as a Honda, Toyota, BMW. Why does anyone buy a new one when they can save quite a bit of coin and buy one that's only got a "few scratches" and a "few miles" on it?

One reason is year over year improvements... in the case of Tesla they continue updating their cars with new software for quite a while but you miss out on any hardware revisions that come along.

Another reason is warranty. Many people buying a 2-3 year old car are following the fairly sound advice of "buy a 2-3 year old low mileage car and then drive it till the wheels fall off". For those buyers the warranty is a pretty big deal.

 

[xav-]

No one talks about this but it is conceivable that tax credits could get extended. The main reason is that GM is extremely dependent on that. The entire bolt and volt programs will be shut off without an extension.

I read somewhere on a forum that the CEO of GM was lobbying for it. I don’t know how accurate that is but that would make sense.

The key for the feds would be to come up with a way to prop up GM while leaving tesla so I think if they do it we will see a purchase limit of $40k or something.. so the base teslas would take advantage of it but the rest of their cars wouldn’t.

 

[Effopec]

Here's what Autolist predicts, via Electrek. So if you drive 12k/yr, they are estimating about 15% after 2 yrs. The federal rebate will definitely play into the actual numbers, as will the queue, when they phase in international deliveries, what other manufacturers (and the Model Y) have announced by then, etc.

 

[S4WRXTTCS]

What you're saying applies to pretty much any 2-3 year old car with good resale such as a Honda, Toyota, BMW. Why does anyone buy a new one when they can save quite a bit of coin and buy one that's only got a "few scratches" and a "few miles" on it?

One reason is year over year improvements... in the case of Tesla they continue updating their cars with new software for quite a while but you miss out on any hardware revisions that come along.

Another reason is warranty. Many people buying a 2-3 year old car are following the fairly sound advice of "buy a 2-3 year old low mileage car and then drive it till the wheels fall off". For those buyers the warranty is a pretty big deal.

It's extremely sound advice, but people are emotional creatures.

A really good CPO car can have a great warranty which completely removes the advantage from buying new. Plus most ICE cars don't really change all that much in 2-3 years.

I've bought new cars pretty much all my life, and I have ZERO rational explanation for it. Cars to me are less about getting from Point A to Point B, and more about the adventure.

Owning a Tesla has been an adventure.

Sadly I can feel the whole car ownership experience coming to an end. If I wasn't so EV obsessed I'd be doing the Volvo subscription thing.

 

[Leftysmasher]

Well, crap guys... I just placed a reservation!

Let's see where the invite lands, and I'll write up the for-sale ad on my S...

I prefer AWD as well after having some AWD loaner S cars (and X) and living in PA (snow), but my 09 Tahoe is 4x4 and likes to bounce off things in the snow... so I'll just use that for snow days

Sometimes you need Teslas more than you need money... so... yeah...

If I can time the car to get the rebate, I'll buy the car. If not, I'll drive my gas sucker until I can see a Model Y.

I'd be curious how long it would take to get the invite for the 2nd Model 3? I am in the same situation. Have a 3, love it. Would prefer an X as a second car but it is too much. So, plan is to sell the S and get another 3 and flip it in a couple of years. But, the question is how long will it take to get the invite for the 2nd Model 3? 30-60 days since you are a current Tesla owner? Who knows..

 

[Az_Rael]

Here's what Autolist predicts, via Electrek. So if you drive 12k/yr, they are estimating about 15% after 2 yrs. The federal rebate will definitely play into the actual numbers, as will the queue, when they phase in international deliveries, what other manufacturers (and the Model Y) have announced by then, etc.

I think Autolist is always overly optimistic with their estimates. If you go back and look at their old Model S projections, they were very optimistic based on today's actual market. I don't think they are accurately accounting for how much Tesla changes their cars over a 2 year span.

For example, in 2 years we will most likely have Autopilot 3 hardware going out on all new cars creating a potential step function in the depreciation curve.