Model 3 lease question.

[jjrandorin]

Thanks for the replies.. still up in the air.. i have time. But here a couple thoughts.

Could this anomoly just be supply and demand?

As in with the cars (Y and 3) now being pumped out and began to saturate the market? Once that supply catches up (pretend it's 2023 today and there's over a million out and a million a year made) these things are coming down man. No way it doesn't. Especially should they come up with cheaper and cheaper models and even these get a price drop or two.

I did the analysis on the high plus and even worst case given known data and the Lease is the safe option. 3yrs from today we "could" still be alright... but idk. Would definitely suck to shell out say 15k pay 600/mo for 3 yrs and then "walk away" dead even vs paying 600/mo with 5k (my state rebate) down and wipe my hands of it...

Definitely a gamble. Not factoring in inflation of unknown % given this tumultuous climate (hopefully settled for the next 4 yrs one way or other in a couple of weeks!).

Any thoughts

No one who is PLANNING on selling in 3 years should ever buy a car vs leasing it. Tesla leases are not very favorable, interest rate (money factor) wise, but if you are into renting cars (since there is currently no way to buy a model 3 off lease) then go for it. I am totally not into the perpetual "lease vs buy" debate.

I only chimed in here because you keep saying people are "taking a beating on used teslas" and we keep saying "this is the model 3 section, and that is not happening on model 3s". Saying that, there is no guarentee of anything 2 weeks from now, let alone 3 years from now, so if the plan is to definitely sell in 3 years, then you should lease it.

 

[dmurphy]

I did the analysis on the high plus and even worst case given known data and the Lease is the safe option.

You and I are in a very unique position, being in NJ... we don't pay sales tax, and we have a $5,000 check-mailed-to-you rebate -- even for a lease.

That really changes the equation on leasing a Model 3. For fun, let's argue that, over 6 years, you'd either take 2x 36-month leases, or buy the vehicle outright.

Leasing - you'd get $10,000 in rebates. Buying outright, you'd get $5,000.

So at the end of 6 years, how much would those leases actually cost, and - in the purchase case - what would the residual value of a 6-year-old Model 3 be?

That's some of the math you'll need to run, and some of the assumptions you'll need to make. Unfortunately, there aren't any 6 year old Model 3's on the road yet, so that's just a guess. Will the bottom fall out on value, or will it remain insanely high? Nobody knows ...

 

[wrapspeed]

To op and others who plans to lease vs buy, I'm in the same shoes as well. While I'm still considering which way to go, I was able to confirm that although there is no option to buy the car after the lease term but during the term the car can be trade into to another car. If that's the case, any place or individual who has a dealer license or know anyone that does can purchase the car from Tesla to resell. If one can confirm this that would be great.

In CA we are paying more than 10% in sales tax & registration and there's no tax credit for trade-in. The benefit for leasing is you only pay the tax on monthly basis not the entire tax. It would make a sizable difference for higher MSRP model such as Performance or full autopilot. Not sure if my calculation is right but if I'm planning to keep it for 2 years until the cybertruck(on order) is out I probably better off paying a higher leasing cost monthly than finance it & pay the whole tax upfront that I'll never get back.

Another thing to think about is if during the ownership the car is involved in any type of accident the depreciation cost would be much easier to buried if you don't own the car. That's also something to consider if the car is used frequently on the road.

 

[CapeOne]

With such volatility anticipated in the EV market in the coming years due to new competition, product improvements, etc., I wouldn't rule out leasing as a reasonable option to protect against unexpected additional resale declines. On top of that, there are budget factors (lower monthly payments) that can still make leasing attractive for some.

People buying new Teslas today should not expect resale values to be as good as they may have been in the past. Many used M3s (one of Tesla's best resale value models) less than one year old have already had asking prices 10% to 15% below original retail and these are used retail asking prices, not wholesale/trade values. Wholesale/trade values would be even lower.

A few current examples with very low miles, clean histories, etc.:

Original retail $49,190
Tesla Price $44,200
89.9% of original retail
2020 Model 3 | Tesla

Original retail $49,190
Tesla Price $43,700
88.8% of original retail
2020 Model 3 | Tesla

Original retail $51,690
Tesla Price $44,600
86.3% of original retail
2020 Model 3 | Tesla

Original retail $50,190
Tesla Price $43,200
86.1% of original retail
2020 Model 3 | Tesla

 

[jeremymc7]

If Tesla allowed an open end lease with purchase option I would be open to the discussion as at least there is a chance to getting more of your money back. Since you can't purchase is the only option that allows the chance to cover more of your money. 10-15% is still better than most any other car. Heck some cars loose that driving off the lot.

 

[CapeOne]

If Tesla allowed an open end lease with purchase option I would be open to the discussion as at least there is a chance to getting more of your money back. Since you can't purchase is the only option that allows the chance to cover more of your money. 10-15% is still better than most any other car. Heck some cars loose that driving off the lot.

So do Teslas. Again, my examples above are used retail asking prices and not wholesale/trade values. It’s not unusual to also see non-Tesla low mileage cars less than one year old with asking prices 85% to 90% (or better) of original purchase price.

Even now, but especially going forward, I don’t think Tesla resale values are/will be as good as some seem to think or hope. It's unfortunate that Tesla doesn't at least give customers the option to buy a M3 at lease end but leasing can still provide some protection against what is likely to be a bumpy road in the EV resale world in the coming years as new competition enters the market, products and technology improve, etc.

 

[Gasaraki]

Does anyone here actually have experience with selling a model 3 before? Or trading one into a dealer somewhere? Very curious. I see the kbb is high for say an 18 LR with 25k miles on it. I just don't see how or why someone would pay that much vs a new one only a couple grand more? I wouldn't. Would (or did) you?

All I've read is people taking a beating on used Teslas. I see them advertised how but never hear or see the "sale". Thanks

You just answered your own question. It's better to buy new for now.

 

[wrapspeed]

It's unfortunate that Tesla doesn't at least give customers the option to buy a M3 at lease end but leasing can still provide some protection against what is likely to be a bumpy road in the EV resale world in the coming years as new competition enters the market, products and technology improve, etc.

CapeOne,
I still want to verify my first post which any 3rd party dealer can purchase the car and then resale it to the end user. I just need to confirm that's the case. Finding a particular 3rd party dealer isn't difficult. I would think for a fee of $500 to $1,000 it's worth their hassle to do it? Why not, right?

 

[CapeOne]

CapeOne,
I still want to verify my first post which any 3rd party dealer can purchase the car and then resale it to the end user. I just need to confirm that's the case. Finding a particular 3rd party dealer isn't difficult. I would think for a fee of $500 to $1,000 it's worth their hassle to do it? Why not, right?

You can transfer the M3 lease to someone else (up until last 12 months of contract) or turn it in early (payout lease balance) but I've not heard anything about being able to outright sell the car to another dealer.

 

[jeremymc7]

There is no purchase option on the 3. You can't sell it. Only transfer lease or turn in as mentioned above. Transfer is not worth it on something with no buy out as the amount you get will be LOW.

 

[neurocutie]

what are the rules regarding customization and mods for a leased M3?

 

[jeremymc7]

When I looked myself before running the numbers you can get whatever you want basically. However, the service not fairly decent rate is for a base mode without customizing. The pricing goes up quite notability compared to the value.

 

[Nayston]

I have a M3P on order and have decided to lease over 36mo. I drive about 18K/yr. So that's 3K miles per year over the 15K limit. At .25 cents/mile that's an additional $2,250. I'm still leasing. A few years from now, there is no question there will be improvements and I don't want to be stuck in a current day M3, if they actually make one with a wrapped dashboard, or something. In any event, I'm leasing this car in order to get my feet wet in the EV/Tesla market, with the hopes that there are marked improvements over the next 3 years and then buy the next one.

 

[jeremymc7]

Why would you be “stuck”? You can always trade in or sell a purchased quick quite easily. Some services even come to your home, bring you a check, and take it away on a flatbed.

Leases, especially Tesla, especially the Model 3, are far more restrictive on the options you have and how much you’re out of pocket.

Leasing is a no brainer for sure but often not the best financial option compared to purchase for those that know their way around finances. With exception of limited fringe cases in some areas where you have the loopholes and the knowledge to make it work.

 

[Nayston]

Leases are usually never the right financial decision. Leases are for people that want a new car every 2-3 years and are okay with a recurring payment. People finance cars in order to pay it off and keep it awhile in order to save money in the long run. If you finance a car and don't keep it at least 2 years beyond the finance ending, you were better of leasing. In other words, if you take out a 48 month lease, a general rule of thumb is that you need to keep the car at least 72 months in order to come out ahead. If you sell the car at 36, 48 or even 60 months, you lost money and were better off leasing.

 

[sandohno7]

I placed an order for M3P over the weekend. In my case, financing the car makes more sense. I look at this from a total cash out of pocket standpoint. If I were to finance 100% of the car purchase price over 5 years, the total payment will cover about 6.3 years of lease payments (10k miles/yr). I don't have a business to write off the lease payments, so I don't get any tax benefits. After the car is paid off and by 6.3 year, I should be able to sell/trade in the car for some value, vs. no value with leasing a car. In 6.3 years, the car will be out of the 4-year warranty, but still under the 8-year battery warranty. I hope the car won't require any major work before I decide to sell car.

 

[jeremymc7]

Exactly.

Well said.

 

[CapeOne]

I placed an order for M3P over the weekend. In my case, financing the car makes more sense. I look at this from a total cash out of pocket standpoint. If I were to finance 100% of the car purchase price over 5 years, the total payment will cover about 6.3 years of lease payments (10k miles/yr). I don't have a business to write off the lease payments, so I don't get any tax benefits. After the car is paid off and by 6.3 year, I should be able to sell/trade in the car for some value, vs. no value with leasing a car. In 6.3 years, the car will be out of the 4-year warranty, but still under the 8-year battery warranty. I hope the car won't require any major work before I decide to sell car.

While the car would have value, you would've also paid out a lot more by financing versus leasing.

Let's say you decide to trade at three years.

Assuming the original new selling price was $56,190.
With $0 down:
3 year lease = $755/month
5 year finance = $997/month

At three years:
Lease cost would be $27,875 (total of payments plus $695 fee).
Finance cost would be $35,892 (first three years of payments) but payoff would be around $23,400 for a total of $59,292.
Let's assume the car had a trade/wholesale value at that point of $30,000.

By financing, you would come away with $6,600 ($30,000 trade less $23,400 still owed). Therefore, total out of pocket would be $35,892 less $6,600 net trade for a total cost of $29,292.

However, with leasing you would’ve only spent $27,875.

In this example, leasing would've been $1,417 cheaper than financing.

 

[sandohno7]

While the car would have value, you would've also paid out a lot more by financing versus leasing.

Let's say you decide to trade at three years.

Assuming the original new selling price was $56,190.
With $0 down:
3 year lease = $755/month
5 year finance = $997/month

At three years:
Lease cost would be $27,875 (total of payments plus $695 fee).
Finance cost would be $35,892 (first three years of payments) but payoff would be around $23,400 for a total of $59,292.
Let's assume the car had a trade/wholesale value at that point of $30,000.

By financing, you would come away with $6,600 ($30,000 trade less $23,400 still owed). Therefore, total out of pocket would be $35,892 less $6,600 net trade for a total cost of $29,292.

However, with leasing you would’ve only spent $27,875.

In this example, leasing would've been $1,417 cheaper than financing.

In your example, it's true that in 3 years that it's less out of pocket to lease. However, most people need a car more than 3 years, so the comparison shouldn't stop there. In my case, I don't think I need to lease a new M3P every 3 years, and the M3P in 6 years will most likely still be a very capable and fast car. So the comparison for me is at least 6 years.

Using your numbers,
Total lease payment is $55,750 ($755 x 36 months x 2 + $695 x 2)
Total finance payment is $59,820 ($997 x 60 months)

After 6 years, the car should still have some value. It appears that Tesla is holding its value well. Let's just say it's worth $10K (below 20% residual) to be conservative. I will be about $6K better off. If I choose to keep the car for 2 more years until the battery warranty expires, that's another $18K ($755 x 24 months) savings vs. lease. Furthermore, the older car (after 3 years) will also have cheaper registration fee and auto insurance premium vs. a leased car. The car will likely need some maintenance and repairs, but I hope it won't require any major work that will completely offset the savings.

 

[CapeOne]

IAfter 6 years, the car should still have some value. It appears that Tesla is holding its value well. Let's just say it's worth $10K (below 20% residual) to be conservative. I will be about $6K better off. If I choose to keep the car for 2 more years until the battery warranty expires, that's another $18K ($755 x 24 months) savings vs. lease. Furthermore, the older car (after 3 years) will also have cheaper registration fee and auto insurance premium vs. a leased car. The car will likely need some maintenance and repairs, but I hope it won't require any major work that will completely offset the savings.

If someone wants to keep a car longer than three years then leasing may not be the way to go depending on LEV/buyout figures. Unfortunately, it’s not even an option to buy at lease end with the M3.

Generally speaking, if someone plans to keep a car for five or more years they might as well finance/pay cash and hope that there are no unexpected notable resale value drops. Of course, the longer one keeps a car the less meaningful resale value becomes.