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Model 3 - Makes more sense to Lease vs Finance...here's the numbers

Tezla1

Member
Nov 5, 2018
197
123
Los Angeles, CA
Leasing better than Financing or even Cash??


I'm a serial leaser for over 12+ years and very knowledgeable about how to construct a lease deal.

Tesla has been known to typically be a "bad leasing" candidate due to how they structure their leases. But lately, it seems Lease structure is much better.

So, I ran the numbers in Excel and here's what I found. Would like some feedback on if I missed something?

(I will drive a maximum of 10k mi/year)

Car: 2021 LR AWD , White, 19 wheels
price is $52,790 with drive off fees: govt fee, Reg fee etc. (not including tax)

Lease:

Monthpayment: $727.50/mo.(incl tax) with only $526 cash due at signing towards drive offs. 36/10k. $0 down payment towards cap cost reduction.

Finance:

$52,790 plus 7.75% tax, financed amount: $56,881.
Finance @ 1.99% for 60 months = Payment $997 if I put $0 down.


Cash: $56,881 out the door including tax.



End of 36 months:

Lease:

total cost over 3 years: $26,716 (36 pmts + down payment of $526)


Finance:

1.99% APT / 60 months , $0 down payment. From Credit union.

Finance cost over 3 years: $36k. After 3 years, If I sell the car for $30,000 (60% of MSRP), the net profit would be roughly $7,000 after paying off loan ($23k bal).

Bringing the total cost to $29,000 over 36 months.

CASH

Pay Cash: $56,881 including tax today.

sell car for $30k in 3 years,
Final total cost over 3 years : $27,000

Note on resale value: I know resale values of M3s are crazy right now, maybe 80% after 3 years. But let’s be realistic - in 3 years from now, the used car market for EVs cant be what it is today, and we must assume it will go back to “normal”, where 3 year depreciation goes back to 60-62%. Of course, I could be wrong - but we must plan for the most probable outcome, not what we hope to see.

So, based on above numbers — Why would I want to Finance or pay Cash if Leasing is cheaper?
 
Last edited:

OB1Kenobi

Member
Jun 6, 2021
43
106
Colorado
If you only look at the 36 month cost then maybe you've spent a little more on the loan, but that would flip over the following 2 years as you pay off the loan. The main benefit of the loan is that you own the car in the end. Building equity is too often underrated, which is a big deal with Teslas holding so much value. Go the full 5 years and you'll pay ~$60K, but still have a car worth $20K+ on the open market, so if you sold it you've spent $40K or less. For the lease, after 3 years you have to give the car back, which means getting another lease. Assume you pay the same money for a second Tesla lease to keep things fair, and after 5 years you've spent almost $44K, so now you're in the red compared to the loan. Plus, you're stuck with the lease that you cannot get out of, and in 1 more year you have to give the car back again, and get another lease, again. After 6 years you'll have spent $52K on lease payments, compared to $60K on the loan, but would the Tesla you bought be worth more than the $8K difference? Almost certainly it will, and the longer you keep the car you own, making no payments, the more you come out ahead. The best long-term financial choice is to buy, and plan to keep it at least 8 years, if not 10, especially when interest rates are so low.
 

Tezla1

Member
Nov 5, 2018
197
123
Los Angeles, CA
If you only look at the 36 month cost then maybe you've spent a little more on the loan, but that would flip over the following 2 years as you pay off the loan. The main benefit of the loan is that you own the car in the end. Building equity is too often underrated, which is a big deal with Teslas holding so much value. Go the full 5 years and you'll pay ~$60K, but still have a car worth $20K+ on the open market, so if you sold it you've spent $40K or less. For the lease, after 3 years you have to give the car back, which means getting another lease. Assume you pay the same money for a second Tesla lease to keep things fair, and after 5 years you've spent almost $44K, so now you're in the red compared to the loan. Plus, you're stuck with the lease that you cannot get out of, and in 1 more year you have to give the car back again, and get another lease, again. After 6 years you'll have spent $52K on lease payments, compared to $60K on the loan, but would the Tesla you bought be worth more than the $8K difference? Almost certainly it will, and the longer you keep the car you own, making no payments, the more you come out ahead. The best long-term financial choice is to buy, and plan to keep it at least 8 years, if not 10, especially when interest rates are so low.
Makes sense, but to be fair, you must add in the cost of maintenance and possible large repair bills that come with owning a car that is 5 years old, not to mention 7-8 year old car.

With Tesla, wouldn’t be surprised if you end up spending $4,000-$6,000 in repairs from year 4-10
 

jjrandorin

Moderator, Model 3, Tesla Energy Forums
Nov 28, 2018
10,800
12,516
Riverside Co. CA
These comparisons always assume that for some reason, the person financing the car will sell it after 3 years. I am extremely familiar with leasing (having leased 10 BMWs over the last 15 years or so myself, as well as (formerly) being one of the main people evaluating others lease deals on what used to be one of the largest BMW websites on the internet.

I probably evaluated a couple hundred lease deals or more, along with my own.

The break even point on most german car leases is around 5 years or so, meaning that after approximately 5 years it works out being cheaper to own the car than lease it, even on cars with BMWs historically expensive maintenance and repair costs, at least up till around 100k ish miles or so.

There isnt any negotiation on these as everyone knows, but, OP, why does your math assume that the financed car needs to be sold after 5 years? The average car ownership period is around 5 years anyway, so perhaps you should re do your math to compare a 6 year ownership period, which would be 2 lease cycles (and no vehicle at the end) vs 1 finance cycle (with an asset at the end, even if its not worth more than 25% of its purchase price at that point.
 
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Tezla1

Member
Nov 5, 2018
197
123
Los Angeles, CA
These comparisons always assume that for some reason, the person financing the car will sell it after 3 years. I am extremely familiar with leasing (having leased 10 BMWs over the last 15 years or so myself, as well as (formerly) being one of the main people evaluating others lease deals on what used to be one of the largest BMW websites on the internet.

I probably evaluated a couple hundred lease deals or more, along with my own.

The break even point on most german car leases is around 5 years or so, meaning that after approximately 5 years it works out being cheaper to own the car than lease it, even on cars with BMWs historically expensive maintenance and repair costs, at least up till around 100k ish miles or so.

There isnt any negotiation on these as everyone knows, but, OP, why does your math assume that the financed car needs to be sold after 5 years? The average car ownership period is around 5 years anyway, so perhaps you should re do your math to compare a 6 year ownership period, which would be 2 lease cycles (and no vehicle at the end) vs 1 finance cycle (with an asset at the end, even if its not worth more than 25% of its purchase price at that point.
some good points here - will think on this
 

Tezla1

Member
Nov 5, 2018
197
123
Los Angeles, CA
This is very conservative which is making leasing look more attractive
60% might sound conservative in the current market , but we’re talking about the market in 2024-2025. Do you expect chip shortage to exist another 3 years + covid delays?

Even the best Luxury cars have residuals no greater than 62-63%. So, I think 60% might be a lot closer than the 80% you’re seeing today
 

jaz4uk1

Member
Jul 15, 2021
20
4
england
Firstly unsure using BMW M3 for depreciation.

I think at the moment the PX is +5 to 10% more due to covid and lockdown cash available.

Just PX my nearly 5 year old BMW M240 was £42.5K new and got a bit more than I thought. Retained 50% but this was not a true PX as tesla dont discount and dont want your car so its top book for new and bottom for old. Price from Tesla was auction price so low. Had to move it to an intermediate trader they were £2.5K more than teslas but possible £1.5K less than if I could sell private or haggle main dealer on new car, but not many people want to purchase private on +£20K car with no main dealer support and did not fancy people kicking the tyres and driving for a fun time.
I am getting 4 year estimate would have been around 55% retention value.

So UK 3LR red 12K miles (my car my miles)
Cash £50,590
PCH £0 deposit 4 years £708. hand it back in GOOD condition
PCP £0 deposit 4 years £826 Final payment £17,707 or hand it back in good condition.
Tesla loan £0 deposit 4 years £1,139 @ 3.99%. Cars yours.

Tesla is predicting the car will be worth £17,707 in 4 years. thats like 65% LOSS and only 35% residual. But this is how they make a bit more money on interest payments and a bit of security.

Im getting 2.5 year PX prices at around £35K so 68% residual value which is fairly high and a month loss of 0.8% pm. So projected 4 year would be down at 55%. Take out covid I would budget for 50% residual so MAY be worth £25K, this way less of a shock when its 22K or happy surprise £27K. This will give you at least £7K deposit for next time or a few nice holidays.

In the UK we can do salary sacrifice where we pay the 2 or 3 year hire before tax and NI directly from wage. This includes service, tyres and insurance. Then pay 2% car tax. So all of the car ownership is free of tax and NI other than electric. Company gets the Gets a bit more complicated and its not my car and will need to find a car if and when I leave and I think they charge a bit more so apparent savings bit lower and depends on the company offering to manage schemes as they need to make money.

Im paying cash no credit. May even look at lower loan @ 2% for £25K and invest £25K @ 3% or above 4 year bond.
 
Last edited:

TBrownTX

Member
Dec 25, 2020
880
1,024
Dallas, TX
Cash. Financially, by the numbers, perhaps does not make the most sense in some cases.

However the intangible value of not having any stress knowing you are debt free, no worry over job loss, and protection against infalton? Priceleess.

I realize not everyone can pay cash, it took many years for me to get to that point, so YMMV.

Tim
 
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linux-works

Active Member
Dec 23, 2019
2,188
4,169
mtn view, ca
3 and even 2 years is a long time, in toy-years (there's a joke in there, somewhere, I think..)

these cars are toy cars. fun, gagety, but totally full of tech that grows old, fast. even options grow old with this brand (one year, no heated steering wheel, next year, its there).

the build quality on the outside and inside is not great. paint is below average (I'm being kind, too). battery and motor tech is top-notch but that could change with a competitor releasing new or upgrades, tomorrow. there is high demand for these cars mostly because there is nothing else to 'go to' if you are disappointed with tesla and want something even remotely close. but T does not own the market forever.

2 years is a long time in silicon valley timeticks. lots can happen.

I dont plan to own my car long-term. I started out thinking I'd lease, but I wanted the tax rebate stuff from a year or 2 ago and so went for the buy. but I plan to sell in way less than 4 yrs of ownership. maybe even closer to 3.

if some newcomer company even just is barely competant in customer service, alone, that might get a lot of people to jump brands. so tesla should try a bit harder to keep what they have. as they say 'its theirs to lose'.
 
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Jeremy3292

Gas Is Slow
Jul 7, 2021
503
442
South Carolina
The problem with leases is if your circumstances change in life you’re screwed. New job? Need more miles? Screwed. Need to get rid of the car? Screwed. Always buy and then you can at least drive as much as you want and get rid of it if you ever need to easily. You will also be nickeled and dimes for every little scratch or ding or anything. Leasing never makes sense to me.
 

MG535

3SR+ ordered 7/22 (blue/black/19s). EDD 9/10-16
Jul 22, 2021
137
103
NJ USA
60% might sound conservative in the current market , but we’re talking about the market in 2024-2025. Do you expect chip shortage to exist another 3 years + covid delays?

Even the best Luxury cars have residuals no greater than 62-63%. So, I think 60% might be a lot closer than the 80% you’re seeing today
Value retention of the 3 predates covid and supply chain issues.

As someone who waited for years for a 330e/A4 sized sports sedan EV from BMW or Audi, I wouldn’t hold my breath on them saturating the market. Based on the EQS landing with a deafening sound of silence, I am not holding out for Mercedes either.

After much fanfare the 2022 i4 was announced with big HP and range numbers in the headlines. But those numbers were based on a different cycle. In the EPA cycle the dual motor AWD version is rated for only ~245 miles IIRC. Yes someone may say Tesla’s don’t often achieve their EPA range while other brands exceed theirs, but those nuances are generally lost on the majority of the buying public.

Yes buyers like me who are more or less brand-agnostic will have more choice in the future but based on the slow progress by legacy OEMs so far I don’t think value retention will drop so drastically.
 

MG535

3SR+ ordered 7/22 (blue/black/19s). EDD 9/10-16
Jul 22, 2021
137
103
NJ USA
Unfortunately, leases make no sense unless they gave me 20k miles per year....
You’ll eat the cost of miles whether you buy or lease. The big difference is a purchase doesn’t itemize how much the miles cost you, unlike a lease-end invoice for excess miles.

Granted the cost of miles is not linear on a purchase (vs X cents per miles on a lease).
 

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