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

MG535

3SR+ ordered 7/22 (blue/black/19s). EDD 9/10-16
Jul 22, 2021
137
103
NJ USA
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.
Same principle as above. Buy a brand new BMW, MB, Audi, etc and rack up a ton of miles in 3 years. Or try to get rid of it within the first two years. You’ll eat those costs for sure, it just won’t be itemized on an invoice.
 

Jeremy3292

Gas Is Slow
Jul 7, 2021
503
442
South Carolina
Same principle as above. Buy a brand new BMW, MB, Audi, etc and rack up a ton of miles in 3 years. Or try to get rid of it within the first two years. You’ll eat those costs for sure, it just won’t be itemized on an invoice.
The depreciation cost per miles is far less than a lease overage cost per mile. This is common sense bc the car dealership has to recoup the extra depreciation (miles) you put on the leased car by going over the allotted amount PLUS recoup extra to be able to resell that vehicle. Anytime you add a middleman to a transaction the cost is higher. Same reason trade in values are less than resale values. The car dealership is not the end user and will never pay market value.
 

jjrandorin

Moderator, Model 3, Tesla Energy Forums
Nov 28, 2018
10,800
12,516
Riverside Co. CA
The depreciation cost per miles is far less than a lease overage cost per mile. This is common sense bc the car dealership has to recoup the extra depreciation (miles) you put on the leased car by going over the allotted amount PLUS recoup extra to be able to resell that vehicle. Anytime you add a middleman to a transaction the cost is higher. Same reason trade in values are less than resale values. The car dealership is not the end user and will never pay market value.

Thats actually a bit backward, as the cost per mile for mileage overages is typically less than the cost of depreciation over that same time frame.

In any case, This OP posted the same "lease vs Buy" discussion that has been going on in car forums since there WERE car forums, and the same arguments are being made by people that have been made for both sides of that equation since before there were forums to post about this argument.
 
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MG535

3SR+ ordered 7/22 (blue/black/19s). EDD 9/10-16
Jul 22, 2021
137
103
NJ USA
It’s important to look at these on a case-by-case basis because it depends on the variables. Just to cite one variable, whether the lessor (not the dealership) charges 10, 15, 20, 25 or 30 cents per excess mile.
 

Jeremy3292

Gas Is Slow
Jul 7, 2021
503
442
South Carolina
Thats actually a bit backward, as the cost per mile for mileage overages is typically less than the cost of depreciation over that same time frame.

In any case, This OP posted the same "lease vs Buy" discussion that has been going on in car forums since there WERE car forums, and the same arguments are being made by people that have been made for both sides of that equation since before there were forums to post about this argument.
Depreciation is generally around $0.08 cents per mile per the academic sources I can find. Any car dealerships I’ve ever seen charges way more than that per mile overage. Just logically why would a dealership charge you less than depreciation? That doesn’t seem to make any good business sense. However, I agree with you the discussion is always moot.
 

jjrandorin

Moderator, Model 3, Tesla Energy Forums
Nov 28, 2018
10,800
12,516
Riverside Co. CA
Depreciation is generally around $0.08 cents per mile per the academic sources I can find. Any car dealerships I’ve ever seen charges way more than that per mile overage. Just logically why would a dealership charge you less than depreciation? That doesn’t seem to make any good business sense. However, I agree with you the discussion is always moot.

Im coming from the "german car" leasing background, which is the same background a lot of people are coming from (because german cars leases are usually structured with abnormally high, non realistic in most cases residual values).

I should have said "leasing cars in this class" which normally would not have depreciation numbers of 8 cents. In any case, I likely shouldnt have responded to this thread at all, because as I said "its the same discussion it always is" so I will bow myself out of it, now.
 
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dustinst22

Member
Mar 15, 2021
5
12
Huntington Beach, CA
Don't forget opportunity cost with cash up front transaction. That is, your cash cant work for you during the 3 year period.
Meant to add -- leasing is typically favorable if you upgrade every 3 years. Especially if you can deduct all or part of it as a business expense. I decided to lease for these two reasons knowing that with the way tech is changing so fast I'd want to upgrade every few years.
 

thinktwice

Member
Oct 17, 2018
93
83
Frisco, TX
Doesn't Tesla also charge an acquisition fee for leased vehicles? I know some states (like mine) also levy a personal property tax on leased vehicles. In my case, comes to around $650/yr for a $50k car.
 

B401

Member
Apr 19, 2021
15
3
South Florida
Doesn't Tesla also charge an acquisition fee for leased vehicles? I know some states (like mine) also levy a personal property tax on leased vehicles. In my case, comes to around $650/yr for a $50k car.
Eeek..... I remember I leased a BMW 3 series when I lived in Rhode Island and I had to pay the property tax every quarter and the tax on the property tax! in which BMW paid and I had to reimburse BMW separately. I didn't own this car and I had to pay that tax. It was a Nightmare! The only pro was you could buy more miles at any time.
 

alkaman

Member
Aug 11, 2021
37
62
NJ
Just to add my two cents after finding this thread:
Typically I view leasing vs. buying as making a decision around paying a capped amount of depreciation (lease) vs. a variable amount (buying). The lease buyout option usually means that the depreciation paid via the lease can be less if the car doesn’t actually depreciate in value as much.

Without a buyout option, I view Tesla’s lease as a fixed amount of depreciation. Seems high relative to historical amounts and other cars. Could be less than what transpires for sure. But it’s a different decision to me without having the buyout option - one that allows Tesla to artificially set low residual values in their lease contracts without much downside, and a profit generator as returned cars don’t depreciate as much.
 

Gauss Guzzler

Safety Score = 7
Dec 27, 2020
543
693
Thousand Oaks, California
First, you didn't account for the indirect costs of a lease:
- You're either paying for mileage you didn't accrue, paying disproportionately for overages, or - like most people - you are imposing upon your spouse/kids/bicycle/etc. to stay under the limit.
- You're losing all possible resale value benefits that might come from good care or upgrades.
- You're paying for stuff you don't need like premature tire replacements or whatever else they want to ding you for upon return. Most dealers will only back down from these fees if you agree to pay full price for the next lease.
- You're paying fines on any non-OEM maintenance or repairs, such as different tires or aftermarket glass.
- You're risking financial loss if your life situation changes in any way, even just a simple change in your commute will have financial repercussions amplified by a lease, but if your life changes in a more serious way a lease can complicate it significantly.
- Last but not least, a lease is the most permanent commitment you can possibly make to a car. That in itself is a huge cost because it amplifies all of the above points and controls every aspect of your life, right down to the fact that you have to plan vacations around your lease end date. How sick is that?

If I sell the car for $30,000 (60% of MSRP)...

That's obviously the only number that matters in your calculation. All that other stuff about taxes and interest rates makes no difference when you can just pull a resale value out of thin air and sway the equation any which way. And that's really what a lease is - it's the manufacturer's prediction of - and attempt to influence - the resale value. Kelley Blue Book and others use the lease residual value as one of the dominant metrics in determining the private resale value.

With billions of dollars at stake, you can bet that one of the most critical things to every automaker's profitability is to have a huge team of the world's most brilliant financial analysts working year-round to determine the perfect lease pricing. You can't compete with that - all you can do is guess "60%". And you know what? The house always wins. The odds are stacked against you and that too is part of the lease profit strategy - they know you're drawn to the lower monthly payment and reduced sales tax so they use that advantage to get a little more profit from each lease than they would from a similar sale. Think about it - why wouldn't they? A lease is a hardship on them - they want cash, in full, today - especially growing companies like Tesla. Of course they're going to price their leases at a higher profit point than their sales. Come on.

So unless they screw up, you will always pay more for a lease than a purchase. Sure, it's possible that Tesla could screw up - they're very arrogant, most EV's depreciate faster than average, and other rapidly evolving consumer technologies like phones, computers, and TVs lose value incredibly fast. But don't bet on it. They know what they're doing and the market isn't going to be flooded with EV competition in 3 years. All these new EV's that just barely exist today (Mustang, Polestar, Bolt, etc.) will still barely exist in 2025. Their planned production numbers are tiny, just a few hundred thousand per year. Even Tesla isn't going to flood the market anytime soon - they're going wide, not deep. They have an entire world to supply before they can get around to overproducing here in the US.
 
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DBV1

Member
May 11, 2020
277
282
Amherst, OH
The above definitely is not true on a BMW or Mercedes. When leasing BMW’s it is most always better than buying, especially, since I get new cars every three years. My wife on the other hand pays cash and keeps hers. I can even make a case I am better of leasing a BMW every three years and still better than hanging onto the car for 6 years owning it.

Tesla - I agree. Just can’t make the lease numbers work compared to buying a Tesla. However, really dislike buying a Model S. No idea of what it will be worth in three years when I trade it in and the technology is like an iPhone changing every year. Same with how many miles they per charge. Buying it just does not give me a comfortable feeling and really wish Tesla had better lease numbers.
 

ItsNotAboutTheMoney

Well-Known Member
Jul 12, 2012
10,887
8,587
Maine
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?
If the expensive shoe fits better than the other expensive shoe, wear it.
 

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