Model 3 Resale Value Top of Class

[StealthP3D]

New Kelly Blue Book values put the Tesla Model 3 resale value at the top of any comparable class or segment:

Tesla Model 3: 2nd Best Resale Among All Cars, Tops Segment & All Classes

A couple of months ago there were some very vocal people trying to create the false impression that Tesla's lost value faster than any other car (but without any facts to back it up). The new Kelly Blue Book rankings should put that manufactured fantasy to bed!

 

[UngaBunga1989]

New Kelly Blue Book values put the Tesla Model 3 resale value at the top of any comparable class or segment:

Tesla Model 3: 2nd Best Resale Among All Cars, Tops Segment & All Classes

A couple of months ago there were some very vocal people trying to create the false impression that Tesla's lost value faster than any other car (but without any facts to back it up). The new Kelly Blue Book rankings should put that manufactured fantasy to bed!

I own a M3P and am a HUGE fan of the car and also very respectful of Tesla as an innovator in both the overall automotive and EV space, BUT the projections of resale value for a car that has only been on the market a bit over a year going out 36 and 60 months are utterly meaningless IMHO.

 

[StealthP3D]

I own a M3P and am a HUGE fan of the car and also very respectful of Tesla as an innovator in both the overall automotive and EV space, BUT the projections of resale value for a car that has only been on the market a bit over a year going out 36 and 60 months are utterly meaningless IMHO.

Kelly Blue Book has been doing this for many decades and has more experience than anyone in the business. It's the industry standard and they use many metrics to come up with these number that banks, courts, dealers, used car lots and private buyers/sellers rely upon to appraise the present/future value of a car. Yes, it's a projection that is subject to change in future editions but to call it "utterly meaningless" is a gross distortion of what the numbers mean and how they are used in the finance and auto industries.

They don't pull the numbers out of thin air and the fact that they lead all comparable classes is a very good indicator of future value. No projection of the future value of any car is perfect but to dismiss the industry standard outright is really odd.

 

[jjrandorin]

Kelly Blue Book has been doing this for many decades and has more experience than anyone in the business. It's the industry standard and they use many metrics to come up with these number that banks, courts, dealers, used car lots and private buyers/sellers rely upon to appraise the present/future value of a car. Yes, it's a projection that is subject to change in future editions but to call it "utterly meaningless" is a gross distortion of what the numbers mean and how they are used in the finance and auto industries.

They don't pull the numbers out of thin air and the fact that they lead all comparable classes is a very good indicator of future value. No projection of the future value of any car is perfect but to dismiss the industry standard outright is really odd.

They (KBB) is basically a customer facing service, and are not known as being very accurate. Better than nothing, but certainly nothing someone should plan financially around.

Much better would be Nadaguides values or Black book values. KBB is only good for a snapshot really, and any of these would be guessing. Whats closer to reality is whatever they are going for on auction, as that is what car dealers would buy them for, then mark them up, and sell them.

I am not a fan of "FUD" at all, but I am also someone who is a realist, so while your news is a good data point, it certainly is not enough to put claims of resale value or not "to bed".

For "cars in this class" like BMWs, Audis, Mercedes... they lose about 50% of their resale value in 3 years (somewhere between 49-53%). I would expect tesla to be the same or maybe even somewhat better, once the tax credit is taken into account (which skews the resale value).

In fact, I think that those of us who got the full tax credit could be in a good place 3 years from now (maybe) as it relates to resale value, because the tax credit wont be depressing the resale value.

 

[StealthP3D]

Well, I don't plan on selling mine anytime soon but it's good to know KBB puts it in the top value retention rather than the bottom. Of course, no future projection can be 100% accurate but it's the best indicator available to us at this point and I have no reason to doubt it. Plenty of people want a Model 3 but can't stomach the full retail price so when good used examples come on the market they are in high demand.

 

[jdcollins5]

I used to use the NADA Black Book when selling my cars to third parties. Now all interested buyers want to know the KBB value since this seems to be the consensus. When I have compared to NADA they are typically very close. I have never had a problem selling at KBB pricing and have felt it was a fair value based on insurance and county/city tax values. If I go to used car lots they usually quote KBB on their stickers.

I do not plan on selling my 3 for a long time but knowing it is at the top of the KBB class means a lot to me.

 

[StealthP3D]

For "cars in this class" like BMWs, Audis, Mercedes... they lose about 50% of their resale value in 3 years (somewhere between 49-53%). I would expect tesla to be the same or maybe even somewhat better, once the tax credit is taken into account (which skews the resale value).

The tax credit is not taken into account by Kelley Blue Book values. That is a benefit that effectively allows someone with enough tax liability to be reimbursed for some of the initial purchase price. Not everyone can benefit from a tax credit but those who can effectively reduce the depreciation even more than the calculated depreciation (based on the actual sale price).

In the luxury segment, the Audi A7 is projected to have the best retention of value over 3 years (at 47.3%) and 5 years (32.3%) by KBB. The same rating organization, KBB who has been doing this for over 100 years, projects the Model 3 will retain 69.3% of its value after 3 years and 48.7% after 5 years, considerably better than the best in the luxury segment, the Audi A7. I admit this is simply their best estimation because no one can predict future prices exactly. But they can try.

Clearly, Kelley Blue Book estimators think they know something that you don't. And it's not clear to me why you think they are wrong. Do you have more experience and/or industry data than KBB, the people who make a business out of it?

 

[jjrandorin]

The tax credit is not taken into account by Kelley Blue Book values. That is a benefit that effectively allows someone with enough tax liability to be reimbursed for some of the initial purchase price. Not everyone can benefit from a tax credit but those who can effectively reduce the depreciation even more than the calculated depreciation (based on the actual sale price).

In the luxury segment, the Audi A7 is projected to have the best retention of value over 3 years (at 47.3%) and 5 years (32.3%) by KBB. The same rating organization, KBB who has been doing this for over 100 years, projects the Model 3 will retain 69.3% of its value after 3 years and 48.7% after 5 years, considerably better than the best in the luxury segment, the Audi A7. I admit this is simply their best estimation because no one can predict future prices exactly. But they can try.

Clearly, Kelley Blue Book estimators think they know something that you don't. And it's not clear to me why you think they are wrong. Do you have more experience and/or industry data than KBB, the people who make a business out of it?

No, I just know that car dealers, whose job it is to buy and sell cars, dont use KBB (except for consumers). As I have said before here though, I am not into online disagreements so I am certainly not going to argue with you about it. A particular car is worth whatever someone will pay for it.

As for the tax credit, I know exactly what it is, and isnt.. and I also know that if you took your car right now and tried to sell it, the value of said car would be depreciated by the tax credit, whether you can realize it or not yourself.

I havent looked at it, but I find it interesting that the Audi A7 and the Model 3 would be considered in the "same class" of car. I wouldnt put them in the same class, but I am not a professional, so if KBB thinks they are in the same class /shrug.

 

[Daniel in SD]

According to KBB, the resale value of a Model 3 after 36 months comes in at 69.3 percent of the original price.

Does anyone know how many 36 month old Model 3's have sold? Seems like a small sample size!

 

[StealthP3D]

Does anyone know how many 36 month old Model 3's have sold? Seems like a small sample size!

It's a professional estimation based on a myriad of industry factors to come up with the best guess of future value. All the make/model's estimated future value is estimated based on those factors as crunched through formulas and adjustments. Anyone can claim they have a better estimate but without a long track record to back it up, I think I'm going with the people who have years of industry experience and reams of sales data of various comparables and have developed useful formulas to better formulate their estimations.

The bottom line is they are predicting less depreciation for the Model 3 than any other electric car as well as any gas car in a comparable class (no matter which class you pick). And that's significant considering the single largest expense of any new car is its depreciation.

 

[StealthP3D]

As for the tax credit, I know exactly what it is, and isnt.. and I also know that if you took your car right now and tried to sell it, the value of said car would be depreciated by the tax credit, whether you can realize it or not yourself.

The tax credit is only relevant if you can go out and buy a new comparable car and get the tax credit. Since it's phasing out, it won't materially affect used Model 3 valuations down the road.

I havent looked at it, but I find it interesting that the Audi A7 and the Model 3 would be considered in the "same class" of car. I wouldnt put them in the same class, but I am not a professional, so if KBB thinks they are in the same class /shrug.

KBB put the Model 3 in the category of "Electric cars". But you can compare it to ANY reasonable category (compact car, mid-sized car, luxury car, entry-level luxury car, etc) and it comes out with the lowest 3 and 5-year depreciation estimates.

 

[Daniel in SD]

It's a professional estimation based on a myriad of industry factors to come up with the best guess of future value. All the make/model's estimated future value is estimated based on those factors as crunched through formulas and adjustments. Anyone can claim they have a better estimate but without a long track record to back it up, I think I'm going with the people who have years of industry experience and reams of sales data of various comparables and have developed useful formulas to better formulate their estimations.

The bottom line is they are predicting less depreciation for the Model 3 than any other electric car as well as any gas car in a comparable class (no matter which class you pick). And that's significant considering the single largest expense of any new car is its depreciation.

I guess I'm just a little skeptical. KBB lists the 2015 Model S 85 as having a fair transaction price of $43k for a car that sold for $81k when new. That's 53%, I wonder why they expect the Model 3 to do so much better?

 

[StealthP3D]

I guess I'm just a little skeptical. KBB lists the 2015 Model S 85 as having a fair transaction price of $43k for a car that sold for $81k when new. That's 53%, I wonder why they expect the Model 3 to do so much better?

53% is pretty good after 5 years. I'm sure the more affordable price of the Model 3 leads to less depreciation when it's time to sell. But that figure would imply they depreciate at about the same rate

 

[Daniel in SD]

53% is pretty good after 5 years. I'm sure the more affordable price of the Model 3 leads to less depreciation when it's time to sell. But that figure would imply they depreciate at about the same rate

Oops, though it's more like 4.5 years. I meant to do 2016, so about 3.5 years old.
There are 33 2016 85D listed for sale on ev-cpo.com
Average price $56k
Average mileage 30k
I'll bet the average transaction price new on those was close to $100k.
I guess we'll see how it turns out.
I would have leased my Model 3 if the residual was 70%! It will be interesting to see what the residuals are when Tesla starts leasing them.

 

[StealthP3D]

Oops, though it's more like 4.5 years. I meant to do 2016, so about 3.5 years old.
There are 33 2016 85D listed for sale on ev-cpo.com
Average price $56k
Average mileage 30k
I'll bet the average transaction price new on those was close to $100k.
I guess we'll see how it turns out.
I would have leased my Model 3 if the residual was 70%! It will be interesting to see what the residuals are when Tesla starts leasing them.

Tesla set the three-year residual on a Model S lease at 60% so I'm guessing the Model 3 will be closer to 65% because Kelly Blue Book is projecting the Model 3 will depreciate more slowly than even a Model S. We might not have too long to wait to see.

 

[Knightshade]

The tax credit is not taken into account by Kelley Blue Book values.

That's part of the problem.

Literally the only data KBB (or anyone) has to go on is the last bit-over-a-year of used model 3 sales transaction prices.

All of which are deeply impacted by several things they're certainly not factoring in because they don't normally consider them.... the tax credit is one, and the high scarcity of the car in the first 6-12 months on the market is the other.

So the average "used" Model 3 sold for a lot more than other cars after anywhere from 1 day to 1 year as a result of those factors. For the first few months especially people were listing them for above MSRP used. So that skews the hell out of the data. Then for the next 6 months they listed them for right about AT or barely under msrp- pocketing the tax credit but letting people without reservations get cars when it wasn't clear how long it'd be to get one otherwise without a reservation.

All of which is either not the case anymore (scarcity) or will be going away here shortly (tax credit impact) so shouldn't be used to project prices years down the road.

In the luxury segment, the Audi A7 is projected to have the best retention of value over 3 years (at 47.3%) and 5 years (32.3%) by KBB.

right. because they have decades of data on Audi used car sales- and even on the A7 model specifically.

There's nothing especially out of the original with the last year A7.

There very much is with the last years Model 3s.

Clearly, Kelley Blue Book estimators think they know something that you don't. And it's not clear to me why you think they are wrong. Do you have more experience and/or industry data than KBB, the people who make a business out of it?

On the contrary, the problem appears to be they don't know something everyone else does.

Here's how KBB says they determine their values:

Residual Values are established by experienced automotive analysts that review the output from statistical models built upon millions of transactions

Their numbers appear to be based on the same factors they use for every other "normal" car they've got a ton of data on, and no special circumstances around. Which is why they're fairly useless.

 

[StealthP3D]

Literally the only data KBB (or anyone) has to go on is the last bit-over-a-year of used model 3 sales transaction prices.

All of which are deeply impacted by several things they're certainly not factoring in because they don't normally consider them.... the tax credit is one, and the high scarcity of the car in the first 6-12 months on the market is the other.

So the average "used" Model 3 sold for a lot more than other cars after anywhere from 1 day to 1 year as a result of those factors.

As a matter of fact, you are dead wrong here. The tax credit actually caused immediate depreciation (because a buyer had the option of buying new and taking the tax credit). As to scarcity, certainly that impacts prices and is one of the primary factors modeled by the experts who have been estimating future values for many decades.

On the contrary, the problem appears to be they don't know something everyone else does.

It looks fairly silly to dismiss the industry experts as not knowing as much as you when you just claimed that the tax credit increased the value of used Model 3's (when it clearly decreased it).

I'll put my faith in the people with a long track record estimating car prices of every make and model over someone who seeks to dismiss them as not even knowing what everyone else already knows.

 

[Knightshade]

As a matter of fact, you are dead wrong here. The tax credit actually caused immediate depreciation (because a buyer had the option of buying new and taking the tax credit).

Uh...no.

In fact, that's kind of why (well, one of why) their predictions are so useless for a year or two from now.

Because this year the credit is only half as much.

So a 2018 buyer spends say $57.5k on a Model 3....net 50k thanks to the credit.

A 2019 buyer looking at the same car would be paying a couple grand more (new)... someone buying after July will be paying almost 2k more than that... and someone buying in 2020 almost 2k more yet again (unless Tesla does further price cutting, which it sounds like they can't afford to do).

As the tax credit declines, a new car effectively keeps going up in price every 6 months by a couple thousand bucks.

that's the opposite of depreciation.


But that's not a long term distortion, and will fade as the full credit gets further away in time. Right now though it's a significant effect.

As to scarcity, certainly that impacts prices and is one of the primary factors modeled by the experts who have been estimating future values for many decades.

No, it explicitly isn't. I even quoted you where they mention their models are primarily based on transaction data. That is- the resale price of the car.

The model don't know, or care, about why the price is high or low.

It just knows "for the length of data given, car X retains Y percent of its original price...while car A only retained B percent of its original price"

This can get you pretty decent, with years or decades of data for some car makers and models, at knowing that say (just using a hypothetical) a BMW 3 series will lose about 50% of its value after 3 years, but a Lexus IS will only lose 35% of its value.

This type of model is pretty useless though when you only have 1 year of data, and it's heavily skewed by both scarcity and the price distorting impact of the tax credit. I imagine they'd have to have been using S/X data to help a little bit (since any decent model will have a "brand" factor included) but again the typical S/X buyer is very different from the typical 3 buyer so that's probably not going to give you ideal results either (and even then they've only got a tiny fraction as much data as on established brands)


And it gets even weirder when you consider Tesla already discontinued 2 versions of the car in the first year (the RWD LR and the P3D-) so it's unclear if that will actually help or hurt future resale (some have suggested the rare models will retain/gain value because of continued scarcity- others suggest the opposite that they'll need to be firesaled when sold used because they're oddball abandoned configs)

It looks fairly silly to dismiss the industry experts

I mean, not as silly as you defending them while clearly not understanding what they base their guesses on....

as not knowing as much as you when you just claimed that the tax credit increased the value of used Model 3's (when it clearly decreased it).

Again, no.

If I bought one last month for $57,500... my net cost was 50k.

You buying the same car today would need to pay $55,500 (and you'd get 3750 back NEXT year for a net of $51,750)

Now, if the tax credit didn't exist at all... your new car would've been the same, or cheaper, than mine... so I'd have to drop my asking for a used car accordingly.

But since it does exist I can drop my price less than I would have otherwise.

Hell there was a thread yesterday right here with asking prices for used cars showing this effect happening... a very low mile AWD was only a tiny bit under what a new one would cost (but the buyer would also save almost 10% of the price by avoiding sales tax so was seriously considering it).

I'll put my faith in the people with a long track record estimating car prices of every make and model over someone who seeks to dismiss them as not even knowing what everyone else already knows.

Mainly they estimate car prices based on actual car prices from auctions, used cars sales, etc.

This works great when they've got undistorted, long-term data, for makes and models going back many years.


None of that is true of the data on the Model 3 right now.

If you wanna pretend that's not the case... or that they have some special magic wizards who not only understand all the confunding factors making the data their models use problematic, but also magically can predict the future about how that impacts prices years from now when there's essentially no data from which to draw you're free to do so.

But there's a reason so many folks are suggesting taking their #s seriously is not such a great idea.

Especially since this is the first EV company to exceed the tax credit on sales... and the first EV company to have a mass appeal vehicle selling in these numbers... and the first EV company to have a mass produced car with artifical scarcity for much of its first year of mass production.... AND the first EV company that isn't using traditional model years while you're at it.... (so making blanket price guesses about "X model year" of a car isn't going to work out so well.... take a look at AP1 vs AP2 cars for example- that's not a model year cutoff- but it significantly impacts value....)


But sure... they can reliably tell you how much a 3 year old mustang will sell for at auction, so I guess they've got this all figured out

 

[StealthP3D]

Uh...no.

In fact, that's kind of why (well, one of why) their predictions are so useless for a year or two from now.

Because this year the credit is only half as much.

So a 2018 buyer spends say $57.5k on a Model 3....net 50k thanks to the credit.

A 2019 buyer looking at the same car would be paying a couple grand more (new)... someone buying after July will be paying almost 2k more than that... and someone buying in 2020 almost 2k more yet again (unless Tesla does further price cutting, which it sounds like they can't afford to do).

As the tax credit declines, a new car effectively keeps going up in price every 6 months by a couple thousand bucks.

that's the opposite of depreciation.


But that's not a long term distortion, and will fade as the full credit gets further away in time. Right now though it's a significant effect.





No, it explicitly isn't. I even quoted you where they mention their models are primarily based on transaction data. That is- the resale price of the car.

The model don't know, or care, about why the price is high or low.

It just knows "for the length of data given, car X retains Y percent of its original price...while car A only retained B percent of its original price"

This can get you pretty decent, with years or decades of data for some car makers and models, at knowing that say (just using a hypothetical) a BMW 3 series will lose about 50% of its value after 3 years, but a Lexus IS will only lose 35% of its value.

This type of model is pretty useless though when you only have 1 year of data, and it's heavily skewed by both scarcity and the price distorting impact of the tax credit. I imagine they'd have to have been using S/X data to help a little bit (since any decent model will have a "brand" factor included) but again the typical S/X buyer is very different from the typical 3 buyer so that's probably not going to give you ideal results either (and even then they've only got a tiny fraction as much data as on established brands)


And it gets even weirder when you consider Tesla already discontinued 2 versions of the car in the first year (the RWD LR and the P3D-) so it's unclear if that will actually help or hurt future resale (some have suggested the rare models will retain/gain value because of continued scarcity- others suggest the opposite that they'll need to be firesaled when sold used because they're oddball abandoned configs)





I mean, not as silly as you defending them while clearly not understanding what they base their guesses on....




Again, no.

If I bought one last month for $57,500... my net cost was 50k.

You buying the same car today would need to pay $55,500 (and you'd get 3750 back NEXT year for a net of $51,750)

Now, if the tax credit didn't exist at all... your new car would've been the same, or cheaper, than mine... so I'd have to drop my asking for a used car accordingly.

But since it does exist I can drop my price less than I would have otherwise.

Hell there was a thread yesterday right here with asking prices for used cars showing this effect happening... a very low mile AWD was only a tiny bit under what a new one would cost (but the buyer would also save almost 10% of the price by avoiding sales tax so was seriously considering it).




Mainly they estimate car prices based on actual car prices from auctions, used cars sales, etc.

This works great when they've got undistorted, long-term data, for makes and models going back many years.


None of that is true of the data on the Model 3 right now.

If you wanna pretend that's not the case... or that they have some special magic wizards who not only understand all the confunding factors making the data their models use problematic, but also magically can predict the future about how that impacts prices years from now when there's essentially no data from which to draw you're free to do so.

But there's a reason so many folks are suggesting taking their #s seriously is not such a great idea.

Especially since this is the first EV company to exceed the tax credit on sales... and the first EV company to have a mass appeal vehicle selling in these numbers... and the first EV company to have a mass produced car with artifical scarcity for much of its first year of mass production.... AND the first EV company that isn't using traditional model years while you're at it.... (so making blanket price guesses about "X model year" of a car isn't going to work out so well.... take a look at AP1 vs AP2 cars for example- that's not a model year cutoff- but it significantly impacts value....)


But sure... they can reliably tell you how much a 3 year old mustang will sell for at auction, so I guess they've got this all figured out

That's a lot of words to say that you know more about the likely depreciation rate of the Model 3 than the folks at Kelley Blue Book. The tax credits will be expired so that's not going to significantly affect it one way or the other. And, no, they are not basing their Model 3 prices three years out on actual transactions because they don't have a crystal ball. Recent transactions are the primary method to help appraise current values of used cars, not future value of cars that are new now! But it's obvious you're just spinning your tires and there are a number of good reasons why the Model 3 is expected to have lower than average depreciation over the next three years than your average car.

But you can believe whatever you like and I can see you're not going to be convinced otherwise.

 

[UngaBunga1989]

Kelly Blue Book has been doing this for many decades and has more experience than anyone in the business. It's the industry standard and they use many metrics to come up with these number that banks, courts, dealers, used car lots and private buyers/sellers rely upon to appraise the present/future value of a car. Yes, it's a projection that is subject to change in future editions but to call it "utterly meaningless" is a gross distortion of what the numbers mean and how they are used in the finance and auto industries.

They don't pull the numbers out of thin air and the fact that they lead all comparable classes is a very good indicator of future value. No projection of the future value of any car is perfect but to dismiss the industry standard outright is really odd.

I respectfully disagree. I have owned a lot of "next technology" cars -- Gen 1 Prius, Gen 2 Prius, Gen 1 Volt (2012), Gen 2 Volt (2016) and Kelly Blue Book got the predicted 3-year resale value wrong on all of them by a pretty decent margin...the Priuses held their value much better than Kelly predicted and the Volts much worse. Right now there are precious few Model 3's available, so used pricing is strong. But what happens in 3 years when this first wave of them starts to become available used? I am just pointing out that Kelly Blue Book has exactly zero experience with this kind of car as this kind of car has not existed before...