Model S 60 Resale Value After 3 years

[cplaw]

Scheduled for delivery this Saturday. Got the final figures for my lease, but they also provided me figures for a loan. The loan numbers are really attractive. I do not intend to keep the car for more than 3 years, maybe 4. My only concern with the loan is that in 3 years, because of all of the updates/improvements the cars get in a short period of time, and the availability of the Model 3, the resale value of my car will be substantially lower than the remaining amount due on my loan.

Any thoughts on this? The difference in the amount due at signing is about $1500 more on the lease, but the monthly payment is about $150 more a month on the loan. Also, if I got to the loan, I would purchase the 4 year maintenance plan, which I would not do for the lease. I wouldn't have any maintenance done on the lease since it's not required.

Should I stick with the lease or go with the loan?

Thanks.

 

[bhuwan]

This is purely my personal opinion, everyones situation is different. If I were to purchase a new vehicle today, I would absolutely lease it. Tesla is changing very rapidly, and their tech becomes obsolete as fast. A lease would allow me to enjoy a new Tesla every few years (instead of having to take the big hit on depreciation).

 

[cplaw]

Yeah, those are my same concerns, especially since I don't plan to keep it for the long run....I'm kind of wavering back to leasing now....

 

[CmdrThor]

This is purely my personal opinion, everyones situation is different. If I were to purchase a new vehicle today, I would absolutely lease it. Tesla is changing very rapidly, and their tech becomes obsolete as fast. A lease would allow me to enjoy a new Tesla every few years (instead of having to take the big hit on depreciation).

You are still taking a big hit on depreciation by leasing a new vehicle every 3 years. It is just a known hit and there is no risk of depreciation being worse than the residual specified in your lease agreement. If you were to buy a 3 year old vehicle and sell it after it is 6 years old and repeat, you would spend significantly less than leasing, but then you are driving a 3-6 year old car instead of 0-3 year.

 

[cplaw]

You are still taking a big hit on depreciation by leasing a new vehicle every 3 years. It is just a known hit and there is no risk of depreciation being worse than the residual specified in your lease agreement. If you were to buy a 3 year old vehicle and sell it after it is 6 years old and repeat, you would spend significantly less than leasing, but then you are driving a 3-6 year old car instead of 0-3 year.

Any opinion on what I should do?

 

[xav-]

It's a tough one. Only teslas worth leasing in my opinion are demos with miles on it. I was presented a $783 after tax a month on a P90D on Friday for a $142,700 MSRP car with 2,300 miles on it. The drive off was $8,500. Was hoping for lower.. Did not pull the trigger just too much money for 2 years of ownership of a car.

But I get it you don't want to keep the car and money may not be an issue for you.

 

[Chopr147]

Certainly if you do not plan on keeping the car I don't see any reason at all to buy it. The re-sale value is a wild card right now. But even then the lease is much better financially

 

[CmdrThor]

Any opinion on what I should do?

Certainly if you do not plan on keeping the car I don't see any reason at all to buy it. The re-sale value is a wild card right now. But even then the lease is much better financially

I agree that if you aren't planning on keeping it past 3 years, leasing is probably the way to go.

 

[number12]

lease.. my state its a $15,000 swing upfront lease is more expense or I would have leased no question... monthly payment was roughly equal

 

[Chris8307]

Depends what state you live in as well for leasing.
In most states you only have to pay sales tax on the depreciation amount of the lease. However, some you have to pay the sales tax on the full amount of the car. Which makes it unfavorable unless you can write some of the lease payments off as a business expense. Otherwise, don't lease in those states (Texas).

Also, take into consideration the down payment on a lease. As opposed to the down payment on a purchase, if you were to say get in an accident on a leased vehicle, that down payment is gone. So if you lease, and put 10k money upfront, then a month later someone hits you, bends the frame, car is totaled,...that 10k is gone. poof. Whereas on a purchase, insurance will reimburse you for the value of the vehicle (including your down payment)...assuming you use a good insurance company.


I'm also pondering the resale value of a Tesla Model S 3 years from now... I'm thinking of going with the 90D. Gives it a little more battery that I think will be valued 3 years from now. Also, I think the demand for used Model S's 3 years from now will be fine. Yes, the Model 3 is coming out at a price point that would compete with a used Model S, but the S is also bigger, and there is demand for bigger cars. People want the trunk space, etc. Current Model S's will be fine value wise.

 

[ap105]

Depends what state you live in as well for leasing.
In most states you only have to pay sales tax on the depreciation amount of the lease. However, some you have to pay the sales tax on the full amount of the car. Which makes it unfavorable unless you can write some of the lease payments off as a business expense. Otherwise, don't lease in those states (Texas).

Also, take into consideration the down payment on a lease. As opposed to the down payment on a purchase, if you were to say get in an accident on a leased vehicle, that down payment is gone. So if you lease, and put 10k money upfront, then a month later someone hits you, bends the frame, car is totaled,...that 10k is gone. poof. Whereas on a purchase, insurance will reimburse you for the value of the vehicle (including your down payment)...assuming you use a good insurance company.


I'm also pondering the resale value of a Tesla Model S 3 years from now... I'm thinking of going with the 90D. Gives it a little more battery that I think will be valued 3 years from now. Also, I think the demand for used Model S's 3 years from now will be fine. Yes, the Model 3 is coming out at a price point that would compete with a used Model S, but the S is also bigger, and there is demand for bigger cars. People want the trunk space, etc. Current Model S's will be fine value wise.

From my understanding when you lease a Tesla that down payment is gone regardless. Accident or no accident, so that 10k would be gone end of lease.

 

[Electroman]

rom my understanding when you lease a Tesla that down payment is gone regardless.

Nothing unique about Tesla on that. It is true for any leased car.

 

[ChadS]

My first thought is that these are exactly the same concerns people were expressing when the S first came out in 2012. And when the Roadster first came out before that. And will express when the 3 first arrives. Etc.

Nobody knows (or can know) what the resale value will be, but so far they have been pretty good. It is human nature to over-analyze the downside, and while I completely agree that bad things can happen and you should make sure you are prepared for it, I think you should consider upside scenarios as well. What if consumers suddenly all want EVs, but manufacturers can't ramp up battery manufacturing fast enough? What if there is a war and gas prices go to $6? What if there is an earthquake in Fremont and production of new cars gets way behind demand, so used Teslas become very popular?

Resale concerns aside, if you are pretty sure you are not going to keep the car, a lease seems like a pretty reasonable solution - especially in your case where it sounds like the cost will be slightly less. (If you think you might want to keep the car, it is probably a bad solution because Tesla adds the federal tax credit to the residual). But a lot of things depend on your personal situation: how does your state treat taxes on the two scenarios, how easily can you take incentives in either case, what's your comfort level in selling a car privately, what's your pain level at giving up potential value to the leasing company.

In the future, with the benefit of hindsight you may be able to say for sure which option was better for you. But for now you can't know everything, so don't stress too much over the decision - run the numbers, briefly consider the best/worst scenarios, and then go with what feels good. It sounds like you are doing all the right things. Most of all: enjoy the car!

 

[Sir Guacamolaf]

If you plan on keeping the car for 3ish years, financially speaking, lease vs buy is about equal.
If you are good at selling used cars yourself, in 3 years you'll be ahead $ viz by private selling your Tesla. But you'll be behind in the hassle that comes with private selling any car.

Other factors too,
- Freedom of own vs lease
- Insurance issues
- How much are you financing?
- Is this a business car? Is this your only car?

i.e. too many unknowns here to make a call one way or another.

 

[carter_seattle]

Every time the question of leasing vs. buying comes up, please simply link to this comment:

Questions about leasing an MS

The short answer is that leasing an financing are way more similar than people realize:

• Leasing
  • You pay for Tesla's calculation of the depreciation (they set the residual) of the car while you drive it plus interest.
  • You need to stay below "normal wear and tear" and the agreed upon mileage.
  • After a fixed period (2 or 3 years) you can either buy the car or turn it in for a preset price. It's your option!
  • In most states you only pay sales taxes on the lease payment.
  • Sizable income tax advantages for people who are self-employed or own a business.
• Financing
  • You get a loan for the purchase price, which will include interest.
  • You can do whatever you want to the car, but your choices will affect resale.
  • If you want to sell it in 2-3 years, you'll have to wait and see what it's worth. Could be more or less than the lease residual. It's a gamble.
  • You pay the entire sales tax bill upfront.

 

[cplaw]

Thanks everyone, decided to stay with the leasing option.

 

[xav-]

Nothing unique about Tesla on that. It is true for any leased car.

What is unique with tesla though is that they don't let you put $0 down. Other car makers let you do that, so even let you roll everything into the monthly payment making the drive off effectively $0

 

[dckiwi]

I think you should consider upside scenarios as well.

What if there is a war

What if there is an earthquake

Lol upside scenarios

 

[dgpcolorado]

Too late for the OP, but another factor that should be considered in lease versus buy is mileage. The lease is based on a fixed number of miles per year — usually 12,000 or 15,000 — and if you go over that you will pay for the extra miles. It is often the case that new Model S owners end up driving a lot more miles than they originally figured on because the car is so much fun to drive. FWIW.

 

[ChadS]

Miles are indeed a factor. Although you only pay 25 cents per mile you go over on a lease, which is not bad for this class of car. I imagine on a 3-year-old Tesla, depreciation for the extra miles would be around that much if you were trying to sell it yourself. In fact I just looked at KBB numbers for a 3-year-old S60, and the difference between 10k per year and 12k per year was just about exactly 25 cents.