Model S Depreciation significantly higher than expected

[MassX1317]

My Toyota Highlander depreciated around $11k in 5 years, close to a 100k miles. I traded it in for around $19k.My Tesla Model S depreciated around $35-40k in 1 year, close to 30k miles. I was offered about $60k for a trade.The original poster was only offered $18k more for a Tesla with half the miles and 3 years newer than my Highlander. My Highlander was $60k less than the Tesla.Obviously expensive cars depreciate faster but there is no way Tesla/Autonation should be offering only $18k difference between my Highlander and this guys Tesla. That's terrible residual value on the Tesla.

 

[jerry33]

My Toyota Highlander depreciated around $11k in 5 years, close to a 100k miles. I traded it in for around $19k.My Tesla Model S depreciated around $35-40k in 1 year, close to 30k miles. I was offered about $60k for a trade.The original poster was only offered $18k more for a Tesla with half the miles and 3 years newer than my Highlander. My Highlander was $60k less than the Tesla.Obviously expensive cars depreciate faster but there is no way Tesla/Autonation should be offering only $18k difference between my Highlander and this guys Tesla. That's terrible residual value on the Tesla.

The problem with this analogy is the dealer model. With the Tesla model, the selling price is fixed and the trade in is also on a fixed scale. With the dealer model nothing is fixed, so you have to also compare what you may have been charged for on other parts of the sale (options, financing, various insurance items with the financing). Of course, luxury and premium cars have a higher depreciation rate to start with.

 

[MassX1317]

The problem with this analogy is the dealer model. With the Tesla model, the selling price is fixed and the trade in is also on a fixed scale. With the dealer model nothing is fixed, so you have to also compare what you may have been charged for on other parts of the sale (options, financing, various insurance items with the financing). Of course, luxury and premium cars have a higher depreciation rate to start with.

Highlander was $36.2k, paid $29k. It was brand new. 0% financing 60 months, 0 extras. Free maintenance for 30k miles, one set of tires, routine maintenance, no mechanical issues, no warranty work. Mostly highway miles. Using the depreciation of the original posters car and my Autonation offer. A 3-4 year old $90k Tesla with 75-85k miles will have similar trade in value as a 5 year old $30k Highlander with 85-95k miles. There is no denying that this is a major negative to buying a Tesla. We have gone on a few 400 mile round trip weekend getaways recently and take our F150 because we figure it will cost us about $400 in depreciation to take the Tesla. We are thinking about getting a D or X, so have to keep an eye on depreciation costs.

 

[MsElectric]

My Toyota Highlander depreciated around $11k in 5 years, close to a 100k miles. I traded it in for around $19k.My Tesla Model S depreciated around $35-40k in 1 year, close to 30k miles. I was offered about $60k for a trade.The original poster was only offered $18k more for a Tesla with half the miles and 3 years newer than my Highlander. My Highlander was $60k less than the Tesla.Obviously expensive cars depreciate faster but there is no way Tesla/Autonation should be offering only $18k difference between my Highlander and this guys Tesla. That's terrible residual value on the Tesla.

Premium cars depreciate a lot faster than utility cars like a Highlander. Why would you compare what Tesla offered the OP for his 2 year old car with over 50,000 miles to the residual value of a highlander? Compare it with what a Mercedes, BMW, or Audi that sold for $80,000 would be worth if it is sold after 2 years with over 50,000 miles. Also Tesla needs to allow for about $5,000 for refurbishing and the additional 4 year warranty. Throw in about another $5,000-$7,000 or so in profit and it is likely all Tesla can get for this care due to excessive mileage.

Your logic ties this situation to just Tesla when it applies to all premium cars. Few people want to pay what is still a huge amount of money for a premium car if it has a ton of miles, this is especially the case when the car is not under warranty.

 

[MassX1317]

Premium cars depreciate a lot faster than utility cars like a Highlander. Why would you compare what Tesla offered the OP for his 2 year old car with over 50,000 miles to the residual value of a highlander? Compare it with what a Mercedes, BMW, or Audi that sold for $80,000 would be worth if it is sold after 2 years with over 50,000 miles. Also Tesla needs to allow for about $5,000 for refurbishing and the additional 4 year warranty. Throw in about another $5,000-$7,000 or so in profit and it is likely all Tesla can get for this care due to excessive mileage.Your logic ties this situation to just Tesla when it applies to all premium cars. Few people want to pay what is still a huge amount of money for a premium car if it has a ton of miles, this is especially the case when the car is not under warranty.

So by the logic you a providing an newer premium vehicle with less miles should be worth about the same as an older $60k less than new, middle of the road car with more miles? Tesla also has a powertrain warranty for 8 years unlimited miles, so 6+ more years for the original poster. The reason it's becoming such a hot issue with Tesla owners is because Tesla talked up how great resale value would be and how little maintenance the car would need. Neither of which has proven true.Doesn't mean I don't love the car, I just wish they didn't say anything about resale or maintenance costs instead of selling false promises about the true cost to own.

 

[JasonT]

What Jeff said, also it's well known that Tesla low balls trade in value significantly, better to sell it yourself.

Agreed - I'm buying my first Tesla through the CPO program (an inventory 60). I asked about my Nissan Leaf, they quoted $1,000. Carmax offered $3,000 and I believe I'll be able to sell it for around $5,000 via private sale.

 

[rocketdallas]

Premium cars depreciate a lot faster than utility cars like a Highlander. Why would you compare what Tesla offered the OP for his 2 year old car with over 50,000 miles to the residual value of a highlander? Compare it with what a Mercedes, BMW, or Audi that sold for $80,000 would be worth if it is sold after 2 years with over 50,000 miles. Also Tesla needs to allow for about $5,000 for refurbishing and the additional 4 year warranty. Throw in about another $5,000-$7,000 or so in profit and it is likely all Tesla can get for this care due to excessive mileage.

Your logic ties this situation to just Tesla when it applies to all premium cars. Few people want to pay what is still a huge amount of money for a premium car if it has a ton of miles, this is especially the case when the car is not under warranty.

This +1. I knew I was taking a chance with the residual value of my MS, especially given my typical annual driving habits, and made the leap and have never been happier. Honestly, I suffered greater depreciation with a Jaguar and an Audi I once owned. The financially smarter choice for those of us who put lots and lots of mileage on our daily drivers is probably a lightly used Honda Civic for both ownership and depreciation expenses. But for whatever irrational reason (passion for cars, technology, environmental concerns, whatever), we chose our Teslas.

 

[MsElectric]

So by the logic you a providing an newer premium vehicle with less miles should be worth about the same as an older $60k less than new, middle of the road car with more miles? Tesla also has a powertrain warranty for 8 years unlimited miles, so 6+ more years for the original poster. The reason it's becoming such a hot issue with Tesla owners is because Tesla talked up how great resale value would be and how little maintenance the car would need. Neither of which has proven true.Doesn't mean I don't love the car, I just wish they didn't say anything about resale or maintenance costs instead of selling false promises about the true cost to own.

I am honestly not sure what you are debating any more. It is pointless to compare the depreciation of a utilitarian car like a Highlander to the depreciation of a Premium car. Any premium car including the Model S. If you insist on making the comparison I'd have to conclude you have little experience with the actual depreciation of premium cars. A 2 year old Honda or Toyota is going to hold its value as a percentage higher than just about any premium car. You then consider a 2 year old premium car with over 50,000 miles and the depreciation is even worse. There is no free lunch in putting a ton of miles on a car that is 2 years old. That mileage causes excessive depreciation as it causes the value of that vehicle to go down.

The OP has a Model S that cost about $80K and Tesla had offered $36,000 for trade in due to the excessive mileage. For some perspective, let's consider a 2 year old Mercedes S class that didn't cost just about $80K but cost about $100K new. That vehicle with 58K miles can be bought retail with an asking price of just $40K. Meaning the trade in vale for the Mercedes would have been right around $32K (68% depreciation for the S class). So given the fact that tesla had offered $6K more for a car that cost $20K less, I have no idea what the complaining is about.

http://www.cars.com/vehicledetail/detail/636819417/overview/

Adding a ton of miles to a Mercedes, Audi, tesla, or any other premium car is going to cost you. I'd say unless you really enjoy what you drive and have no issue with paying for it, putting over 25,000 miles on a premium car will result in horrible residual values as few people will want to touch that premium car as a used car when it has so much mileage that after 2 years the car is not even under warranty.

Tesla's offer to the OP is quite reasonable and if the vehicle had fewer miles their offer would have been understandably comparably higher.

It s really unreasonable to blame Tesla here and present this data point as somehow Tesla vehicles have horrible depreciation. In the segment of premium cars, the Model S has the least depreciation. You bring up a great point in that if you have an issue with paying for high mileage depreciation, you are better off buying a highlander or pretty much any Toyota.

 

[MassX1317]

I don't care what two cars you are comparing. If one starts at $90k and the other starts at $30k, and after 85k miles or so they have the same trade in value, than the $90k has terrible resale value. It's not a debate, I'm stating the fact that the car has terrible resale value.

The Model X is going to be a utilitarian car, maybe that will have better residual value.

 

[brucet999]

I sympathize.

That said, I did recently benefit (cost-wise) from purchasing a used Tesla with high mileage, so I do have some personal experience in this matter.

now compare to CPO:
Tesla CPO Consolidator

Thank you for that link. I only wish that it could provide original pricing to make depreciation calculations easier.
I configured as closely as possible with the present design studio to get an estimated new price on 8 similar low mileage 2014 CPO cars (without Autopilot hardware) and came up with an average 81% resale value. Considering net price after incentives, the value is more like 91%. That seems pretty good to me.

Granted, private party sale would not net as much as CPO retail. I don't know how to figure the discount to arrive at trade-in value.

 

[MsElectric]

I don't care what two cars you are comparing. If one starts at $90k and the other starts at $30k, and after 85k miles or so they have the same trade in value, than the $90k has terrible resale value. It's not a debate, I'm stating the fact that the car has terrible resale value.

The Model X is going to be a utilitarian car, maybe that will have better residual value.

Like I said I think you have very little experience buying or selling premium cars based on your statements. We usually buy and keep our cars for about 8 years. Each time we sold a Volvo, Audi, or Mercedes we had owned, it was worth LESS than a Camry of the same model year that cost about 1/3 to 1/4 the cost of the car that we were selling. The used premium car market is tough place for anyone who can't handle depreciation. As soon as a premium car goes out of warranty, the market for that car diminishes significantly as most people looking to buy a used car are not in a position to absorb repair bills that are significantly higher for most premium cars.

The Model X will be a premium car similar to a Mercedes GL but given the scarcity it will likely hold onto its value quite well, especially for the first couple of initial years. I would not call the Model X a utilitarian car. By utilitarian I'm talking about "appliance cars" that people can rely on for dependability and to meet a need of basic transportation, such as a Highlander, Camry, or Corolla.

- - - Updated - - -

Thank you for that link. I only wish that it could provide original pricing to make depreciation calculations easier.
I configured as closely as possible with the present design studio to get an estimated new price on 8 similar low mileage 2014 CPO cars (without Autopilot hardware) and came up with an average 81% resale value. Considering net price after incentives, the value is more like 91%. That seems pretty good to me.

Granted, private party sale would not net as much as CPO retail. I don't know how to figure the discount to arrive at trade-in value.

Model S vehicles have exceptional resale values. Their resale value is about 20-30% higher than a comparable S class so it's puzzling when people complain about the Model S resale value being bad.

 

[omarsultan]

I don't care what two cars you are comparing. If one starts at $90k and the other starts at $30k, and after 85k miles or so they have the same trade in value, than the $90k has terrible resale value. It's not a debate, I'm stating the fact that the car has terrible resale value.

You are comparing a premium car that cost $90K, and is two years old with 58K miles on it with a mainstream SUV that cost $30K and sold five years later with 100K miles on it. How is that an apples-to-apples scenario?

As a data point, the 2013 MB S550 had an MSRP of $98K and Kelly Blue Book currently lists dealer trade-in value for a car with 54K miles in the $41K-$44K range which is the same 41% the OP is seeing.

 

[ohmman]

As a data point, the 2013 MB S550 had an MSRP of $98K and Kelly Blue Book currently lists dealer trade-in value for a care with 54K miles in the $41K-$44K range which is the same 41% the OP is seeing.

These kinds of data points are the only ones that are useful. Going to kbb.com and finding other cars of the same year, same original MSRP, and finding out their value with the same number of miles is the only way to do a true apples-to-apples comparison.

 

[Electroman]

MassX is a clear example of Tesla attracting a section of consumers who have never bought a premium car earlier.

There is going to be this kind of mismatched comparisons between Model S and Corolla and Highlanders.

 

[MsElectric]

I don't care what two cars you are comparing. If one starts at $90k and the other starts at $30k, and after 85k miles or so they have the same trade in value, than the $90k has terrible resale value. It's not a debate, I'm stating the fact that the car has terrible resale value.

The Model X is going to be a utilitarian car, maybe that will have better residual value.

You are right that a premium car around $90K will be worth about the same as a basic car that initially cost $30K after about 85K miles because most people looking to buy a used car would be weary about any repair costs associated with a car that used to cost $90K.

The Model X is going to depreciate like any other premium car and if the Model S was any indication the first 2-3 years the resale values will be quite high due to the newness and scarcity but the residuals will be more or less similar to the Model S.

 

[MassX1317]

MassX is a clear example of Tesla attracting a section of consumers who have never bought a premium car earlier.

There is going to be this kind of mismatched comparisons between Model S and Corolla and Highlanders.

I have owned many vehicles, some premium, some not so much. I usually keep them for a couple years and trade them in. I generally would not buy a $90k car but I think the Model S is the best daily driver on the market right now and I have followed and loved Tesla since day 1, so that is what I bought. I planned to keep it until the Model X came out. I didnt stretch myself to try and buy a fully loaded P85+, but that doesn't mean I'm just a guy looking for a Corolla. Even if I was cross-shopping a Corolla to a Model S I'm not sure why that would make me any less educated of a buyer. I think you may have been trying to insult me but I'm not really 100% certain.

Comparing apples to apples is really an arbitrary term. I'm comparing two vehicles that I have owned. The one I traded for the one I bought with that trade in. To me the apple is the car I owned. I still think the car has terrible resale value and comparing it to other cars with terrible resale value doesn't really change my thoughts about it.

One of the arguments that has been brought up a few times here is that people are leary to buy an out of warranty premium car because of the cost to fix them if they break. One of the selling points of the Model S is that there are so many less things that can go wrong on it compared to an ICE. There is also an unlimited mile 8 year power train warranty....compared to my out of warranty Highlander.

Makes the comparison sound even worse. We are comparing a $30k Highlander with no warranty to a $90k Tesla with 6+ more years of powertrain warranty, it looks like they will be worth about the same after 85k miles or so, and we are defending this saying its a good residual value on the Tesla? I'm sorry but I just can't agree. It doesn't make the Model S any less of an awesome car, but I'm not going to sugar coat the true cost to own. This won't impact those who keep their cars for 8 years.

To me the major frustration is that Tesla is promoting the resale. They even went as far as having a blog on their website or Facebook about a family that is actually saving money by owning a Tesla. They factored in depreciation that was drastically lower (I think they may have used KBB) than what the real depreciation is. I don't think Tesla needs to stretch these numbers to sell cars. The car literally sells itself the second you get behind the wheel. Knowing what I know now I would have just waited for the X but instead I will just keep the S until I feel like I have gotten enough value out of it.

 

[ohmman]

Comparing apples to apples is really an arbitrary term.

Possible, but the example of using similarly priced and classed vehicles is a closer reality to that term than using two cars you happened to have owned. I could compare two apples - one dinner I had at the French Laundry, and one I had at a Burger King in El Paso, but I think it would be disingenuous to suggest that's a proper comparison.

To me the major frustration is that Tesla is promoting the resale. They even went as far as having a blog on their website or Facebook about a family that is actually saving money by owning a Tesla. They factored in depreciation that was drastically lower (I think they may have used KBB) than what the real depreciation is. I don't think Tesla needs to stretch these numbers to sell cars.

Now this, I couldn't agree with more. I understand where they are coming from when they try to sell up their "savings on gas" etc. on the website, but I find it pretty off-putting. What about the insurance premiums, which are more than an apples-to-apples car (ha, see what I did there)?

To be fair, I think the MS depreciation is as high as similarly priced cars, and I don't think that's terribly surprising. Anything Tesla does to make buyers think otherwise is not a good business practice.

 

[Oil4AsphaultOnly]

To me the major frustration is that Tesla is promoting the resale. They even went as far as having a blog on their website or Facebook about a family that is actually saving money by owning a Tesla. They factored in depreciation that was drastically lower (I think they may have used KBB) than what the real depreciation is. I don't think Tesla needs to stretch these numbers to sell cars. The car literally sells itself the second you get behind the wheel. Knowing what I know now I would have just waited for the X but instead I will just keep the S until I feel like I have gotten enough value out of it.

IIRC, I think Tesla had always promoted their resale value against other premium vehicles, not against ALL vehicles.

Just found a good reference: Elon Musk Ups Resale Value Of Tesla Model S: 'We Decided We Were Wrong' - Forbes

"In a conference call with reporters today Elon Musk said Tesla Motors TSLA +4.04%will make the Model S resale value guarantee the highest of any premium sedan brand on the market."

So, yeah, I think you need to change your perception, as everyone else has already demonstrated that their resale value is holding up as well as they've promised.

 

[No2DinosaurFuel]

Market manipulations are a sure way to get in trouble down the road. I have been a staunch advocate of letting the price of the car reflect the supply and demand of the car in the generally free market. I definitely do not condone what Musk is doing, but I understand his perspective in trying to promote his cars and keeping current owners happy.

My take on his "guarantee" is only good for reasonably mileage cars and for only 3 years. Afterwords, it will fluctuate depending on the market. So for 3 years, you are sort of guaranteed a high price car, but after that, who knows. There have been cases when owners here have complained about low balling from tesla for their less than 3 years old trade ins.

Where is my proof of market manipulation? Well:
1) One is the 3 years price buy back guarantee. Without it, I am sure teslas might be worth a tad less than what the CPOs are going for now.
2) Two, because of this guarantee, some owners somehow feel they should be driving the car for free (or even make some profit) for 3 years if you factor in the government rebates. I have seen tesla on craigslist that have been renewed for 6 months or more now, ever since the AWD announcement.
3) Three, if you look at the CPOs lot across the country, many have shown hundreds of cars sitting there on the lot. I am 100% sure not all of them are on the CPO website. I think tesla is making sure they have around 200-300 vehicles sold at anytime on the CPO website to cap the supply. However, I conjecture they probably have close 1 to 2 thousands total sitting idle on lots.

My point is Tesla is definitely manipulating the resell value of the Model S to keep those promises to the early adopters. Again it might work in the short term, but I can guarantee you they will get themselves into trouble down the road. Think when tesla releases the model X and more flood of Used model S comes in. Think when in 2016 or 2017 when the 3 years guarantee runs out for those 2012/2013 Model S? Think when other manufacture release alternatives and somewhat lowers demand for the Model S. All this will point to tesla adjusting the prices of the used tesla to move them.

 

[metafor]

I wonder why mileage is such an important factor in price for a Model S. For a gasoline car, it makes sense as there are so many moving parts that wear down over use. But for an electric car....there's the motor (which is covered under warranty for quite some number of years) and the battery (again, covered under warranty). Based on the pricing of the replacement battery in 8 years ($12k for a 85kWH), and typically recorded degradation, there should probably be a cap as to how much mileage counts against the selling price.

It'd be a steal to basically go and buy cheaper, but higher mileage Model S's.