Model S Depreciation significantly higher than expected

[MsElectric]

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.

Because there are hundreds of Model S vehicle to buy with far fewer miles.

Because mileage over 50,000 means you are no longer covered by the full warranty, unless the warranty was extended before it ran out.

Because someone buying a used car likely does not want to pay for the depreciation caused by someone else who put 54,000 miles in just 2 years.

Because the market sets the price on used cars and cars with more miles are worth less due to wear and tear on the vehicle caused by mileage.

I still stand by what I said in that this thread and the way it is presented is absolutely unreasonable to Tesla. The trade in value offered to the OP is a result of a two year car being given back with 54,000 miles making that car undesirable to many premium used car buyers who are ideally looking for a gently and lightly used car.

Tesla has already sold CP cars in the mid to late 40s and that might be all they feel they can get for this car.

And let me say this again, the Model S resale values are strong and depreciation is less than comparable premium cars. That's all Tesla has promised and that's what it is.

Earlier on this thread I posted a Mercedes S class for sale that is only two years old with mileage in the mid 50s and that car, which originally sold for around $100K, can now be bought for an asking price of $40K. Welcome to the ownership of a premium car where the used car market is tough on cars with excessive mileage. Why else do you think Tesla leases charge for excess mileage? Because excess mileage diminish the value of the car, especially a premium car. This is car ownership 101.

 

[No2DinosaurFuel]

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.

I agree. Sadly most people in the world do not understand electric motors and batteries. IMO, electric cars should not depreciate as fast. High depreciation is a relic of ICE cars and should really only reflect the battery wear and its replacement cost. That being said, my opinion is just one and it doesn't mean much when everyone is still on the ICE bandwagon.

I say give it a few years and we will see how electric cars' depreciation rate will reflect what really degrades in the car: the battery.

However one major things I would like to see in BEV is not only battery replacement, but battery upgradability. Say I get a Nissan leaf today with 84 miles range today. I would like to see in the future, say 5 years down the road, Nissan to offer a battery upgrade to upgrade the range to 200+ miles using the same power train and charging setup with minor full charge capacity change in the settings. However, this might be a pipe dream because this would mean Nissan will make less money because they will only sell you battery and not the full car. Therefore Nissan should become predominately a battery manufacture instead of a car company. Sounds familiar?

 

[ecarfan]

However one major things I would like to see in BEV is not only battery replacement, but battery upgradability. Say I get a Nissan leaf today with 84 miles range today. I would like to see in the future, say 5 years down the road, Nissan to offer a battery upgrade to upgrade the range to 200+ miles using the same power train and charging setup with minor full charge capacity change in the settings.

Like Tesla will offer this year to Roadster owners: a 70kWH battery to replace the original 56kWh battery.
At some point years from now I think Tesla will offer battery upgrades for the S and X but until Tesla has lots of battery production capacity it makes no sense for them to do so since they can't build cars fast enough to satisfy demand and need all the batteries they can get.
Note that the replacement Roadster battery uses different cells than the S.

 

[Max*]

Like Tesla will offer this year to Roadster owners: a 70kWH battery to replace the original 56kWh battery.
At some point years from now I think Tesla will offer battery upgrades for the S and X but until Tesla has lots of battery production capacity it makes no sense for them to do so since they can't build cars fast enough to satisfy demand and need all the batteries they can get.
Note that the replacement Roadster battery uses different cells than the S.

Was a price-point for the upgrade ever announced?

 

[Gizmotoy]

High mileage kills the resale value of even gasoline cars. It's a major factor. I have a Model S, and even I would be a bit conservative about buying a high-mileage Model S simply because it's a relatively new technology and we don't know how well they'll perform into old age. Early indications are very favorable, but it's still quite early to know for sure. Now imagine how someone who has never owned a BEV might feel.

We've seen that on average the Model S does as well or a little better than its competitors in resale, but I'm not surprised that high mileage examples take a larger hit. There's uncertainty, warranted or not, and that affects value.

Still, don't just accept Tesla's offer. Shop the car around. The easy route is always going to cost you the most, and I'm sure you'll get more for it private party.

 

[zer0cool]

Years or mileage will kill resale value of any car. Regardless of original price, almost any car is worth just a few thousand after say 8 years or 120k miles. Whether the car was 20k new or 100k new, after 120k miles, they are worth basically the same. So yes, the 100k car has greater depreciation, always.

E.g. I had a 2014 BMW 535i Msport with 10k miles and 9 months old, 65k original MSRP. I received a trade-in offer of just 42k... Fortunately I had an amazing lease deal and was able to transfer the car with 0 losses on my part. I can only imagine what the trade-in would have been if I had kept the car for 2 years and drove 55k miles... I guarantee you it would have been in the 20's...

The fact is 55k is pretty much expected mileage for a 4 year old car and late 2011 or early 2012 535i's are selling basically in the lower to mid 30's... this means that dealers are probably trading them in at 10k less than that since they need to add 2 additional years of warranty up to 100k miles, clean and condition the car, and sell for a profit while paying for land, power, salesperson, etc... so basically think of your car as a 4 year-old car instead of a 2 year-old and its value should have depreciated by about 50% for a private sale, and 10% less than that for trade-in.

This is not unique to Tesla, but Tesla does have some terrible trade-in offers.

 

[seclinton]

I'm probably one of the highest mileage CPO at 52k for my 2013 P85. With a decent config (search for my vin on the consolidator) I still think it was the best deal that was posted at the time in the SF bay area. (lowest prices/most features) I wanted. Tesla gave me the effective new car warranty and ~98% original battery health. And the car has been perfect since. I think the depreciation is inline with other luxury mass produced cars.

VIN: P10456

 

[Lloyd]

Buy any premium car that cost around $80,000 and put over 50,000 miles in just 2 years and don't wonder why the trade in price for the car is only about $40,000. You have put such a huge amount of miles on your car that some potential buyers will not even look at the car unless it is offered with a huge discount.

You've saved a bunch of money on gas so add those savings to what Tesla offered you. Or you can try to sell the car on your own but you are going to have a really hard time finding a buyer for a car with that many miles. I assume with over 50K miles your car is now out of warranty. Tesla has already sold some used cars for the mid to late 40s and that might be all they can get for your car. They will likely spend about $5,000+ reconditioning your car as needed and adding additional 4 years of warranty coverage. You add about another $5,000 in profit and that's likely how much they will sell your car for.

Tesla has bought some Model S cars at a loss based on some reports here on what people received for the cars and what Tesla ended up selling the cars for and I'm glad Tesla is not subsidizing for someone else's depreciation as that is unsustainable. Trade in prices are always going to be on the low end as they are pretty much at wholesale level or even less but if you don't like the price Tesla offered you sell on your own.

Model S vehicles are holding their value better than an S class so your title for this thread isn't entirely correct. May I suggest the title:

"Over 50,000 miles on a two year old car causes significant depreciation."

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Resale value guarantee isn't a mythical program to absolve an owner's responsibility to pay for depreciation When you own a car it depreciates based on time and mileage. For premium cars, excessive mileage causes significant depreciation.

I would be less concerned about High Mileage with a Tesla when compared to an ICE car. I would prefer a higher mileage Tesla based on the price discounts I am seeing as long as the interior and exterior wear and tear is reasonable. I bet we will see these cars go for 5X the miles compared to the gasoling couterparts.

 

[Uncle Paul]

It seems that one of the biggest causes of depreciation on Teslas is the evident wear and tear of the drivers front leather seats.

 

[MsElectric]

I would be less concerned about High Mileage with a Tesla when compared to an ICE car. I would prefer a higher mileage Tesla based on the price discounts I am seeing as long as the interior and exterior wear and tear is reasonable. I bet we will see these cars go for 5X the miles compared to the gasoling couterparts.

Technically what you say is true but the lower repair bills for Model S cars is yet to be proven as few people have cars that are out of warranty. If a contactor failure or door handle issue come up out of warranty how much would that cost to fix? I'd personally not own a Model S out of warranty and I'm likely better informed about the car than most typical buyers looking to own one.

It is up to Tesla to prove that EVs cost less to repair when Tesla owners out of warranty need repairs done so let's see how that plays out. In the meantime the safe thing to do for most people considering buying a Model S is to buy one with less mileage as to some extent it means less wear and tear on the car due to less use.

Many people looking to buy a two year old used car for around $50-60K will likely stay away from buying one with over 50,000 miles in only 2 years -- and hence the depreciation and the high depreciation quoted by Tesla.

 

[jvonbokel]

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.

I agree. Sadly most people in the world do not understand electric motors and batteries. IMO, electric cars should not depreciate as fast. High depreciation is a relic of ICE cars and should really only reflect the battery wear and its replacement cost. That being said, my opinion is just one and it doesn't mean much when everyone is still on the ICE bandwagon.

I say give it a few years and we will see how electric cars' depreciation rate will reflect what really degrades in the car: the battery.

I'll second that. In the long term, I think EVs in general, and the S in particular, will hold their value better than ICE cars, but we need more time. Thankfully you couldn't pry my high-mileage 2012 S out of my hands if you tried!

I believe there are a handful of cars out there that have already surpassed 100k miles. I think you'll see a few minor headlines when the first cars start hitting 200k or 300k miles, and perceptions might start to change, but it will likely still take a while beyond that for it to have a noticeable impact on average resale values.

Also the tax credit has a substantial impact. Everybody knows a car loses a good chunk of value as soon as you drive it off the lot, but EVs lose up to $7500 as soon as you register them. It's effectively unfair to compare sticker price when calculating resale value. This could theoretically come back to some extent in the future when those credits dry up, but I'm not exactly betting on it.

 

[Jdcleary]

What are the details of your car? S60?

Until I see the details of your car, I won't get into whether or not I think that level of depreciation is warranted or not.

Oh and try a smaller font?

Jeff

Tesla Model S $ 57,400
85KWh Battery $ 20,000
Tech Package $ 3,750
Pearl White $ 1,500
Panoramic roof $ 1,500
Black Nappa Leather $ 1,500
Air Suspension $ 1,500
Twin Chargers $ 1,500
Total $ 88,650
Inspection, prep & delivery $ 1,170
$ 89,820
Tax Credit $ (7,500)

Net Cost (Excluding License & Sales Tax)
$ 82,320

Don’t know why the font was what it was… if you care to explain what I should have done to get it in a more appropriate type, please feel free to do so.

I'm not sure you can point to a trade-in value and cry about loss of resale value. Check the private party sale value, that's where it's at.

I wasn’t crying about the loss of resale value… just pointing it out to others who may not be aware of what I considered significant loss.

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 didn’t stretch myself to try and buy a fully loaded P85+, but that doesn't mean I'm just a guy looking for a Corolla.

Exactly my sentiments! I only have one vehicle, I’m retired, and we travel a lot. Thus the high miles. Also, keeping the Model S, assuming it is not possible to get a better price, is something I need to consider.

Thanks for your thoughts.

 

[Spidy]

However one major things I would like to see in BEV is not only battery replacement, but battery upgradability. Say I get a Nissan leaf today with 84 miles range today. I would like to see in the future, say 5 years down the road, Nissan to offer a battery upgrade to upgrade the range to 200+ miles using the same power train and charging setup with minor full charge capacity change in the settings. However, this might be a pipe dream because this would mean Nissan will make less money because they will only sell you battery and not the full car. Therefore Nissan should become predominately a battery manufacture instead of a car company. Sounds familiar?

How much is a 5year old Nissan Leaf worth? How much would such a battery upgrade cost? If fell like the battery would cost more than half the value of the car, so who would do that?

 

[No2DinosaurFuel]

How much is a 5year old Nissan Leaf worth? How much would such a battery upgrade cost? If fell like the battery would cost more than half the value of the car, so who would do that?

Remember the reason the leaf is less than 1/2 the worth after 5 years or less is because of the precieved depreciation, federal tax credit, low range, slow charging, 1st gen ev stuff, lower new car starting prices, etc. So it makes the leaf a very unpopular car. Also there are a mass of leases that are due and those will be coming onto the used market further pushing down prices. This is why you see the leaf going for less than 1/2 of the original price. Simple supply demand problem.

However once you get somwthing with better features and current gen ev tech but with limited range then i can easily see how battery swap is very conceivable.

Ask yourself. If you take the current gen 70D and replace the batteries after 10 years at which point it might only have 200 miles max range. A simple battery upgrade to 400+ miles range will still make it conpetitive with the ev cars 10 years from now.

This one of the reason why i think the model s can hold its value up to some point provided tesla still exist 10 years from now and they are willing to offer the battery upgrade.

 

[kirkbauer]

Ask yourself. If you take the current gen 70D and replace the batteries after 10 years at which point it might only have 200 miles max range. A simple battery upgrade to 400+ miles range will still make it conpetitive with the ev cars 10 years from now.

Do we have any idea if Tesla would ever offer better battery packs to older MS's? I mean it is theoretically possible but it doesn't mean they'll do it. I don't think they have done it yet, have they?

 

[Uncle Paul]

Believe that once they get a couple Mega Factories up and running Tesla will be selling battery packs for all sorts of applications.

Putting in a new battery pack in a Model S is a 10 minute job. Far easier than putting a new engine in an ICE>

 

[neroden]

My Model S listed at $89, 820 and with the Federal Tax Credit of $7,500 the net cost, excluding Sales Tax and License, was $82,320.

The car will be 28 months old on July 10th and has 54,000 miles. My Tesla trade-in quote was $37,000 meaning the Model S has lost 55% of it's value.

That's a severe lowball quote. They're reselling CPOs for no less than $46.9K, and those are S60s. On the open market the cheapest I see on Autotrader is $56K.

If you have an 85, I bet you can get at least $55K in a private sale. (P85 and S85 seem to have interchangable value in the resale market, with other options being more important.)

Well, the extremely high mileage compared to most 2-year-old Model Ses may mean you'll get less than that, but I'd still bet you can get $45-$50K.

Anyway, on the upside, you drove a *lot* which means you saved a *lot* of money on gas. Those of us who drive relatively little don't save that much money on gas.

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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.

I actually suspect metafor is right. I think the market is currently pricing Model S as if it depreciates physically like a gasoline car. Eventually they'll notice that all of the internal parts last longer (motor lasts forever, for example), and start valuing it that way. But in the meantime I think the prices are getting lowballed.

Basically, I think depreciation *after 10-15 years* on the Model S will turn out to be better than on most other cars, but I think we're seeing a lot of the depreciation value frontloaded due to buyers having a lack of experience with the characteristics of electric cars.

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How much is a 5year old Nissan Leaf worth?

Due to lack of battery thermal management, Nissan Leaf owners have been seeing loss of battery capacity and battery failures fairly quickly. This is causing fast depreciation. The number of "bars" on the battery is the first thing anyone checks on a used Leaf.

This has not been an issue for Tesla, where even Roadster with 100K miles on them and many years of driving seem to have nearly-full-capacity batteries.

 

[demundus]

I bought the cheapest MS85 I could find in California a few days ago. 55k miles for $55k. Based on even a nationwide search, this proved to be one of the best deals on the market at the time (at least listed on Autotrader)

Personally: These cars could go to 0 and I wouldn't care... as long as there is some level of support for people like us who took the leap into what should be the future of driving, I will drive this damn car into the ground. :love:

 

[S4WRXTTCS]

If I remember correctly, it is offered with certain mileage parameters through partnered financing, which the OP exceeded. I do too much driving each year (25k mi.) and so it doesn't apply to me also. I think everyone stated it well already: large luxury cars depreciate heavily in the first couple of years, especially with high mileage, and trade-in offers are usually low so the other party may insert some amount of profit margin when they flip your car, unless it is a rare and highly desired car.

What I was addressing was the "significantly higher than expected"

The Resale Value Guarantee gives me a good idea as to how much my car will be worth in 3 years. There shouldn't be any surprises.

In my case the Cost of the 70D (without options) was $75K
The Cost of the options was $14K

So the total cost of the car is $89K plus Destination and Documentation fee which I won't count, and should not be counted.

The RVG I was given was $43,520.00 (50% of the base + 43% of options)

That's 49% roughly of the price of the car if I don't subtract out the tax rebate from the car, and it's 53% if I do.

The mileage allowance is 15K per year so that means if I put 55K miles on it within 3 years it's only going to reduce my RVG by $2500. It's 25cents per mile over the 15K/year.

So if I was roughly in the same spot as the OP I'd be around $40K.

Doing the math on the OP's car brings it to just around the same amount if he had a RVG, and if he didn't put too many more miles on it before the 36 month mark.

 

[dhrivnak]

I do believe the battery or rather the unknown about the battery is hurting resale values. My 6.5 year old Roadster has lost over 10% of range. We are told a battery is $42,000 or 70% of the going used rates. This could change radically if Tesla offers an upgrade with more range at say $18,000 proving that batteries WILL be cheaper and better. Proof is much better than a hope and a dream.