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Model S Lease Residual

coupedncal

Member
May 25, 2015
59
26
NCal
If i build a model S on the Tesla site, the purchase price comes to $69,420. The lease terms offered for this same build is: $7,500 down and $923 per month for 36 month. This means the lease cost is: $40,728. I did not include tax in this calculation. My question is what is the residual value in case you want to purchase the car at the end of three years? Does Tesla offer the option to purchase at lease end or like Model 3, you must walk away from the deal after turning the car in?

If i was to guesstimate the residual after factoring in interest on the lease, it seems the initial purchase is a much better deal compared to leasing.
 

irish26

Member
Dec 10, 2020
40
34
Florida
I have zero experience with leasing but I am fairly certain that car will be worth more than $28,692 in 3 years. Most 2018 non-performance Model S’ I have seen on Tesla’s website are north of $55k
 

CapeOne

Member
Jun 14, 2016
818
513
New England
If i build a model S on the Tesla site, the purchase price comes to $69,420. The lease terms offered for this same build is: $7,500 down and $923 per month for 36 month. This means the lease cost is: $40,728. I did not include tax in this calculation. My question is what is the residual value in case you want to purchase the car at the end of three years? Does Tesla offer the option to purchase at lease end or like Model 3, you must walk away from the deal after turning the car in?

If i was to guesstimate the residual after factoring in interest on the lease, it seems the initial purchase is a much better deal compared to leasing.
The total "purchase price" would actually be $70,720 as you need to include the $1,200 destination/doc fee and $100 order fee. The lease would also need to include the $100 order fee plus a $695 acquisition fee. The lease cost, excluding sales tax, would therefore be $41,523. Tesla does allow you to purchase the MS at lease end.

A benefit of leasing is that it protects you against any unexpected significant resale value drop.
 

coupedncal

Member
May 25, 2015
59
26
NCal
The total "purchase price" would actually be $70,720 as you need to include the $1,200 destination/doc fee and $100 order fee. The lease would also need to include the $100 order fee plus a $695 acquisition fee. The lease cost, excluding sales tax, would therefore be $41,523. Tesla does allow you to purchase the MS at lease end.

A benefit of leasing is that it protects you against any unexpected significant resale value drop.

I agree with your numbers. Just curious if anyone here can share their actual lease residual on their recent MS lease so we could get the full story.
 

FoxSTL2HOU

Member
Nov 12, 2018
475
276
HOU
I can't speak to the residual, but as a rule for anyone considering leasing: NEVER put money down. In the event of a total loss during the lease, that money disappears.
 
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emailforbrett

Member
Dec 22, 2020
49
62
Orlando
I always lease our cars because my wife and I drive about 10,000 miles per year each and we like newer cars. The Tesla I put a deposit on last week is the first car I’m having to buy, and I hate it. I hate “owning” cars.

That said, there is no way I can make the Tesla lease numbers remotely reasonable to lease compared to purchasing it. They just don’t work. I can buy the car and sell/trade it in three years for a brand new one and still come out financially ahead over leasing it for three years. Some makes of cars historically never lease well (Porsche, Audi, AMG Merc’s, etc) but the Tesla is a whole ‘nother ball of wax with their lease terms. Makes zero financial sense over a purchase.
 
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whitex

Well-Known Member
Sep 30, 2015
6,456
7,648
Seattle area, WA
I always lease our cars because my wife and I drive about 10,000 miles per year each and we like newer cars. The Tesla I put a deposit on last week is the first car I’m having to buy, and I hate it. I hate “owning” cars.

That said, there is no way I can make the Tesla lease numbers remotely reasonable to lease compared to purchasing it. They just don’t work. I can buy the car and sell/trade it in three years for a brand new one and still come out financially ahead over leasing it for three years. Some makes of cars historically never lease well (Porsche, Audi, AMG Merc’s, etc) but the Tesla is a whole ‘nother ball of wax with their lease terms. Makes zero financial sense over a purchase.
Is the issue residual value or other terms (like interest rate)? It used to be that the $7,500 tax credit was added to the residual value, but Tesla no longer qualifies, so that leaves either interest rate or residual value. I suspect the latter is the problem. They know of any refreshes coming, how quickly the battery ages and any possible crippling of the batteries that might be required. Do you really think your car will be worth more than Tesla thinks it will be worth in 3 years? In 3 years, the residual they give you now is the high end of the trade-in value they will give you, sans inflation of course.
 

emailforbrett

Member
Dec 22, 2020
49
62
Orlando
Back of napkin numbers:

Lease a 2021 Model S Performance with MSRP of $95k costs about $53,000 (monthly x 36 plus down payment)

2021 Model S Performance bought new $95k

2017 Model S Performance with 30,000 miles about $70k

Sell the 2021 in three years and the effective cost to own is $25,000. You save about $28,000 over three years with purchasing and selling, as opposed to leasing. If you finance the purchase, the savings drops about 2% over the three years due to finance charges.

The difference is staggering. Other cars may lease poorly but Tesla is just bad. I don’t know if it’s the MF, Residual, Rental Charge, etc. I just know the end result compelled me to buy outright and I am a former lease-only type of shopper. It pains me to buy a car just to get rid of it during the highest depreciation periods of the car’s life. Who knows, with the continual updates sent to the car, and the fact that Tesla doesn’t appreciably change the body style since 2012, I may just end up keeping it longer than three years.
 

beatle

Active Member
Aug 31, 2019
1,044
510
Springfield, VA
That also assumes the price of a new equivalent car doesn't drop. The 2017 "MS performance" was the P100D, a car that cost $134k new in 2017. After 3-4 years they are selling for $65k - $70k, sometimes a bit less. That's a $65k - $70k drop in value, not $25k.
 

CapeOne

Member
Jun 14, 2016
818
513
New England
We don't exactly know where pricing (new or used) for the MS will be headed in the future but the lease vs. buy cost difference may not be as dramatically different as some think.

2021 MS Performance purchase loan (36 months, 2.49% APR) = $97,000
2021 MS Performance lease (36 months, 10k miles/year including acquisition and disposal fees) = $52,400

Approximate wholesale value of 2018 MS P100D with 30k miles and no extra cost options = $60,000 which is about 47% of original 2018 MSRP after deducting $7,500 tax credit.

47% of the 2021 MS Performance MSRP would be around $43,800.

Based on the above and excluding taxes, the lease cost would be around $52,400 and the purchase cost would be around $53,200 ($97,000 - $43,800). Practically the same.

Granted, it is unlikely that the MSRP of the MS Performance will be reduced as much between 2021 and 2024 as it was between 2018 and 2021 but you never know.
 
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emailforbrett

Member
Dec 22, 2020
49
62
Orlando
2017 Models S Performance (100D) price new $95,000. Less $7,500 Fed credit, so let’s say $87,500. They sell all day long today for about $70,000, but let’s go with $65,000 to be conservative. That’s an effective residual of 74%. That’s with 30,000 miles and three years old.

2021 Model S Performance price new $95,000 (let’s keep the numbers simple). Assuming no major refresh announced tomorrow so the residual stays the same. If they do a major refresh of this model year, then the residual just goes up. But to be conservative, it stays at 74%. That’s a “selling value” of $70,300. So the car cost just under $25,000 for three years of use and 30,000 miles.

The lease rates Tesla is quoting today far surpass this cost of ownership. I don’t have access to an executed lease so I don’t know if the disparity lies in their residual value being much lower than 74% or their monthly rent charge is atrociously inflated.

I am by no means a car-leasing expert. I only know from my previous 8 cars that I leased for my wife and I about how leases are structured. Believe me, I’d much rather lease this Tesla. I have tried every which way to make these numbers make sense to me and they just don’t. If I am wrong on these calculations, please explain it to me in easy terms for my little brain to understand. If I can wrap my hands around what you are saying to justify a lease deal, then I’ll contact Tesla and change my financing to a lease deal and sleep better at night!

Just a crude example. My current lease is a 2018 Maserati Ghibli S. MSRP was about $86,000. I paid 0 down and $680 a month for 36 months and 30,000 miles. That shows how wonky leases can get. There are $50,000 Audi’s that have higher lease rates than this. Now mine is kind of an outlier because it was a very solid deal I was able to negotiate, but the point is these leases can run the gamut from good to bad with the same MSRP. These Tesla’s represent the worst I have seen for leasing prospects.
 

emailforbrett

Member
Dec 22, 2020
49
62
Orlando
... I see... I had no idea the 2017 100D with Ludicrous went for $135,000 when new! What happened to the MSRP of this car since then?!?! I am new to this Tesla thing so I don’t know the history enough. Elon really whacked the price of this car in three years!

At any rate, that makes the residual about 50% now. So my 2021 would be worth about $47,500. That makes the cost of ownership $47,500 for three years and 30,000 miles. Still about $8,000 cheaper over the three years vs leasing. Easier for me to stomach, but still too much of a premium to lease. I’ll stick with my outright purchase.
 

beatle

Active Member
Aug 31, 2019
1,044
510
Springfield, VA
Some people (prospective buyers) are happy for the price cuts, but they really tank the value of used cars.

Heck, a 2015 P85D with the Ludicrous upgrade could set the original owner back over $140k! Back then you could stlll get the $7500 tax credit so that takes some of the sting out of it (enough to pay for Ludicrous which was originally $7500, then $5k, then free with all performance cars) but it still hurts. I bought my 2015 P85DL car (a little over 4 1/2 years old) from Tesla for just over $50k. Since they traded it in to Tesla, I'd wager the original owner may have taken a bath to the tune of close to $100k after only 4 years of ownership.
 

CapeOne

Member
Jun 14, 2016
818
513
New England
... I see... I had no idea the 2017 100D with Ludicrous went for $135,000 when new! What happened to the MSRP of this car since then?!?! I am new to this Tesla thing so I don’t know the history enough. Elon really whacked the price of this car in three years!

Yes, prices have come down a lot on these cars. A loaded 2017 MS P100D could run close to $170k sticker price.
 

FoxSTL2HOU

Member
Nov 12, 2018
475
276
HOU
Some factors I'm not sure on how to handle to make a fair price comparison:

Taxes (location dependent) - For a purchase, you are paying sales tax on the full price; how is the lease handling these? Location comes in to play here, not only because of the state sales tax rate, but some states handle taxes differently. Here in TX, a leased vehicle is charged sales tax on the full value at time of lease, not just the depreciation over the lease.

GAP - Is Tesla building a GAP payment into the lease costs or are the driver's responsible for finding/paying for GAP coverage?
 

Uncle Paul

Well-Known Member
Nov 1, 2013
6,256
6,779
Canyon Lake,CA
Luxury auto brands have made a science of leasing their high end vehicles. They retail price them very high, then offer factory discounted appealing leasing rates. Buyers feel they are getting a deal, but still paying high costs for their shiney new prestige models. Residuals are often higher than trade in pricing, so many just release a new one when their lease is up.
This keeps the "iron moving: and results in them selling a new premium vehicle every 3 years of so.

Lease return buyers also like this, as they can buy a 3 year old prestige model for often 50% of the original sticker price.

Had a friend that purchased a new Mercedes S class AMG. Joked that he could actually hear it depreciating while it was sitting in his garage :)

Tesla does not like leasing as they cannot realize the income from the lease when delivered, only a % of the sale every month. Makes it harder intitially to show profitability.
 

CapeOne

Member
Jun 14, 2016
818
513
New England
Some factors I'm not sure on how to handle to make a fair price comparison:

Taxes (location dependent) - For a purchase, you are paying sales tax on the full price; how is the lease handling these? Location comes in to play here, not only because of the state sales tax rate, but some states handle taxes differently. Here in TX, a leased vehicle is charged sales tax on the full value at time of lease, not just the depreciation over the lease.

In some states, taxes may advantage leasing while in other states they may advantage buying, and in some it may basically be a draw. Another variable is what happens to car at the end of "X" years. Turn it in or buy it (w/lease)? Trade it? Sell it? Keep it? That can have tax implications as well. However, not knowing what the car's resale value will be in “X” years still remains a major factor/variable in all of this.


GAP - Is Tesla building a GAP payment into the lease costs or are the driver's responsible for finding/paying for GAP coverage?
Tesla leases include gap insurance.
 

emailforbrett

Member
Dec 22, 2020
49
62
Orlando
It looks like the new 2021 Model S Performance (AKA “Plaid”) is right back up to the premium pricing they commanded a few year ago. So there was a brief three year window when you could have a new Performance S for under six digits. Now we are back up to $130k, like the prices you guys pointed out for the earlier years.

So that begs the question: How long before we see the Plaid’s price slashed below $100,000? Is past precedent a good predictor of the Plaid’s future?
 

beatle

Active Member
Aug 31, 2019
1,044
510
Springfield, VA
That's anyone's guess. I'd wager Tesla will enjoy the higher margins for a while until there is some kind of competition, if the sales wane, or if they make production more efficient/less expensive.
 

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