TMC is an independent, primarily volunteer organization that relies on ad revenue to cover its operating costs. Please consider whitelisting TMC on your ad blocker or making a Paypal contribution here: paypal.me/SupportTMC

New Model S (Should we Lease or Finance?)

Discussion in 'Model S' started by glh280, Nov 26, 2015.

  1. glh280

    glh280 Member

    Joined:
    Jan 6, 2015
    Messages:
    38
    Location:
    Florida
    We ordered our Model S last Friday and it is an inventory car coming from the Northeast. (60 kWh, White, Panoramic Roof, Tan Leather, Supercharger, Dual Chargers, Tech w/Autopilot)

    Our plan is to lease the vehicle. Since it is an inventory car it had a discount of $11,800 plus the $1,000 referral discount. By the time the lease is over we will have paid $31,110 excluding tax (an additional $2,177 for tax). If we buy the car outright we will be at $63,170 after the tax credit excluding tax (an additional $4,947 for tax). The residual buyout on the lease is $48,400 (15k miles). It seems that I would come out quite a bit further ahead if I purchased the vehicle instead of leasing it. What have you seen?

    If we financed I we could keep the payments close to the lease on an 84 month note and the balance of the loan would still be $9k-$11k less than the residual value of the lease in 3 years.
     
  2. eclipxe

    eclipxe Member

    Joined:
    Aug 31, 2015
    Messages:
    666
    Location:
    CA
    84 months is a long time. In 7 years the car will be out of date. If you see yourself wanting the latest and greatest then lease.

    I'm the type of person that needs a new phone every year and I've never kept a car longer than 2 years, so a lease is best for me.
     
  3. AEdennis

    AEdennis Active Member

    Joined:
    Jul 23, 2013
    Messages:
    1,741
    I have over 50,750 miles on my 2 years and less than one month Model S... Leasing would kill me because of the mileage limits... Buy...

    On another note, you were able to apply the referral discount on an inventory car... That's cool I thought it was only on new, build to order and CPO and Inventory didn't count.
     
  4. ChadFeldheimer

    Joined:
    Oct 25, 2015
    Messages:
    188
    Location:
    Chicago, IL
    If you buy the car at the end of the lease, Tesla's leases are set up so that you lose out on the $7500 federal tax credit. The $7500 is added to the residual to lower your lease payments - but if you choose to purchase, you pay the full residual so you're padding the bank's bottom line by $7500.

    This is probably why it seems like you would come out ahead by buying.

    I recommend leasing only (1) if you are confident you won't buy the car at lease end OR (2) you would not be eligible for the $7500 federal tax credit.
     
  5. dmunjal

    dmunjal Member

    Joined:
    Aug 17, 2012
    Messages:
    364
    Inventory counts for referral but CPO doesn't.
     
  6. ZachShahan

    ZachShahan Member

    Joined:
    Dec 3, 2014
    Messages:
    497
    Location:
    Sarasota, FL / Wroclaw, Poland
    It's an issue I've been struggling with for ~1 month. Depends on various assumptions about your own future, of course, as well as assumptions about the value of the car in a few years and how much EV/Tesla tech/cars will improve.

    I was planning to lease for a while, but am now leaning toward purchasing, but am really unsure.
     
  7. jerry33

    jerry33 S85 - VIN:P05130 - 3/2/13

    Joined:
    Mar 8, 2012
    Messages:
    12,752
    Location:
    Texas
    Most Tesla owners, including me, drive far more with the Tesla than they did with previous cars. 62K miles in 2.75 years. A lease would be quite expensive because of the miles driven. As far as obsolescence goes, you get software updates for free, hardware updates are possible although some are price prohibitive (mine recently had the LTE upgrade), and the battery was designed to be replaceable.
     
  8. OlderThanDirt

    OlderThanDirt Member

    Joined:
    Apr 19, 2015
    Messages:
    49
    Location:
    Two Rivers, WI
    ^^ This is a very real factor.

    We will defiantly purchase the Tesla we have on order for this very reason. Though leasing the Volt we recently turned in was the right decision for that car. Any true EV will make you want to drive more but a Tesla is several magnitudes above that even.
     
  9. glh280

    glh280 Member

    Joined:
    Jan 6, 2015
    Messages:
    38
    Location:
    Florida
    This is what I was thinking as well. I might not own it after the 3 years. I might own it until the warranty is up, but either way if we chose to sell sooner than the lease ended it looks like we would be at a $7500 disadvantage as well.

    - - - Updated - - -

    The only reason that I am looking for an 84 month lease is to make the payment similar to the $740/mo that the lease is. Even at 84 months the car should depreciate slower than the balance of the loan. Day one we would be financing $63,000 and it shouldn't take long to be right side up.

    - - - Updated - - -

    This is definitely a concern as well. Tesla will keep improving the cars and the Model 3 will be out around the time the lease is up. With all of that in consideration the 60 kWh is now the 'old' version and the ones without autopilot still have strong resale value. I keep running numbers and it looks like the car would only run me $400-$500/mo in depreciation over a 3 year period based on the $13k discount we already received and the tax credit. If we lease that is $740 regardless of the value at the end because the residual will be $7500 higher at that point making it harder to sell for profit.
     
  10. JonathanD

    JonathanD Member

    Joined:
    Apr 21, 2014
    Messages:
    107
    Location:
    OC, CA
    I don't know if they still offer it, but when we purchased ours, we used one of their preferred lenders so we have the 3-year guaranteed buy-back clause in effect (I think it was 53% of the base price plus half of any options).
     
  11. supratachophobia

    supratachophobia Active Member

    Joined:
    Sep 24, 2014
    Messages:
    1,968
    Location:
    Columbus, Ohio
    Lease if you can keep within the miles. Otherwise, finance and buy. Interest rates are so low that you'll do something better with your money for the next 4-5 years.
     
  12. glh280

    glh280 Member

    Joined:
    Jan 6, 2015
    Messages:
    38
    Location:
    Florida
    Our local Tesla store pointed us to Suncoast Credit Union. They offer 1.75% rate on a 72 month loan. If I finance 100% of the vehicle purchase the amount I would have put down on the lease plus the tax credit ($14,330) could be used to reduce the first 36 payments (essentially pulling from an account with the $14,330 to decrease the amount needed monthly to make the $1,118 loan payment). This would net us a payment of $719/mo ($20 less than the lease payment).

    This would also give us a loan balance of $39,212 after 3 years, and I am estimating the car will be worth about what the residual is on the lease ($48,400). This option would keep the out of pocket the same as the lease and if the residual value holds in 3 years as it has in the past it will result in having $8k-$10k left in equity after 3 years.

    Buying also gives me more flexibility to sell before the lease term is up as the lease includes the inflated buyout amount. Does this sound correct?
     
  13. eclipxe

    eclipxe Member

    Joined:
    Aug 31, 2015
    Messages:
    666
    Location:
    CA
    That residual on the lease is including the $7,500 tax credit (the residual is increased by $7500 to lower the payments). That makes the actual expected value $40,900 for a difference of $1688.

    My point on the lease - I know that I won't keep the car longer than 3 years - there is some risk in counting on the residual being high enough in 3 years, especially when the Model 3 will be widely available. What I've found is that the used car market for $35k+ vehicles is relatively small, so the risk in not being able to sale when I'm ready vs. the cost for a guaranteed return in 36 months is worth it.

    Of course, there is also the Resale Value Guarantee - but I don't believe it is valid for loans over 60 months.

    - - - Updated - - -

    20k over at $0.25 a mile is about $5k.

    You'd pay about that in increased depreciation if you wanted to sale. It's sort of a wash.

    - - - Updated - - -

    I will also add that getting out of a lease early is not impossible - I've used a lease swap site before and it was relatively painless to swap my remaining list obligation to someone else.

    Yes, you might save maybe $1-2k on a loan, but a lease offers flexibility in terms of:

    1. Sell at anytime and pocket the difference if actual residual is higher
    2. Give back at the end of the lease if the actual residual is lower
    3. Perform a lease assumption to get out early

    With rapidly changing technology, the rate of innovation coming in the next 5-10 years, and the release of the Model 3, if you can deal with the mileage requirements (or pay the overage) a lease can offer significant peace of mind and future flexibility.
     
  14. brkaus

    brkaus Member

    Joined:
    Jul 8, 2014
    Messages:
    936
    The value of a lease will also vary slightly due to state laws on sales tax. Some states apply tax to payments, some (like Texas) levy the sales tax on the full initial cost of the car.
     
  15. hybridbear

    hybridbear Member

    Joined:
    Oct 6, 2015
    Messages:
    352
    Location:
    Minneapolis, MN
    Has anyone done that yet with the Model S? This is how we got our current Ford Focus Electric, we took over a lease for someone from NY since we couldn't get a dealer in MN to get us a Focus Electric for a reasonable price.
     

Share This Page