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Owning an M3 "for free?"

Discussion in 'Model 3' started by slipnslider, Mar 22, 2017.

  1. slipnslider

    slipnslider Member

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    For people who will get their cars the earliest, is it possible that I could buy the M3 (for say $45k), have it for a year, take the tax credits (-$10k in my state) and then sell it after a year for roughly the $35k total that I spent after the tax rebate?

    Since the tax credits will be much lower by then and the wait to get an M3 could still be long, do you think a 1-year used 2018 model could sell for what you paid for it in 2019?

    I know eventually these cars will depreciate, but it seems possible that you could buy one with the tax credits, drive it for a year or two, sell it, and break even on your total costs, and get rid of it before the real depreciation starts to kick in.

    Am I crazy?
     
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  2. strider

    strider Active Member

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    #2 strider, Mar 22, 2017
    Last edited: Mar 22, 2017
    The fine print on the tax credits (at least the Federal one, don't know about Cali) says that you have to keep the car for 3 years or else you can't take the credit. So yes you could do what you say but you couldn't do it legally. Not to mention it completely violates the spirit of the tax credits which is to encourage EV adoption, not reward speculators.
     
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  3. BluestarE3

    BluestarE3 Active Member

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    Even if it were theoretically possible to break-even on such a transaction, you wouldn't be getting a Model 3 for "free" because at the end, you'd no longer have a Model 3. :) Maybe it's more like "driving a Model 3 for a year for 'free'"?
     
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  4. slipnslider

    slipnslider Member

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    That's very interesting. So basically any "used" M3 we see for sale for the first 3 years will likely be someone trying to violate the law, unless they're going to NOT take the rebate, or give it back (hah!)

    But even I keep the car for 3 years, I think the elimination of the tax credit over that time will mean NEW M3's will cost more to buy, and help prop up the value of 3 year-used M3s.
     
  5. EXOTIC1

    EXOTIC1 Member

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    yes
    you'll come out ahead if the roll out is without glitches they won't be able to keep up with demand the first 6-12 months.
    tax credit will be ending soon. most m3 buyers won't get the rebate.
     
  6. Gouldness

    Gouldness Gould times ahead.

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    The ending of the rebate would be the only thing to save you. *ignoring the whole legality of taking the rebate thing and then selling.

    I myself am considering this. A few things to consider: The early Model 3's will have only the launch features as Elon has alluded that the some of the cool ideas they had won't come at launch so they don't delay start of production, so by the time the masses can pay retail ie: 35k after the 400k backlog clears in 2 years, they'll have lots of new shiny options to choose from first with the S & X (as Elon has promised all the cool stuff will start there) then onto the M3.
     
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  7. strider

    strider Active Member

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    Correct. Though as @Gouldness stated, 3 years is a long time in Tesla land. If there's a big update (drivetrains, battery packs, new AP hardware, etc) that will depress the prices of early models. Plus there's the question of the quality and reliability of early models. If there are issues Tesla may make changes in-flight to fix things (ie the leaking screens on early MS's). The tax credits will certainly help decrease the depreciation hit you take but I wouldn't count on being able break even.
     
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  8. McRat

    McRat Active Member

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    Answer: Yes.
     
  9. dsvick

    dsvick Active Member

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    Do you have a link for this? I haven't seen mentioned before. I know you can't claim the car if it is for resale, but never heard of the 3 year rule.

    To the OP, if Tesla ramps up as quickly as they expect to and are producing at the rate of 500K per year by the time you're ready to sell, I'm not sure there will be enough backlog for you to break even. Especially considering any added options that might be available and the assumption many will have that a car produced a year after production starts will be of higher quality than one of the first ones.
     
  10. Bearlytiger

    Bearlytiger Member

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    There is no link because there is no such "3 year rule".
     
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  11. strider

    strider Active Member

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    Argh, I had my programs backwards. There's no limitation on the Federal credit except for the resale part but that's a grey area. It's the California credit that you have to possess the car for 30 months.

    I can't edit my original post anymore. Sorry for the confusion!

    From the CVRP website:
    Rebated vehicles must be registered in California and stay in the possession of the applicant for 30 consecutive months from the original purchase or lease date. Resale of a vehicle or return to a dealer is allowed within this 30 month period if necessitated by unforeseen or unavoidable circumstances. Military duty exemptions may be approved by ARB on a case-by-case basis. If you are no longer in possession of your rebated vehicle, please give us a call at 866-984-2532 to discuss your available options.

    ARB verifies vehicle ownership through periodic checks of Vehicle Identification Numbers (VINs) in the California DMV database. If a vehicle purchaser or lessee sells or returns the rebated vehicle to the dealer and does not receive prior approval, ARB or its designee reserves the right to recoup CVRP funds from the original vehicle purchaser identified on the rebate form and may pursue other remedies available under the law for unauthorized early termination of vehicle ownership.
     
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  12. chillaban

    chillaban Active Member

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    Considering my less than 1 year old Tesla was $88,000 new (not counting $15,000 in fees and sales tax) and $59,000 was the trade in offer I received from Tesla two weeks ago, I'd be highly surprised if you can make the depreciation curve work the way you expect. Good luck though!
     
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  13. jsmay311

    jsmay311 Member

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    As was already pointed out, there's no minimum ownership duration for the federal tax credit. All that is required is: "The vehicles must be acquired for use or lease and not for resale" Plug-In Electric Drive Vehicle Credit (IRC 30D)

    You could drive it for a month, then decide you want something different (or have some situation in your life change, or whatever) and sell it, and you'd be fine legally.
     
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  14. Az_Rael

    Az_Rael Supporting Member

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    Yeah, the state reserves the right to claw back the rebate if you sell the car before the timeframe. I am waiting to see how that pans out with my 2014 Volt that I sold to buy my Model S. Supposedly its a prorated clawback (i.e.they won't hit me for the full rebate), but I haven't gotten any notices yet.
     
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  15. zenmaster

    zenmaster Member

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    For a limited production car, it'd work. But supply and demand economics for this car will likely prevent you from coming out on top, unless you do a rather immediate turn-around. Mass production ensures there will be thousands for sale on the used market over that year, even if only 1-2% put theirs up for sale.
     
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  16. EXOTIC1

    EXOTIC1 Member

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    You will be ahead or even after one year the demand cycle will be 600-700k cars and they'll be maxed out at 75,000-100,000 cars yearly. Book it....... you'll be fine for at least a year you'll be close to driving 4 free.
     
  17. swaltner

    swaltner Member

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    Please post your source. This is totally contrary to my understanding.

    The California tax credit for EVs does have a ?3? year period of ownership required, but not the Federal credit. Look at the instructions for IRS Form 8936. These are at https://www.irs.gov/pub/irs-pdf/i8936.pdf. The IRS says the requirements are:

    The federal credit has a restriction that you did not purchase the vehicle for resale, but no specific timeframe is listed. Just be ready to defend a vehicle sale within the first 2 years of ownership as potentially being questioned by the IRS and don't think of claiming the credit if you posted on a forum like TMC that your soon-to-be purchased Model 3 is available for sale at some premium over retail so the buyer can "jump the line". If I worked for the IRS, I'd be scouring the forums looking for people that blatantly violate this rule and auditing their returns.

    Edit: Never mind, I missed the retraction in post #11 before firing off that "someone is wrong on the Internet" :)
     
  18. ModelNforNerd

    ModelNforNerd Active Member

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    Tax, title, registration........

    in MA, you'd get the $2,500 state rebate and the $7,500 tax credit. However, in your scenario of a Model 3 with a window sticker of $45K, your out of pocket costs on delivery are now up to ~$48,000....and then, because it's MA, you're going to pay a pro-rated (based on date of registration) tax of $25/$1000 NADA Blue Book value (after year 1...in year 1, you pay the tax based on 90% of your sticker price).....so add another $1080 to the total.


    In year 1 in MA, you've now shelled out roughly $49,000, and will "get back" $10,000 of that. You'd need to sell the car after a year for $39,000 to break even on your deal....and then find another car.



    Me? I'll just stay in my Model 3 for a while. Thanks.
     
  19. Booga

    Booga Member

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    This has crossed my mind because I don't want to be in a situation where an early car has too many design flaws if it's something that can't be easily fixed or in a decent time. I could potentially get the car but plan on trading it in two years later if the tax credit will have offset a good bit of the depreciation.

    If it weren't for the tax credit, I would have probably held off 2-3 years in my planning for this car. I'm pushing it sooner because $7,500 is a reason to be lured in.
     
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  20. Sasmania

    Sasmania Member

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    I disagree on the amount of backlog. I think once people see these amazing cars on the road, the back log from new orders will outpace even the 500K a year output.

    Meaning in 2018 even if they sold 500K cars, the back log could be 800K+ long by Jan of 2019 with new orders.

    Call me crazy, but I would not be surprised one bit.
     
  21. bonnie

    bonnie Oil is for sissies.

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    I think you got these reversed. I believe the Federal tax credit only requires that you purchase with the intent to put it into service & not resell. But your state (and my former state :) ) requires keeping the car for 3 years.

    Edit: Oh never mind. You already caught it. :)
     

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