Purchasing Dilemma

[gubes]

Huge coincidence. I too have a December 2009 E-Class (E300). I am close to purchasing the Model S. The Model S is the better car - pure and simple. But there is another reason you should consider it - cost!

Lets assume you went for a Model S with a config of around HK$700k (similar to a brand new E class).

I suggest you buy the S on finance. Here is why:

1) The interest rate on the finance is 1.45%. I don't know about you, but I think I can do better than 1.45% by investing the money elsewhere! Assuming you put 20% down and do a 5 year lease, the monthly payments are around HK$10k per month of which only HK$700 is interest.

2) By taking finance, you are eligable for the guaranteed resale program (75% of the base price + 65% of the options). So long as you travel less than 36k km over 3 years, you can sell it back to tesla at that price - i.e around 26-28% depreciation. What car do you know that you can buy brand new that depreciates by that amount over 3 years? (Residual is deducted at HK$3/km for any mileage in excess of 36k km)

3) Lower fuel costs and licence fee - which works out to around HK$18k a year depending on your driving habits.

So. The way I see it you have 3 options, 1) Buy the Tesla on finance; 2) Buy the new Merc; and 3) Keep your car and decide in 3 years.

Option 1 - Buy the Tesla. Cost over 3 years: Depreciation = 27% x HK$700k = HK$189k. Interest Cost = HK$25k. Total Cost = HK$214k. If you charge using non Tesla Superchargers, your electricity cost works out to be around 15% of the fuel cost. It would then depend on how much you choose to do that. But I reckon you are looking at maybe HK$5-8k in electricity over 3 years. So if you want to be very conservative, lets say it costs around HK$220-225k

Option 2 - Buy the new E class. Depreciation will be immense especially as they will release a new model within that period. Based on work I did looking at used prices already, I think you should assume 40% depreciation over 3 years. Depreciation = HK$280k. Then add fuel costs, oil changes and liscence fees should amount to HK$20k a year at least. So thats around HK$60k. Total cost = HK$340k

Option 3 - Keep existing E class. Current market value is probably around HK$200k if you decide to sell it now I think. You will probably lose close to HK$80k in depreciation. Your annual costs would be higher due to the need for more servicing, repairs etc. I estimate HK$30k per year. Over 3 years, your cost is HK$190k.


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Basically, buying a new Model S ends up costing marginally more than if you keep your existing car if you exercise the resale after 3 years. Buying the new E class will end up costing you 55% more over 3 years assuming you buy the model at the same sticker price as the config you choose for your Model S.

Bottom line? No brainer. (I haven't bought the Model S yet but am close to placing an order)

 

[3fiftynine]

1) The interest rate on the finance is 1.45%. I don't know about you, but I think I can do better than 1.45% by investing the money elsewhere! Assuming you put 20% down and do a 5 year lease, the monthly payments are around HK$10k per month of which only HK$700 is interest.

Great analysis, you must be in finance or accounting! Just one comment about finance, I use ORIX which is only 1.18% this is probably best globally. Too bad buy back option wasn't available when I purchased my MS and I expect to do about 25,000km per year. I'm the lucky one, like you said no-brainer decision, as my employer pays me back $1.5 for every km I traveled for work!

What $/km you are expecting from a E300? In fact I was considering BMW520d for fuel cost reason but I didn't bother to do the math ... no brainer!

 

[gubes]

Great analysis, you must be in finance or accounting! Just one comment about finance, I use ORIX which is only 1.18% this is probably best globally. Too bad buy back option wasn't available when I purchased my MS and I expect to do about 25,000km per year. I'm the lucky one, like you said no-brainer decision, as my employer pays me back $1.5 for every km I traveled for work!

What $/km you are expecting from a E300? In fact I was considering BMW520d for fuel cost reason but I didn't bother to do the math ... no brainer!

Yes I am in finance - glad you guessed. So, with my E300, I get around 8-9l/100km in terms of fuel consumption. Based on petrol prices of HK$16/l, the cost per km is around HK$1.4/km. On the 520d, the list price is around HK$550-600k. The 520d is likely to depreciate by a similar percentage compared to the E class. New E-class will be released in 2016 and the new 5 series will come out in 2017. So over 3 years the depreciation will probably be around HK$230k. Fuel consumption on the 520d would probably be 20-30% less compared to the E300 (not sure what the price of diesel is but i heard its actually cheaper than petrol in HK - on the caltex web site it sais around HK$11-12/l. If so, its 30% cheaper. So if you say it consumes 25% less and the fuel costs 30% less, then your fuel costs would be close to half compared to the E300. So the total running costs of would be more like HK$40k over 3 years rather than HK$60k.

Still your total cost of buying the 520d would be around HK$270k. That would still cost HK$50k more than a HK$700k Tesla Model S. People in Hong Kong forget that the price you pay for a Model S is similar to the price in the USA (due to no FRT). In the US, buyers of the Tesla Model S are comparing the car to cars like the M5 or larger engined, more powerful german cars as they are at the similar price point.

Also remember another very important thing. Hong Kong, effectively has the largest subsidy for the Tesla Model S. In the US, you get a US$7,000 subsidy. The effective subsidy for a Tesla model S here, is around HK$500k (US$65,000!) due to no FRT. You know for SURE, this will not last the more people buy the Model S. Extending the zero FRT program in HK was hotly contested before it got passed. This is another reason to buy. I believe that "eventually" they will put an FRT on electric vehicles above a certain price point. That will mean that the used market will go up for used Teslas. So you have that optionality too.

 

[Phil K]

Thank you. Very good analysis.

 

[Lee Tsui]

Yes I am in finance - glad you guessed. So, with my E300, I get around 8-9l/100km in terms of fuel consumption. Based on petrol prices of HK$16/l, the cost per km is around HK$1.4/km. On the 520d, the list price is around HK$550-600k. The 520d is likely to depreciate by a similar percentage compared to the E class. New E-class will be released in 2016 and the new 5 series will come out in 2017. So over 3 years the depreciation will probably be around HK$230k. Fuel consumption on the 520d would probably be 20-30% less compared to the E300 (not sure what the price of diesel is but i heard its actually cheaper than petrol in HK - on the caltex web site it sais around HK$11-12/l. If so, its 30% cheaper. So if you say it consumes 25% less and the fuel costs 30% less, then your fuel costs would be close to half compared to the E300. So the total running costs of would be more like HK$40k over 3 years rather than HK$60k.

Still your total cost of buying the 520d would be around HK$270k. That would still cost HK$50k more than a HK$700k Tesla Model S. People in Hong Kong forget that the price you pay for a Model S is similar to the price in the USA (due to no FRT). In the US, buyers of the Tesla Model S are comparing the car to cars like the M5 or larger engined, more powerful german cars as they are at the similar price point.

Also remember another very important thing. Hong Kong, effectively has the largest subsidy for the Tesla Model S. In the US, you get a US$7,000 subsidy. The effective subsidy for a Tesla model S here, is around HK$500k (US$65,000!) due to no FRT. You know for SURE, this will not last the more people buy the Model S. Extending the zero FRT program in HK was hotly contested before it got passed. This is another reason to buy. I believe that "eventually" they will put an FRT on electric vehicles above a certain price point. That will mean that the used market will go up for used Teslas. So you have that optionality too.

Gubes I have one more for you, I totally already figured out what you said in your last message, but I am buying the car under my company, right now if you purchase an EV you can claim back supposedly 100% of the car as a write off for company profits. I'm guessing with a loan this option may be deleted or heavily reduced?

If you factor this option into the equation, which way would be better? getting the loan with buyback and investing the money elsewhere, or buying the car outright through your company and getting back that big lump of tax break and not having the spare cash.

Currently Orix is HP at 2.87% APR. so it's not super low really but the buyback seems so great.

I'm guessin they are offering high buyback due to the fact that by March 2017 the government will add Model S to the luxury car first registration tax again or at least add a significant amount of FRT to the Luxury EVs right? This would in turn boost the 2nd hand value of current Model S, maybe this is what is driving the high buyback price in HK.

 

[markwj]

Regarding diesel, here is some background reading:

LCQ11: Diesel private cars

To improve roadside air quality, the Environmental Protection Department has required that the emission performance of newly registered diesel private cars in respect of RSP and NOx should be on a par with their petrol counterparts since 1998. To achieve this requirement, we have adopted the US Californian emission standards (which are the most stringent in the world) for newly registered diesel private cars.

Latest figures from April 2015 show about 4,500 private diesel cars in Hong Kong.

http://www.td.gov.hk/filemanager/en/content_4700/table44.pdf