Residual Value - Using Tesla's New Leasing Option

[whitex]

Uh CLEARLY you aren't keeping up on the news. They're appreciating assets now!

Tesla vehicles are now ‘appreciating assets’ due to self-driving capability, says Elon Musk

If that's true, then they have a bug in their lease calculators. If the car is appreciating, the lease payment should be negative (Tesla should be paying me).

On the other hand, I think I would buy a new Tesla today if Tesla would guarantee 100% MSRP buyback in 3 years, backed by Elon's personal wealth (like in the past). I don't even want the appreciation back, just my money back even though the car will be worth more. The car's appreciated value would be would be my appreciation gift to Elon, because I like him.

 

[Retaw]

You CAN'T just ignore the interest. Using 4.25% APR (same as financing, so 0.00177 MF), the residual value instantly goes up to 54.5%. That's without messing with tax calculations, of course.

 

[Retaw]

I like to think of investments more than cash. Unlike your portfolio, car is something you can actually drive. If the convenience and enjoyment of driving a car is worth $20000 over walking/public transportation in three years, and the car depreciates $15000, that's an investment with a return of $5000!

 

[Daniel in SD]

Because Tesla has so much profit that they need to offset the taxes on?

Haha. Never thought of that. Seems like they should be able to use a subsidiary to do it but I'm not a tax expert.

 

[PARNY]

Greetings -

Like many others I've wondered about resale value for my M3, and frankly don't expect high value retention given the constant changes in list prices/configuration options, vanishing Tax Credits, and Tesla's tendency to make "special pricing deals" at times when they need to generate extra revenue.

I looked at Tesla's lease options, made available yesterday, to see how Tesla views this. I used a LR AWD model, now with the new "standard" autopilot included, in basic black color with no other options. Tesla specs that car at a price of $49,500 (pre transportation/doc fees, exclusive of state taxes/fees - as do other manufacturers). The lease requires a $3,000 down payment and 36 payments of $674. Tesla also notes that there is no option to buy the car when the lease ends (and I assume that there is therefore no tax benefit to lessees).

So, the 36 payments total $24,264, adding in the $3,000 down payment, the total payments are $27,264. To make the math easy (there are time value of money considerations, implied financing, etc. - none of which I'm considering) that means that Tesla expects the car to be worth $49,500 less $27,264 when the lease ends (again, they expect it to be worth more if you allow for implied financing and various carry costs).

Given the simple example above, Tesla believes the car's residual value will be approximately 45% of the new price at the end of three years. Again, lots of things to add to the calculation - tax credits among them, at least for now as Tesla will get them as the manufacturer.

So if Tesla expects the cars to drop in value by roughly half in three years, it seems that none of us should expect residual values to be dramatically higher than Tesla's own estimates. Their residual estimates don't surprise me, and aren't all that different from European brands. It just confirms what many have said before - Tesla is a unique car that many of us enjoy fully, but they are not investments, and shouldn't be expected to have lower depreciation than competitor cars.

You neglected interest. A lease payment is a combination of interest on the outstanding balance and depreciation. If you use 4.5% which is the interest rate on Tesla's loans, the residual value is $27,184 or 55%.

 

[SergeyUser]

I think what Elon meant to say about Tesla car being an appreciating asset is that for some periods of time during Tesla’s lifecycle it could happen.

Think about it. For a regular car, for any moment of time t > 0 since the car purchase, for any delta > 0, Value of your car at t + delta is always lower that at t.

However, for Tesla, chances are that in some cases the car value is actually higher at t + delta.

This can happen for multiple reasons I can think of:
1. Tesla adds cheap battery replacement option in the future.
2. Tesla will add FSD so advanced, that people will want to buy used Teslas more than they wanted to do it before.

This value will not exceed value of a new car for an obvious reason. But you will be able in some cases to buy a used Tesla and then sell it at a higher price (if you are lucky).

 

[Leafdriver333]

it is clear to me Tesla set the residual at 45% (below realistic value) because they are not letting people buy the cars at the end of lease.
If they set the residual at 30%, it would be even better for Tesla.
If there was option to purchase the car after lease end, this would not be good on the used Tesla market.
But it is not the case.
with 45% residual, Tesla can sell those cars in used market for even 67% with CPO extended warranty.
That would be double income generating because the suckers leased and over paid. And Tesla can sell the used ones for good profit in the second round.

 

[gilscales]

I leased a 535d in July of 2014, the car after much negotiating came in at 58k or almost 13k off of msrp, I put down the maximum amount of security deposits (I think it was 7) or about $4,200 for them to hold to get interest down to under 1.5%, I put a small amount down of a few hundred to get my security deposits down to $600 each and there were some other associated cost but out of pocket was approx. $2,500 plus the refundable security deposits I got back, 30,000 mile lease for 36 months at $589 a month, the residual was over 62% or something really high, 38k plus buyout at the end and the real value of the car was maybe 30k so BMW was clearly subsidizing WAY to heavily.