Tesla EV Tax Credits coming back?

[Fluffhead]

Right.. that's in the "soon" timeframe of a few months. In a year? I suspect at least $8K or more in depreciation. In three years with constant $7500+ tax credits - who wants a 2020 Model 3 when the new 2024 one is $7500 cheaper and has 4860 cells? In fact, who wants 2021, 2022, 2023 either... meaning they will have significant depreciation unlike how it is currently.

Unless prices continue to rise like they have recently

 

[torifile]

This depreciation might be buoyed a bit by the $4k in possible used EV tax credits included in the bill. However, this will likely only impact other EVs since the purchase price would have to be >$25k and there are basically no used Teslas at that price.

I do think that the high demand and long waits will keep used Tesla values from falling by the full tax credit amount since there will always be people willing to pay higher to have it NOW- I predict a decrease of about $5-6k rather than the full $8k credit amount.

To play devil's advocate, with interest rates so low, money in this market could make you way more than the interest you save. Most people won't have ~$60k available upfront to pay in full or invest instead, but it sounds like you do.
Disclaimer: People have different risk tolerances, returns are not guaranteed, etc., etc., etc.

Financed	Interest Paid	Avg. Stock Market Return (6 yr./72 mo.)*	Total Return
Self-Financed	-$4500	$71,007	-$66,507
Tesla Financing ($60k, 72mo., 2.49%)	$4656	$71,007	+$66,351
CU Financing ($60k, 65 mo. , 1.24%)	$2069	$71,007	+$68.938

*Calculated using average annualized return for S&P500 (13.9% from 2010-2020)

I was going to pay cash for my MYP but decided I’d do better to invest the money.

 

[voxel]

Unless prices continue to rise like they have recently

When Austin factory is 100% then supply side of cars won't be as constrained. If prices keep rising we have some serious economic structural problems and car prices will be the least of our worries.

 

[Bosco33]

Did you read the bill? The $4K is for used is for two year old EVs and some stupid price limit of $25K and incomes under $75K (something like this). When I read it... I figured it applied to nobody except Leaf and Bolt buyers.

I'm currently driving a 2016 VW egolf that I bought used for 9500. Will sell in 2022 when my MYLR shows up. My egolf could go for <5K to someone when it's sold. This credit will greatly increase the value of the used car so if I'm lucky I can benefit on both sides. .

That said, there will be more than just leaf and bolt buyers that will benefit from this. Personally, I think the used EV credit is a more important tax credit than the new EV credit. Low income folks can greatly benefit from the low operational costs of an EV and range may not be an issue for people in places where they just desperately need to get to work and back. A flood of low cost used EV's to lower income groups will help push adoption.

 

[PNWLeccy]

Did you read the bill? The $4K is for used is for two year old EVs and some stupid price limit of $25K and incomes under $75K (something like this). When I read it... I figured it applied to nobody except Leaf and Bolt buyers.

You said "EV normally depreciate 50% over 3 years which is primarily caused by these tax credits since why would you buy used when you can buy new for $7500 less?" so I figured you were talking about the broader EV market. I said it wouldn't apply to any used Teslas anyways since none are going for <$25k.

Right.. that's in the "soon" timeframe of a few months. In a year? I suspect at least $8K or more in depreciation. In three years with constant $7500+ tax credits - who wants a 2020 Model 3 when the new 2024 one is $7500 cheaper and has 4860 cells? In fact, who wants 2021, 2022, 2023 either... meaning they will have significant depreciation unlike how it is currently.

The most recent news points to used car values staying very high throughout at least 2022 with the lack of new cars, chip shortages, etc. (What to expect in the 2022 used car market). There's already some evidence that car manufacturers may decide to produce less new cars and focus on higher margins going forward so the whole market is pretty unpredictable. If prices continue to rise with inflation, people who buy in at a lower price may not actually lose as much in the end.

 

[MY-Y]

How did you do that?? Did you call your SA ??

I did nothing. I think someone at Tesla has a big calendar on the wall and a box of darts. At random intervals, my delivery dates moves a random amount.

 

[leaftoy]

This depreciation might be buoyed a bit by the $4k in possible used EV tax credits included in the bill. However, this will likely only impact other EVs since the purchase price would have to be >$25k and there are basically no used Teslas at that price.

I do think that the high demand and long waits will keep used Tesla values from falling by the full tax credit amount since there will always be people willing to pay higher to have it NOW- I predict a decrease of about $5-6k rather than the full $8k credit amount.

To play devil's advocate, with interest rates so low, money in this market could make you way more than the interest you save. Most people won't have ~$60k available upfront to pay in full or invest instead, but it sounds like you do.
Disclaimer: People have different risk tolerances, returns are not guaranteed, etc., etc., etc.

Financed	Interest Paid	Avg. Stock Market Return (6 yr./72 mo.)*	Total Return
Self-Financed	-$4500	$71,007	-$66,507
Tesla Financing ($60k, 72mo., 2.49%)	$4656	$71,007	+$66,351
CU Financing ($60k, 65 mo. , 1.24%)	$2069	$71,007	+$68.938

*Calculated using average annualized return for S&P500 (13.9% from 2010-2020)

In cases 2 & 3 don't you have to factor in monthly payments? Or is there actually a ballon payment at the end option for Tesla financing or CU financing? Also, while it is a safe assumption that stock market moves up long term, it may or may not in 6 year timeframe. Especially after the historical bull run we have been having.

 

[RD3P]

If pressed to cancel, is it better to re-order for an added $2250-3250 in new order fees and price hikes, for the CHANCE that the $8000 credit will not be retroactive and of course actually passes. Basically paying an extra $3250 for the chance to save $4750. Then there's also the benefit of a 2022 VIN (higher resale value?), and the possibility of getting an Austin build.

Are you a gambler? Cause that is what you proposed

 

[RD3P]

SA aren't assigned to individuals. They work as a pool and are interchangeable.

Exactly my point. Keep asking people and you might run into the answer you are looking for.

 

[PNWLeccy]

In cases 2 & 3 don't you have to factor in monthly payments? Or is there actually a ballon payment at the end option for Tesla financing or CU financing? Also, while it is a safe assumption that stock market moves up long term, it may or may not in 6 year timeframe. Especially after the historical bull run we have been having.

You're probably right but this was just a quick and dirty calc based on having a liquid $60k upfront, which would be the case if you were paying in full - so either giving Tesla $60k or investing it in the market.

As mentioned in disclaimer, no returns are ever guaranteed, historical returns don't predict future returns, etc., etc., etc. Overall, you're more likely to come out ahead investing that money but people have different goals and some people don't like to hold any debt.

 

[thinktwice]

Damn that fine print in the order agreement....

"Order Process; Cancellation; Changes: After you submit your completed order, we will begin the process of preparing and coordinating your Vehicle delivery. At this point, you agree that any paid Order Fee, Order Deposit and Transportation fee have been earned. If you cancel your order or breach this Agreement and we cancel your order, you agree that we may retain as liquidated damages the Order Fee, Order Deposit and Transportation Fee, to the extent not otherwise prohibited by law. You acknowledge that the Order Fee, Order Deposit and Transportation Fee are a fair and reasonable estimate of the actual damages we have incurred or may incur in transporting, remarketing, and reselling the Vehicle, costs which are otherwise impracticable or extremely difficult to determine. If you make changes to your order, you may be subject to potential price increases for any pricing adjustments made since your original Order Date. Any changes made by you to your Vehicle Configuration, including changes to the delivery location or estimated delivery date, will be reflected in a subsequent Vehicle Configuration that will form part of this Agreement. The Order Fee, Order Deposit, Transportation Fee and this Agreement are not made or entered into in anticipation of or pending any conditional sale contract."

"The estimated delivery date of your Vehicle, if provided, is only an estimate as we do not guarantee when your Vehicle will actually be delivered. Your actual delivery date is dependent on many factors, including your Vehicle’s configuration and manufacturing availability. "

IANAL, but my understanding is once you hit order, you entered into a contract. If you decline to take delivery of the vehicle, you've basically terminated the agreement, and are subject to the terms and conditions of the contract you entered into. The fact that Tesla is willing to allow the pause button is one thing, and somewhat generous of them, since technically they don't need to allow a pause and still honor any of the terms and conditions of the original purchase. But if you've gotten a VIN and refused delivery, it shouldn't be a surprise IMO if they terminate the contract on their side and keep the $250 (really they could collect the $1200 transportation and doc fee too).

I certainly don't dispute what they can and can't do, I just wouldn't be happy about it if I'm negatively affected, fine print or not. A few weeks off, ok. Heck, even a month off is acceptable. But if your estimates are 3-4 months off, that's just not good business practice. This is a large purchase that most people need to plan and prepare for.

 

[Corndart]

I certainly don't dispute what they can and can't do, I just wouldn't be happy about it if I'm negatively affected, fine print or not. A few weeks off, ok. Heck, even a month off is acceptable. But if your estimates are 3-4 months off, that's just not good business practice. This is a large purchase that most people need to plan and prepare for.

Fair - what I noticed here quickly though when perusing the order experience threads is that the EDD gyrates faster than a Kardashian relationship. One minute it's March (Scott), next week its January (Justin), and 3 days later you've got a VIN (and she's married to Travis).

 

[thinktwice]

There's already some evidence that car manufacturers may decide to produce less new cars and focus on higher margins going forward so the whole market is pretty unpredictable.

I don't think that'd ever actually happen. Competition will prevent this. For something like this to work, all manufacturers would need to collude. It would only take one of them to start producing more to sell more for the rest to follow.

 

[PNWLeccy]

I don't think that'd ever actually happen. Competition will prevent this. For something like this to work, all manufacturers would need to collude. It would only take one of them to start producing more to sell more for the rest to follow.

It may not be their decision to make since chip shortages and other supply constraints may make it necessary. Who knows in the long term but this could be the reality for years.

Chip Shortage Forces US Automakers To Shift Focus To High-Profit Vehicles | Carscoops

GM CEO Mary Barra said that by prioritizing sales of higher-margin models, the company posed solid profits in Q1

www.carscoops.com

https://www.kbb.com/car-news/automakers-plan-to-build-fewer-cars-to-keep-prices-higher/

Chip-Threatened Automakers Sell Less, But Profit More

Demand for new cars and SUVs is strong but the semiconductor crisis has created shortages, allowing many manufacturers to make sure they maximize profits on the fewer cars they can bring to market.

www.forbes.com

 

[leaftoy]

You're probably right but this was just a quick and dirty calc based on having a liquid $60k upfront, which would be the case if you were paying in full - so either giving Tesla $60k or investing it in the market.

As mentioned in disclaimer, no returns are ever guaranteed, historical returns don't predict future returns, etc., etc., etc. Overall, you're more likely to come out ahead investing that money but people have different goals and some people don't like to hold any debt.

The point is your math makes pay cash vs car loan and invest the cash difference much wider than it is. Let us say person 1 invests in 60k, and makes monthly payments from cash flow. And person 2 pays cash, and be fair in comparison you have to do something with the money person 2 has each month by not having to do monthly payments. Let us say person 2 invests whatever they would have paid for the loan each month (and this second part is what is missing from your "quick and dirty" calculation. You assume cash buyer pays cash, and that's it).

If the market does keep going up, of course you will come ahead with your get a car loan and invest strategy. Even assuming your unsustainable 14% stock market return, the difference is still under $20k. And could be negative if the stock market goes down.

 

[TSLY]

Exactly my point. Keep asking people and you might run into the answer you are looking for.

I actually found an SA savvy enough to allocate my MY simply because I requested it. When my EDD was bumped to December I called the store and informed him I was ready to take immediate delivery. He located a MY hot off the assembly line, matching my specs, and allocated its VIN to my order within 2 hours. I took delivery 10/16. Still can't believe my good luck!

 

[TSLY]

This depreciation might be buoyed a bit by the $4k in possible used EV tax credits included in the bill. However, this will likely only impact other EVs since the purchase price would have to be >$25k and there are basically no used Teslas at that price.

I do think that the high demand and long waits will keep used Tesla values from falling by the full tax credit amount since there will always be people willing to pay higher to have it NOW- I predict a decrease of about $5-6k rather than the full $8k credit amount.

To play devil's advocate, with interest rates so low, money in this market could make you way more than the interest you save. Most people won't have ~$60k available upfront to pay in full or invest instead, but it sounds like you do.
Disclaimer: People have different risk tolerances, returns are not guaranteed, etc., etc., etc.

Financed	Interest Paid	Avg. Stock Market Return (6 yr./72 mo.)*	Total Return
Self-Financed	-$4500	$71,007	-$66,507
Tesla Financing ($60k, 72mo., 2.49%)	$4656	$71,007	+$66,351
CU Financing ($60k, 65 mo. , 1.24%)	$2069	$71,007	+$68.938

*Calculated using average annualized return for S&P500 (13.9% from 2010-2020)

Not everyone can afford the luxury. I'm an investor so I keep cash on the sideline. My conclusion was it was a prudent use of capital that might otherwise lay dormant. I'm already paying Tesla, why pay the bank, too? And I dislike unnecessary monthly payments. You're going to pay it eventually. Why not lock in a profit and pay it off in a lump sum?

 

[Viv1984]

I certainly don't dispute what they can and can't do, I just wouldn't be happy about it if I'm negatively affected, fine print or not. A few weeks off, ok. Heck, even a month off is acceptable. But if your estimates are 3-4 months off, that's just not good business practice. This is a large purchase that most people need to plan and prepare for.

I'm actually at the opposite end. I put an order on a MYP because I was told 4-6 weeks (August order,, September delivery date) and wanted the car soon even if it meant giving up the tax credit. It's now November and no vin... if I get the car in December, I'd rather wait the extra couple weeks and get a credit. They better let me delay my order since they've delayed in their end by over double their "estimated" time.

 

[mwdietertg]

Looks like another set of price bumps on M3 and MY tonight. My April MYLR order on hold is now $7k below current pricing.

 

[PNWLeccy]

The point is your math makes pay cash vs car loan and invest the cash difference much wider than it is. Let us say person 1 invests in 60k, and makes monthly payments from cash flow. And person 2 pays cash, and be fair in comparison you have to do something with the money person 2 has each month by not having to do monthly payments. Let us say person 2 invests whatever they would have paid for the loan each month (and this second part is what is missing from your "quick and dirty" calculation. You assume cash buyer pays cash, and that's it).

If the market does keep going up, of course you will come ahead with your get a car loan and invest strategy. Even assuming your unsustainable 14% stock market return, the difference is still under $20k. And could be negative if the stock market goes down.

TSLY said he had the $60k on the sidelines so I did the calculations based on a simple buy or invest decision. As I said, most people won't have a liquid $60k upfront to do this.

I'm not entirely sure what your "person 2" is doing, investing the same amount as their loan payment each month instead of a lump sum upfront? Even invested monthly, you still come out far ahead. Use whatever avg. return you want - I used the 30yr annualized return for S&P500- I assume that's a long enough time horizon to be fair or are you just arguing that an investment can go up or down in the short term? I think people know how investments work.

Everyone has different metrics you can plug into this but financing at these low rates and investing is almost always going to be better, financially. If you really want to make it simple....Do you feel like you can get better than a 1.24% or 2.49% return on your investments? If yes, then do that instead of paying upfront.

Financed	Interest Paid	Monthly Payment	Upfront Investment: Return over (6 yr./72 mo.)*	Monthly Investment: Return over (6 yr./72 mo.)*	Total Return
Self-Financed (Paid $60k Outright)	-$4500	$0	$53,828		-$49,328
Tesla Financing ($60k, 72mo., 2.49%) (Invested $60k Outright)	$4656	$898	$53,828		+$49,172
Tesla Financing ($60k, 72mo., 2.49%) (Invested $60k total, monthly over 72mo.)	$4656	$898	$0	$26,331	+21,675
CU Financing ($60k, 65 mo. , 1.24%) (Invested $60k Outright)	$2069	$955	$53,828		+$51,759
CU Financing ($60k, 65 mo. , 1.24%) (Invested $60k total, monthly over 72mo.)	$2069	$955	$0	$28,003	+25,934

*Calculated using average annualized return for S&P500 (10.72% from 1991-2020)