Tesla resale and depreciation concerns as prospective buyer

[Stealth.Pilot]

I've been looking at buying a Model X and have numerous concerns about resale and depreciation.

1) It looks like the cars have depreciated something like 30% in the past year.

2) It seems Tesla is hurting owners ability to sell their cars for a decent price in several ways:
a) Tesla destroyed the independent used car dealer market by not allowing warranty transfer on those cars. Which means your only option to sell your car back is to Tesla (gives them ability to set the trade-in price as they have no competition)
b) Tesla makes it hard to sell your car privately because the warranty on a private party sale is also not clear
c) Tesla won't sell an extended warranties on any used car (which is something German OEMs continue to offer)

3) So it seems basically you get ****ed on the back end with a Tesla. I have read on this very forum some people were offered 70% of new price after just 6 months of ownership by their local Tesla store. That is an egregiously low trade-in offer. With a BMW or Porsche, you can just take it to Carmax and get a better offer. At Tesla you can't because independent dealers can't transfer the warranty so that market doesn't exist.

Am I correct in this, or have I been fed false info. It is enough to prevent me from buying a Tesla. I have always got solid resale prices selling my cars privately. If I am forced into a model of selling for rock bottom trade-in value then I am out because I would be much better off with an X6M or a Cayenne Turbo (when the new style comes out).

 

[Pale_Rider]

Person to person sales don't impact the warranty, so you always have that route...

 

[XHokie]

A few things to consider, but can't answer some of your questions about if you are being fed bad info...depends on who are you getting it from and how much of an expert they truly are in the used car market...

1. Any Tesla under current manufacturer warranty (i.e. 4yr/50K and 8yr/infinite battery) can be sold privately to another owner without any issues in terms of warranty transfer. Same goes with Unlimited Supercharging. It transfers with the vehicle/VIN and I believe all you have to do is notify Tesla via your local service center or I'm sure there's an 800 number to do this...
2. I know I've seen my local CarMax take Tesla trade-ins, but I'm sure their offers aren't as good as trading back to Tesla directly...so yes, that is different and maybe not like other car manufacturers. I assume part of this is because Tesla offers a better CPO program and can more easily resell the car...
3. As far as the depreciation concerns go, my thoughts are that almost all high-end cars see a 20-30% hit the first year. For example, Land Rover Range Rover and Rover Sport (my previous vehicle) can top out (Autobiography edition) in the $125-$150k range, even higher sometimes, will see a $30-$40k drop in value within the first year and after typical/average rate miles are put on the car. Pretty sure a fully-loaded Cayanne would see a similar percentage/ratio in depreciation, especially if you can't negotiate much on the new body style when it is released.
4. My Model X, which is now almost a year old could fetch about $80k in trade in (14k miles) and great condition, but that's on a car that was sticker $116k. I'm confident I could maybe get about ~$85k privately if I was patient, because Tesla doesn't have many CPO 90Ds in inventory with my options lower than about $88k in my local area. Same thing with Land Rover and their high-end SUVs after year one...the depreciation starts to slow down.

After this first year, yes, it will obviously continue to depreciate, but the rate you pay down the vehicle will be faster than depreciation. That's why, on more expensive cars...sometimes it is better to pay a larger down payment so that you aren't upside down for more than year and you can continue to pay off the vehicle. Personally, I try to also pay more than the minimum payment and pay more frequently to pay it off faster, thus staying ahead of depreciation in that way as well. I'm confident that in another year or 2, after my vehicle is 2-3 years old, it will be valued in between ~$65-$70k, and I should have ~$15-$20k in equity at that point, barring anything unforeseen of course.

Not sure if this helps answer your questions or at least gives you more info to think about...

 

[Stealth.Pilot]

Let's set aside brands like Range Rover. They make the lowest rated cars on JD Powers in terms of reliability and are known for high depreciation. They shouldn't be a benchmark for Tesla.

While it is true that a 1 year old Mercedes might sell at 80% of original MSRP, the difference is that you don't pay MSRP. I can get 10% off on a new Mercedes (i.e. buy it new at 90% of MSRP), and sell it a year later for 80% of MSRP. I've done it several times before.

Case example - my 2014 M5. I bought it new for $105k while MSRP was $118k. I then sold it 30 months later for $78k. So that's 26% depreciation over 2.5 years. Not bad. My 2013 BMW M5 had an MSRP of $113k and I bought it new for $97k. I then sold it 15 months later for $85k. That's 13% depreciation in 1.25 years.

With the Tesla Model X it seems people paid 100% of MSRP a year ago, and sold it at 70% of MSRP a year later if they got a private sale. That's not comparable.

I assume this means the depreciation curve then becomes more flat after that which would favor buying a used one? or not?

 

[TJtv]

Don't forget that most everyone gets $7.5k back as a tax credit. On a car that is around $100k, that takes 7.5% of the depreciation away.

 

[Pandamoanium]

A few things to consider, but can't answer some of your questions about if you are being fed bad info...depends on who are you getting it from and how much of an expert they truly are in the used car market...

1. Any Tesla under current manufacturer warranty (i.e. 4yr/50K and 8yr/infinite battery) can be sold privately to another owner without any issues in terms of warranty transfer. Same goes with Unlimited Supercharging. It transfers with the vehicle/VIN and I believe all you have to do is notify Tesla via your local service center or I'm sure there's an 800 number to do this...
2. I know I've seen my local CarMax take Tesla trade-ins, but I'm sure their offers aren't as good as trading back to Tesla directly...so yes, that is different and maybe not like other car manufacturers. I assume part of this is because Tesla offers a better CPO program and can more easily resell the car...
3. As far as the depreciation concerns go, my thoughts are that almost all high-end cars see a 20-30% hit the first year. For example, Land Rover Range Rover and Rover Sport (my previous vehicle) can top out (Autobiography edition) in the $125-$150k range, even higher sometimes, will see a $30-$40k drop in value within the first year and after typical/average rate miles are put on the car. Pretty sure a fully-loaded Cayanne would see a similar percentage/ratio in depreciation, especially if you can't negotiate much on the new body style when it is released.
4. My Model X, which is now almost a year old could fetch about $80k in trade in (14k miles) and great condition, but that's on a car that was sticker $116k. I'm confident I could maybe get about ~$85k privately if I was patient, because Tesla doesn't have many CPO 90Ds in inventory with my options lower than about $88k in my local area. Same thing with Land Rover and their high-end SUVs after year one...the depreciation starts to slow down.

After this first year, yes, it will obviously continue to depreciate, but the rate you pay down the vehicle will be faster than depreciation. That's why, on more expensive cars...sometimes it is better to pay a larger down payment so that you aren't upside down for more than year and you can continue to pay off the vehicle. Personally, I try to also pay more than the minimum payment and pay more frequently to pay it off faster, thus staying ahead of depreciation in that way as well. I'm confident that in another year or 2, after my vehicle is 2-3 years old, it will be valued in between ~$65-$70k, and I should have ~$15-$20k in equity at that point, barring anything unforeseen of course.

Not sure if this helps answer your questions or at least gives you more info to think about...

Not to be a dark cloud, but our 90 batteries are not valued like that. If you get a new quote at that level I'd be interested to see it. Not to mention to recent huge discounts on them.

 

[XHokie]

Not to be a dark cloud, but our 90 batteries are not valued like that. If you get a new quote at that level I'd be interested to see it. Not to mention to recent huge discounts on them.

I don't entirely disagree, but I think it will vary on your location and how easily it will be for that Tesla Gallery/Service Center to re-sell the car. In the DC Metro area where I live, I believe it is one of the top markets for Teslas outside of those Cali markets. The quote that I received was from my Tesla Service Center about a month ago from speaking with the Gallery Manager, who I know well and sold me my X, based on me looking into getting a Model X 100D AP2 vehicle. Given the depreciation hit, I decided to wait and let some equity build up, and also because my speculation is in the next year to two they will make some updates to the X to make it even better than the current version. May as well wait and continue to enjoy my 90D.

 

[Silverstreak]

If you buy new, even a Porsche will depreciate quite a bit, so strike that concern. It is the price you pay to buy new.

 

[Stealth.Pilot]

If you buy new, even a Porsche will depreciate quite a bit, so strike that concern. It is the price you pay to buy new.

Porsche doesn't depreciate anywhere near what a Tesla does. My 3 year old 911 Turbo S is still worth 70% of the new price.

 

[Silverstreak]

30% is still a lot

 

[kort677]

is there any car that when bought new doesn't suffer a hit to it's value once it is driven off the lot?

 

[XHokie]

Porsche doesn't depreciate anywhere near what a Tesla does. My 3 year old 911 Turbo S is still worth 70% of the new price.

My understanding is there are a lot of Porsche 911's that have retained their value very well because of unique body styles and options, that are harder to find in the used car market. That said, I also have heard Porsche's have a very high cost of ownership in terms of maintenance. Exponentially more than VW/Audi, Mercedes, BMWs, etc. Is this true? If so, should that be a factor that's also considered when talking about cost of ownership and depreciation?

 

[JohnnyCakes]

Let's set aside brands like Range Rover. They are known for high depreciation.

i disagree.

i owned a Range Rover Sport Autobiography in 2014 for 6 months. bought for $100k, sold for $96k.

i owned another Range Rover Sport in 2016 for 1.5 years. bought for $92k, sold for $82k.

i currently own a 2016 Land Rover LR4 Landmark (about a year) that is going for more on the used car market than i paid new for it.

 

[XHokie]

i disagree.

i owned a Range Rover Sport Autobiography in 2014 for 6 months. bought for $100k, sold for $96k.

i owned another Range Rover Sport in 2016 for 1.5 years. bought for $92k, sold for $82k.

i currently own a 2016 Land Rover LR4 Landmark (about a year) that is going for more on the used car market than i paid new for it.

Agreed and also believe there is a stigma with Land Rover's older brand/vehicles, prior to the Tata acquisition, that they have not been able to shake yet. Their newer vehicles, since ~2014, have been phenomenal SUVs for the most part. I had a 2014 RR Sport and it was the best pure SUV I've ever driven. I would argue in some ways better than the Model X, but in many other ways the Model X is a lot better and obviously more advanced. I would recommend RR hands down over many other brands if someone wanted a ICE-powered SUV...

 

[skilly]

First, a car is pretty much throw away money any way you look at it. And, Im not sure of the logic in looking at 1yr depreciation values on a car purchased new - who on earth would do that...not sure of the use case but it reminds me of that commercial where theres a guy at an art auction bidding on a painting. He wins the auction and then declares immediately that he wants to sell it.

In buying a car, outside of reliability and it having the basics, everything else is "bling". If we agree on that then the next thing might be real world apples to apples comparison - I just went through this with my P85D. Keep in mind, Im not looking at this through the lens of being emotional about Tesla - just a purely economic look at what your statement suggests.

Below is an example of the higher end cars that should illustrate how hard the cars get hit in depreciation given that the comparison cars are what each manufacturer would likely agree as an equal comparison. And, given they are on the high end of each car offering, they should all be examples of 'worse case scenario' depreciation.

Similar cars would be a 2014 Mercedes S63 and BMW Alpina B7 (you could also use the Panamera or A8 too).

New Prices (in 2014)

• Mercedes S63: $155,000.00 (mildly optioned).
• Model S P85D: $138,000.00 - (fully optioned) less (then) a $10,500.00 Fed and state tax credit (California).
• Alpina B7: $130,000.00

Todays value (with an average of 12K miles per year):

• Mercedes S63: $80,000.00 to 85,000.00 (trade in value roughly 10K less)
• Model S P85D: $85,000.00 to $90,000.00 (trade in value roughly 7K less)
• Alpina B7: $50,000.00 to $65,000.00 (trade in value roughly 10K less)

IN the examples above Tesla takes the smallest hit amongst the options - this isn't perfect math either; the numbers can be researched by anyone with a PC and some patience. Im looking at the pricing from a California perspective - and Im being generous with the resale values for BMW and Mercedes. The caveat is that the resell value of the Tesla is a little off because they operate a lot like Volvo where the best resale will almost always be obtained at the deanship. That said, they also offer you a very reasonable price for your car whether you are trading it in or selling it back. Factor in the other costs to maintain each of these comparable cars and Tesla easily comes out on top with TCO factored.

Car companies don't really care to understand Tesla. They want to create doubt and uncertainty around the market. The market isn't listening though and its only going to get better for Tesla as the Model 3 becomes mainstream. I also, disagree with anyone that says this latest addition to the Tesla family will further drive down the costs of a Model S. In some cases yes, but not in a material way - we only need to look at dozens of other examples by Mercedes, Audi, BMW etc can show us - the C class doesn't take away sales from the S class...the 3 series doesn't take sales away from the 7 series. Really the C class and the 3 series allow people to enter a market that they otherwise wouldn't be able to afford - allowing them to say "I drive a Mercedes...".

Lastly, consider that the Model S has been outpacing all of the rivals since 2015. In fact, Tesla’s Model S currently outsells Mercedes S-Class, Porsche Panamera, and BMW 6/7 Series combined in the US in 2017. Here are the stats (pulled from electrek.co).

 

[skilly]

Porsche doesn't depreciate anywhere near what a Tesla does. My 3 year old 911 Turbo S is still worth 70% of the new price.

apples to oranges...the Panamera is a better comparison and it has TERRIBLE resale.

 

[skilly]

The warranty statements aren't true except for not being able to procure a warranty from Tesla for a used car. That said, there isn't a single car manufacturer in the market that will do this either! You can go into some manufactures and buy a what appears to be a manufacture's warranty if the car is still under factory warranty but read the fine print - its not a factory warranty. It will be backed by Prudential or some other underwriter. You're confusing CPO with an extended warranty - they are two different things. Tesla doesnt do anything different here than any other car manufacturer.

Tesla warranties are totally transferrable. If you have a Tesla that is still under warranty and you aren't the original owner, it doesn't negate the warranty. Not to mention, they are more substantial than anything else out there on the market - backing the drive train and power source for 8 years and unlimited mileage simply doesn't exist anywhere else. There is transferability for both the extended warranty and pre-paid service.

Here is the verbiage straight from Tesla's web site:

"Tesla owners can indeed transfer the unused portion of their Extended Service Agreement with the sale of their Tesla. Our practice of refunding the unused portion of the Extended Service Agreement also continues. In addition, Tesla owners can transfer the unused value of their Extended Service Agreement towards an Extended Service Agreement for a new Tesla Model S or Model X.”

 

[skilly]

My understanding is there are a lot of Porsche 911's that have retained their value very well because of unique body styles and options, that are harder to find in the used car market. That said, I also have heard Porsche's have a very high cost of ownership in terms of maintenance. Exponentially more than VW/Audi, Mercedes, BMWs, etc. Is this true? If so, should that be a factor that's also considered when talking about cost of ownership and depreciation?

Not true. 911s are bullet proof in terms of service costs and resale values. The fact that they have been selling the platform for almost 50years now makes them that way. Exotic versions of the 911 will actually appreciate, but thats an exclusive club reserved for limited releases.

All this said, comparing the 911 to a Tesla isn't a comparison at all. They are distant cousins at best....comparing apples to oranges.

 

[number12]

i disagree.

i owned a Range Rover Sport Autobiography in 2014 for 6 months. bought for $100k, sold for $96k.

i owned another Range Rover Sport in 2016 for 1.5 years. bought for $92k, sold for $82k.

i currently own a 2016 Land Rover LR4 Landmark (about a year) that is going for more on the used car market than i paid new for it.

Interesting. Why? Are you getting some sort of discount?

 

[CSFTN]

If Stealth.pilot is whom I believe him to be, he's buying his BMWs with a European Delivery discount then sells them a year later for little to no loss, as BMW gives you 7% off if you take ED, plus a few select delearships will negotiate an even lower price, as the sale doesn't count against their inventory, so the don't really loose anything selling to you. It's not impossible to get a car for 13% off list, have it loose 20% MSRP in the first year sell if for that loosing <10 of your actual purchase price.

If it's him, I posit he's become so used to that process that he no longer appreciates how exceptional a deal the ED process represents. By definition, exceptional is atypical elsewhere, including Tesla.