The bad "Add option X for resale value" argument

[snooper77]

Hi all,

Very often I read things like "you should add the twin charger for better resale value", or "choose multi-coat white over regular white for resale value". Are people actually aware that is is completely wrong? If you add, say, the double chargers for $1500, do you really think you'll be able to sell the car for more than $1500 more? Of course not. Maybe you can sell it for $1000 more or something, but that ultimately means locking in a sure loss of $500! ​Every option you choose when buying the car because of "resale value" will be a sure loss for you.

Things are of course very different if you want a double charger because you can charge faster, or if you get multi-coat white because you like it better than regular white, but the "add it for resale value" argument is just plain wrong.

Just my 2 cents.

snooper77

 

[bonaire]

Resale value is most affected by comparison shopping at the time. The Gen-III and competitive models on the market will have the biggest impact (whether good or bad) on resale value in three years or more. Gen-III could "tank" MS resale value if it is close to the same quality.

Buying options that you don't want "for resale value" is like people saying "you need to have a home mortgage so you can take the tax deduction". Remember - never take financial advice from poor people.

 

[ZsoZso]

On the other hand, there are some options that are considered important (tech package) and if you don't have them you may not be able to sell at all. So in that case it is not a matter of $ value, but enabling the sale in the first place. So if you don;t have the tech package, you may not be able to sell your car at all, because the buyer will simply look for another car with the tech package.

 

[hanstremblay]

Totally agree with ZsoZso about the tech package. This is probably the most impotant feature for resale. Nobody want to have a 5" tomtom gps beside the 17" screen of the S.
As I am in the market for a used one I wondering if tech package could be retrofit by tesla ? Or at least the nav feature.

 

[JonathanD]

Yep I'd say tech package is pretty key, may not get every penny back but you can probably re-sell the car for the price you want much faster if need be.

I also really appreciate that the Supercharger hardware is on board whether you order it or not. So even if the next person really wants it, it's just a matter of a phone call.

 

[dsm363]

Agree. Tech package is a 'must' if you are looking to sell the car. I'm sure you could sell the car without it however maybe not at a price you would like.

 

[bonnie]

Every option you choose when buying the car because of "resale value" will be a sure loss for you.

On the other hand, there are some options that are considered important (tech package) and if you don't have them you may not be able to sell at all.

Nuances in every debate. And this is really the crux of this one. Financial payoff vs. enabling the sale.

It's like a house. Putting money into a kitchen remodel will never be fully recovered - but if the kitchen is so out dated, unusable, visually repelling that sellers don't even consider the house ... then perhaps it's worthwhile to put that money into the kitchen that you won't recover. Because even saying there is a credit for a kitchen remodel may not get the majority of buyers past the initial impression.

Regarding car options, I usually get what I want and not worry about if I will recover the money later or not. Because I plan to drive it for quite awhile. No rationalizing to others of 'well I did it for the resale value'. Just say you want it, if you want it. You've earned it. No apologies.

 

[golfski]

I might be biased here, but the fact people are not buying the tech package to begin with leads me to believe people in the used market might be able to live with that as well. The only argument that I think could be made is the battery size because it can compete with the range of a new 60. But still, I am sure there will be local commuters who could use a degraded 60 at the cheaper cost of a used 85. I bought the options I wanted and wasn't willing to fork over 5-10k extra for things that I didn't even know existed (e.g. cornering lights) just for resale value.

On the other side of the argument are the options that might end up costing more $ to maintain or replace like the air suspension, folding mirrors, fog lights, etc. The warranty is only 50k miles, which in most peoples case will be a single owner.

Looking forward 3-5 years from now, a degraded battery and a clean and crisp interior would be mighty attractive to someone that would normally spend 30-40k on and new or used ICE. I've never bought a car for more than 30k, but I saw the longer term savings of less to maintain and gas savings, yet still having a pretty sweet car. That argument only gets stronger as time goes by, our cars will depreciate faster than the cost of ownership will go up. I find it hard to believe Tesla will kill its own residual value by making the GEN-III too awesome. I think it will be much less luxurious at the 35k price point (maybe 10" screen?), which they can get away with to that audience that isn't looking for a car so fancy. The Model S is a 70k+ car, so it has to be sweet for them to sell them in the first place!

 

[dsm363]

You'll still be able to sell a 60 kWh Model S without a tech package I think you might find the pool of potential buyers will be smaller. Any car is a bad 'investment' so counting on any option for resale value probably isn't the best way to think about it. Get the options that you can afford and that you want and then worry about selling the car later and get the best price you can.

 

[green1]

I have to agree with the OP. Options on used cars barely affect the price at all, people look at condition and mileage, and use options more as tie-breakers between two similar vehicles. Buy whatever options YOU want when you get a car, but don't buy one you won't use simply because you think the next guy will want it (unless you've already made arrangements with that "next guy")

Unless there is a huge glut of used Model S cars on the market, a more expensive paint job is unlikely to get you an extra $10 let alone the original price difference, some options will get you a bit more, but I doubt there's a single option out there that you will recover the entire price on.

Buy what you love, drive what you like, but don't try to plan for the next guy.

 

[ckessel]

I find it hard to believe Tesla will kill its own residual value by making the GEN-III too awesome.

Oh, Elon would absolutely devastate the S resale if that fits his goal of advancing EV adoption. I'm sure Tesla will come out with as awesome a car as they possibly can for the price constraint and impacts on the S be damned.

Now, whether G3 can be awesome enough at the 40k price point to damage the S resale value, that's a harder question. Though just the driving down of the battery price by 30% will have a major impact since that immediately drops the relative value of the S battery shipping today.

As for original point on options, they'll never add more value to resale than you paid. They're all value losers. Some, like the tech package, may make it easier to sell by appealing to a broader customer base, but you'll never get back the money you put in.

 

[dsm363]

They would always have the option to reduce price of Model S too as long as they can keep the margins they want.

 

[JonathanD]

Indeed, if he could sell the Model S profitably for a lower price he would. He needs to make money to fund the enterprise, but ultimately he did not start this company to make money but to start a revolution.

 

[golfski]

Indeed, if he could sell the Model S profitably for a lower price he would. He needs to make money to fund the enterprise, but ultimately he did not start this company to make money but to start a revolution.

While I agree there is a revolution going on, this is still a publicly traded company, there has to be profit and smart decisions being made about the ENTIRE product line they are putting out there. Tesla is a for-profit company, not a non-profit. Pushing an agenda that doesn't make financial sense will only go so far before the investors bail. While it is certainly a new way to think about automobile manufacturing and ownership, I think it will hold for the same reason you get lots of options on an S class, less on the E and even less on the C because of the audience you are selling to. The vision/revolution is about putting electric powered cars on our roads, not providing huge touch screens and what not.

That's not to say the Model S can't get cheaper, we are paying a premium to be early adopters, but not as much as you would think.

 

[dsm363]

If they do accomplish a 30% reeducation in pack costs there is no reason why they couldn't pass that savings onto the consumer for the Model S (if they had to because of low sales). If people are still buying them they wouldn't have to.

 

[green1]

It seems more likely to me that the 30% cost savings for MS batteries would be converted to more features on the S rather than a lower price, I have a feeling some of the reason the S is missing many features standard on other 100K cars is that there just isn't the money left over after the battery pack. They want to have a car in the MS price range, they know there are people that will buy it, but they also know that those cars are expected to have toys that aren't yet available. adding those while keeping the cost the same seems the best long term choice.

 

[dsm363]

That would be my guess as well. Keep base price the same or slightly decrease it and add missing features or at least not do things like $1,000 for extra lights.

 

[freds]

I think there is too much worry going on here. I agree that if the generation III came with 400+hp then the model S would be toast; but I think Elon would be loyal to MS purchasers like he has to the roadster I would expect the generation III to have electricity economics with say not more then 200HP to preserve MS mystic.

 

[ckessel]

I think there is too much worry going on here. I agree that if the generation III came with 400+hp then the model S would be toast; but I think Elon would be loyal to MS purchasers like he has to the roadster I would expect the generation III to have electricity economics with say not more then 200HP to preserve MS mystic.

So you think Elon would purposely cripple what could be offered in the truly mass market EV in order to prop up the more niche luxury model? That wouldn't seem to be in alignment with Elon's goals on accelerating EV adoption.

 

[JonathanD]

I'd expect the performance to be comparable, with lower interior spec (smaller touch screen, etc), fewer available options, and less range. Think about the German makes, their more expensive models are not necessarily faster (unless it's a specific performance model i.e. AMG), they differentiate based on size, options, and interior. Wouldn't surprise me if they made supercharging subscription-based as well.