Total lease costs?

[Dan203]

So in this example you are essentially paying $1/mile to drive this car for three years. That seems high to me. How does this compare to BMW/Mercedes lease figures?

For my BMW 340i I put $30k down and even at special 0.9% financing the payment was still $595/mo. Right now I still owe about $10k and the car is only worth about $28k. That's roughly $1.85/mi. Add in gas which was roughly $0.20/mi and we're over $2.

For me a car is more of a luxury than a necessity.

 

[cucubits]

I've been leasing my past two cars and now I'd really like to buy the next one but Tesla has me in a pickle.

Let's just say I do want to drive an EV now but I don't have any high hopes for Tesla in 2-3 years. With the scenario of getting a Model 3 now and then getting rid of it in 2-3 years in favor of another upcoming EV make, I'm not sure if I should lease it or buy it, especially considering how bad Tesla's lease terms are.

 

[Dan203]

EVs seem to be more like iPhones than cars at this point. The technology is constantly getting better and you're more likely to want a new one in the next few years then you might with a ICE car. If I were just looking at upgrading my BMW 340i to a 2019 340i I probably wouldn’t do it. The improvements are incremental at best and it's not worth it. But with Tesla that may not be the case. In 3 years they may have a battery with 2x the range that charges twice as fast. Or some new 3 motor system that does 0-60 in 2 seconds. Those sorts of things will simultaneously make me more likely to upgrade and our current cars less valuable.

 

[reedog117]

At first look this is very high, 5.45% on my screen. However, the residual is also very high, it calculates out to about 67.8%. Obviously this is irrelevant to any future purchase, but it is very high by industry standards, and arguably also by any realistic future prospects. This greatly affects the amount amortized versus simply borrowed, and thus the actual cost of the lease in dollars.

For example, instead of 5.45%/67.8%, how does 3.25%/62% sound? A lot better on the interest rate, and much more likely on the residual side (although still a bit generous, in fact). Well, it comes out to almost exactly the same dollars, and for me, since I prefer to lease anyhow, and I figure if I still love Tesla I will be able to buy this or another car at the end at then-market price, that dollar/month amount is all that matters, and in fact the deal is not in my view so unfavorable at all.

YMMV, naturally

Of course one thing you have to keep in mind is that every other car manufacturer discounts off of MSRP and provides additional cash incentives, whereas Tesla does not. With BMW/MB in particular, 10-15% off MSRP for common models is not an uncommon practice on top of stacking manufacturer rebates, so this wipes out the residual advantage. If Tesla can drop their MF to near the .0015 level, then I believe things can get pretty interesting.

I am coming from leasing and moving back towards buying - my rationale for leasing originally was actually that drivers in the DC metro area are psychotic and I've been rear-ended by ignorant drivers a few times. Leasing protected me from the negative depreciation associated with the accident as that risk gets shifted onto the bank instead of me. However, after having gone through the legal process a few times, I'm pretty familiar with how diminished value claims work and am comfortable moving back towards buying and pursuing legal avenues to protect the value of the car (and/or my wallet).

If you haven't checked it out yet, you should take a look at forum.leasehackr.com where there have been multiple discussions about the Tesla lease. It's a real eyeopener the types of deals you can actually have with a lease with certain brands when you understand the numbers and how they work. For example, an interesting tidbit I found - I could take the same $0 down 72mo loan payment on a Model 3 Performance and end up with a 36mo/10k i8 lease. However functionality is completely different (BMW obviously doesn't have FSD) and it doesn't cover my use case (I want a car with FSD that can easily hold 4 adults).

 

[raptor5244]

I've been leasing my past two cars and now I'd really like to buy the next one but Tesla has me in a pickle.

Let's just say I do want to drive an EV now but I don't have any high hopes for Tesla in 2-3 years. With the scenario of getting a Model 3 now and then getting rid of it in 2-3 years in favor of another upcoming EV make, I'm not sure if I should lease it or buy it, especially considering how bad Tesla's lease terms are.

I guess the real question is realistically what other EV will even come close in the next 2-3 years. Consider the current battery range, performance specs, supercharging network, user interface with over-the-air updates, buying model that eliminates a traditional dealer network and mobile service. I expect more EVs to hit the market but I just don't see anyone catching up yet. look at the new $150k Porsche Taycan being compared to the 2012 Model S. Time will tell. i would just buy the car and enjoy it and worry about whats next when it comes.

 

[Dan203]

If you're just looking for the best lease deal and you're not set on getting a Tesla specifically then I'm sure that BMW and Mercedes are better options. But if you have your heart set on a Tesla then you've got two choices.... lease or buy. Based on my calculations, and experience, leasing is cheaper if you only plan to keep the car for 2-3 years and buying is better if you plan to keep the car longer or drive a ton of miles.

Now there are some who believe that a Tesla will somehow magically retain 70% of it's value after 3 years and that buying is always the best option, but they're using values from Model S and X which are much more expensive and niche cars. The truth is the Model 3 has only been in wide production for about 1.5 years and no one knows yet how they'll hold their value. So really it's a gamble either way. But if you go on the depreciation of similarly priced ICE cars after 3 years the lease is a better deal.

 

[stevegu]

Of course one thing you have to keep in mind is that every other car manufacturer discounts off of MSRP and provides additional cash incentives, whereas Tesla does not. With BMW/MB in particular, 10-15% off MSRP for common models is not an uncommon practice on top of stacking manufacturer rebates, so this wipes out the residual advantage. ...

I may be missing something, but I don't think the price of the car has anything to do with the lease terms once you "normalize" the purchase price. After all, when one negotiates a lease, it begins with negotiating the purchase price of the vehicle, or at least it did the last time I leased (from BMW, list price around $45,000, basic cap cost around $41,500). The interest rate and residual were applied to the lower number.

 

[reedog117]

I may be missing something, but I don't think the price of the car has anything to do with the lease terms once you "normalize" the purchase price. After all, when one negotiates a lease, it begins with negotiating the purchase price of the vehicle, or at least it did the last time I leased (from BMW, list price around $45,000, basic cap cost around $41,500). The interest rate and residual were applied to the lower number.

Residual is always calculated in relation to MSRP not the sale price.

 

[raptor5244]

I may be missing something, but I don't think the price of the car has anything to do with the lease terms once you "normalize" the purchase price. After all, when one negotiates a lease, it begins with negotiating the purchase price of the vehicle, or at least it did the last time I leased (from BMW, list price around $45,000, basic cap cost around $41,500). The interest rate and residual were applied to the lower number.

Except you can't really negotiate the price of a new Tesla.

 

[stevegu]

reedog117 -- Surprised to hear this, I will check my last lease. If so, they set it way above market, not that I was going to buy it out anyhow

raptor5244 -- exactly, so other than the above consideration, one should make all comparisons between makes using the negotiated (and financed) price rather than the list

 

[holmgang]

Now there are some who believe that a Tesla will somehow magically retain 70% of it's value after 3 years and that buying is always the best option, but they're using values from Model S and X which are much more expensive and niche cars.

But then again, all the similarly priced cars (exec saloons, S class, 7 series, A8, etc) are the ones that depreciate the quickest, relative to their brand's lineup.

Though I agree with the rest of your sentiment.

 

[Dan203]

But then again, all the similarly priced cars (exec saloons, S class, 7 series, A8, etc) are the ones that depreciate the quickest, relative to their brand's lineup.

And I think the Model 3 might just be the one that depreciates the quickest for the Tesla lineup. I could be wrong, and I guess we'll see in 3 years, but my guess is that the Model 3 is going to be the BMW 3 series of the Tesla lineup.

 

[cucubits]

And I think the Model 3 might just be the one that depreciates the quickest for the Tesla lineup. I could be wrong, and I guess we'll see in 3 years, but my guess is that the Model 3 is going to be the BMW 3 series of the Tesla lineup.

That sounds like a reasonable assumption but I'm still inclined to buy instead of lease. The real gamble will be when good competitors start pushing out EVs. I'm keeping my eyes on the e-tron GT but for sure others will come too. I don't see the lack of a supercharger-like network as a huge impediment in going with another make. It's going to see mostly city driving and the occasional roadtrip where charging won't be a problem.

 

[Octo]

EVs seem to be more like iPhones than cars at this point. The technology is constantly getting better and you're more likely to want a new one in the next few years then you might with a ICE car. If I were just looking at upgrading my BMW 340i to a 2019 340i I probably wouldn’t do it. The improvements are incremental at best and it's not worth it. But with Tesla that may not be the case. In 3 years they may have a battery with 2x the range that charges twice as fast. Or some new 3 motor system that does 0-60 in 2 seconds. Those sorts of things will simultaneously make me more likely to upgrade and our current cars less valuable.

I agree with your point but given how mature iPhones have gotten, maybe iPhones aren’t the greatest comparison.

I have an X from 2017 and that is still so good that I won’t upgrade until maybe 2021. I wish my P3 would stay that up to date over the years.

 

[Dan203]

Competition is going to force Tesla to update more frequently. Even the $185k Taycan seems to be pushing Tesla to speed up the timeline on the Plaid drivetrain for the S/X. As more and more EVs come to the market they're going to start pushing the 3 as well.

Plus there are just the sheer numbers that will drive up the depreciation. The simple economics of supply and demand dictate that in 3 years there will be likely more supply than demand, or at the very least an equilibrium, which will drive down prices. The S/X never really saw that because they were so expensive and produced in such relatively low quantities.

 

[holmgang]

Depreciation affects the car regardless whether it's leased or purchased.

What's the long term goal with the car?

If it's believed the car will depreciate more quickly than today's estimate (due to rapid innovation and legitimate competition), and an existing owner wants to swap to those new cars, they'll take that depreciation hit. A lessee will have benefited from lower amortized amount due to higher lease residuals.

 

[Dan203]

Depreciation affects the car regardless whether it's leased or purchased.

What's the long term goal with the car?

If it's believed the car will depreciate more quickly than today's estimate (due to rapid innovation and legitimate competition), and an existing owner wants to swap to those new cars, they'll take that depreciation hit. A lessee will have benefited from lower amortized amount due to higher lease residuals.

By biggest concern with buying is the situation I'm in today. I bought a BMW 340i 3 years ago. It's only got 19k miles on it but it's still only worth half what I paid for it. Between the payoff on the loan and the amount I put down I'm looking at losing about $10k. I don't want to do that again 3 years from now with the Tesla. The only way that wouldn't happen is if the Model 3 retains an abnormally high percentage of it's value. That's certainly possible, and some will point to the Model S/X to say it's probable, but I'm not willing to take the gamble. I'd rather pay a set amount for a set period of time and know exactly where I'll stand in 3 years.

 

[cucubits]

Another good option can be a used 3 now. Let someone else take the worst part of depreciation. On the other hand viable deals rarely pop up for now...

 

[holmgang]

By biggest concern with buying is the situation I'm in today. I bought a BMW 340i 3 years ago. It's only got 19k miles on it but it's still only worth half what I paid for it. Between the payoff on the loan and the amount I put down I'm looking at losing about $10k. I don't want to do that again 3 years from now with the Tesla. The only way that wouldn't happen is if the Model 3 retains an abnormally high percentage of it's value. That's certainly possible, and some will point to the Model S/X to say it's probable, but I'm not willing to take the gamble. I'd rather pay a set amount for a set period of time and know exactly where I'll stand in 3 years.

I've only ever bought cars. And bought them with honest intent to keep for life. Average ownership duration ended up being only 3 years -- due to change in climate (e.g. going to snow), change in needs (e.g. 4 doors), change in lifestyle, change in countries, etc...

Leases probably would have suited me better. But only in hindsight, and only when those periods coincided with or close to 3 years / lease terms.

My takeaway is that it all averages out. If we permit ourselves to be a bit callous -- these are all upmarket cars requiring a sizable outlay, whats a little difference gambling on scheme A vs scheme B, in the big picture of things?

If we're diligent at the start of the deal (looking at money factor i.e. cost of finance, negotiating base price, etc), we should satisfy ourselves on the deal without having to second guess the decision, be it purchase/lease/loan

 

[raptor5244]

If you factor in the gas and maintenance savings it looks a little better. I figure I will save ~$10k over 4 year in fuel and maintenance vs. ICE based vehicle.