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Used P85 pricing

Discussion in 'Model S: Ordering, Production, Delivery' started by RonMathMD, May 9, 2014.

  1. RonMathMD

    RonMathMD Member

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    #1 RonMathMD, May 9, 2014
    Last edited by a moderator: May 11, 2014
    List prices for used Model S's seem to be ludicrously high. Many sellers are asking prices that are close to or above MSRP for vehicles that are 12 mos or older and have 12,000 or more miles. It is as if they are driving the car for a year and expecting to sell it for almost the same price after taking the federal and state tax credits for themselves!

    Tesla Motors is continuing to increase production and will soon be up to 700 cars/week and will hopefully reach 1000 cars/week by the end of the year. Wait times for new cars are at an all time low. A new P85 ordered today in mid-May 2014 will be available in late July per the website.
    Most used ICE cars with MSRPs around $100,000 (e.g., Mercedes S550) have Edmunds True Market Values of 75% of MSRP at 12 mos.

    Kelly Blue Book and Edmund's True Market Values are not yet available for Model S's, and it seems many sellers are taking advantage of this in hopes of making a profit.

    Tesla Motors offers used demo/loaner cars at a significant discount: 1%/month AND $1/mile. Plus, they still offer the full 8-year battery warranty AND the federal and state tax discounts ($10,000 in CA). E.g., a well-equipped 6-mo old car with 6000 miles would sell for: $110,000 * 0.94 - 6000 = $97400 - $10000 tax credits = $87,400 WITH FULL 8-yr BATTERY WARRANTY!

    I have been researching the used P85 market for a few months now as I plan to buy a used P85 in the next few mos. I have seen asking prices as high as $120,000 with most prices around $99,500. This is absurd! And the tax credits do not apply for these cars in CA making matters worse!

    Used well-equipped P85s (tech, sound, 21s, pano, etc) that have sold have had sales prices of $81,000-91,000 and range from 6-13 mos old and 5000-13500 miles. Two recent P85s sold on Ebay for $82,600 and $84,500. A seller recently offered me $85,500 for his 11-mo old P85 with 13k miles.

    I have been working on a depreciation formula to calculate fair True Market Value for used P85s. The 1%/mo and $1/mile calculation is unrealistic for higher mileage cars. For example using this calculation, a 36-mo P85 with 36k miles would be worth: $112000 * (1-.36) - 36000 = $35680.

    Tesla Motor's buy-back program offers 50% of the MSRP of the 60 + 43% of any options (inc upgrade to S85 and P85) after 36-39 mos with 15k miles/yr. A well-equipped 2014 P85 with an MSRP of $112,220 will be worth $53153 in 36 mos with 45k miles per Tesla's buyback program. This works out to linear depreciation of 1%/mo + $0.41/mile. For an S85, this works out to 1%/mo + $0.35/mile; and for an S60, this works out to 1%/mo + $0.31/mile.

    So for example, if a P85 is 12 mos old with 12000 miles and had an MSRP of $112,000, it's True Market Value would be: $112,000 * (1-.12) - (0.41 * 12000) =$ 98560 - $4920 = $93640. Since the seller benefited from the tax credits, these should be subtracted from the TMV: $93640 - $10,000 = $83,640.

    This gives the seller the benefit of linear depreciation which is not consistent with reality in the used car market; used cars depreciate exponentially in the first 2 yrs and then level out over years 2-5. Typical depreciation curves show 25-28% depreciation in the first year.

    I urge all buyers of used P85s to use my depreciation calculations when making offers on used P85s (or S85s/S60s for that matter). Do not overpay for a depreciating asset no matter how badly you want it now. A one-year old car in 2 yrs will only be worth $53,000 per Elon Musk's calculations. And he should know!
     
  2. Zapped

    Zapped Model S - PURE EV

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    Buy a new one. Better for Tesla, better for you (latest improvements)
     
  3. RonMathMD

    RonMathMD Member

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    #3 RonMathMD, May 9, 2014
    Last edited: May 10, 2014
    List prices for used Model S's seem to be ludicrously high. Many sellers are asking prices that are close to or above MSRP for vehicles that are 12 mos or older and have 12,000 or more miles. It is as if they are driving the car for a year and expecting to sell it for almost the same price after taking the federal and state tax credits for themselves!

    Tesla Motors is continuing to increase production and will soon be up to 700 cars/week and will hopefully reach 1000 cars/week by the end of the year. Wait times for new cars are at an all time low. A new P85 ordered today in mid-May 2014 will be available in late July per the website.

    Most used ICE cars with MSRPs around $100,000 (e.g., Mercedes S550) have Edmunds True Market Values of 75% of MSRP at 12 mos.

    Kelly Blue Book and Edmund's True Market Values are not yet available for Model S's, and it seems many sellers are taking advantage of this in hopes of making a profit.

    Tesla Motors offers used demo/loaner cars at a significant discount: 1%/month AND $1/mile. Plus, they still offer the full 8-year battery warranty AND the federal and state tax discounts ($10,000 in CA). E.g., a well-equipped 6-mo old car with 6000 miles would sell for: $110,000 * 0.94 - 6000 = $97400 - $10000 tax credits = $87,400 WITH FULL 8-yr BATTERY WARRANTY!

    I have been researching the used P85 market for a few months now as I plan to buy a used P85 in the next few mos. I have seen asking prices as high as $120,000 with most prices around $99,500. This is absurd! And the tax credits do not apply for these cars in CA making matters worse!

    Used well-equipped P85s (tech, sound, 21s, pano, etc) that have sold have had sales prices of $82,000-91,000 and range from 6-13 mos old and 5000-13500 miles. Two recent P85s sold on Ebay for $82,600 and $84,500. A seller recently offered me $85,500 for his 11-mo old P85 with 13k miles.

    I have been working on a depreciation formula to calculate fair True Market Value for used P85s. The 1%/mo and $1/mile calculation is unrealistic for higher mileage cars. For example using this calculation, a 36-mo P85 with 36k miles would be worth: $112000 * (1-.36) - 36000 = $35680.

    Tesla Motor's buy-back program offers 50% of the MSRP of the 60 + 43% of any options (inc upgrade to S85 and P85) after 36-39 mos with 15k miles/yr. A well-equipped 2014 P85 with an MSRP of $112,220 will be worth $53153 in 36 mos with 45k miles per Tesla's buyback program. This works out to linear depreciation of 1%/mo + $0.41/mile. For an S85, this works out to 1%/mo + $0.35/mile; and for an S60, this works out to 1%/mo + $0.31/mile.

    So for example, if a P85 is 12 mos old with 12000 miles and had an MSRP of $112,000, it's True Market Value would be: $112,000 * (1-.12) - (0.41 * 12000) =$ 98560 - $4920 = $93640. Since the seller benefited from the tax credits, these should be subtracted from the TMV: $93640 - $10,000 = $83,640.

    This gives the seller the benefit of linear depreciation which is not consistent with reality in the used car market; used cars depreciate exponentially in the first 2 yrs and then level out over years 2-5. Typical depreciation curves show 25-28% depreciation in the first year.

    I urge all buyers of used P85s to use my depreciation calculations when making offers on used P85s (or S85s/S60s for that matter). Do not overpay for a depreciating asset no matter how badly you want it now! A one-year old car in 2 yrs will only be worth $53,000 per Elon Musk's calculations. And he should know!
     
  4. 4sevens.com

    4sevens.com Member

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    I'm in the market for a P85 as well. And while I agree that market price on second hand P85's should be much lower at the end of the day sellers will price according to what they thing they can get and buyers will buy what they think the car is worth. And the fact of the matter is it's inflated and nobody can doing anything about it. You can't tell a seller to lower their price if they feel the value is there, neither can you force a buyer to buy if they don't feel it's worth it.

    Eventually the second hand market will balance it self out. But until then it is what it is. And if you need a P85 before it balances out you're likely ending up paying more :)
     
  5. professionalr

    professionalr Member

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    MSRP with tax included or not?
     
  6. dgmanny

    dgmanny Member

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    One thing that is different about the tesla used car market is that tesla raised their prices on their cars significantly, where I'm not aware of situations where other car mfgs have done the same thing. For example, I have a p85 with all the options except for the third row seats. I took delivery in mar13. The same car new is 16k more. Additionally there are probably fewer sellers of used teslas vs other car maker on a per unit basis.
     
  7. snooper77

    snooper77 Member

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    Why not simply let the market decide, offer and demand?
     
  8. Keysh2oboy

    Keysh2oboy Member

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    Try caffeine-free products
     
  9. bonaire

    bonaire Active Member

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    Some sellers are perhaps speculators. They got the car for a few thousand miles of fun, took the tax credit and state rebate and now are looking to move on. They won't sell at high prices but they will list them at such a price. You can avoid them and buy a new "loaner" at a bigger discount than these sellers want. I suspect the sellers the OP mentions wanted to cash in on the tax credit and see if they can have a zero-cost short-term ownership.
     
  10. MacLeodMX

    MacLeodMX Member

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    Fair market value. Your definition is based on a concept that does not apply to a car that has very little to depreciate. All aluminum, no performance drop off from pistons wearing out, complete refresh in 10 years with a new battery (worst case scenario). There is no comparison to be made. Tesla is unique. The market will dictate the fair price, not your funny math based on dinosaur thinking.
     
  11. pgiralt

    pgiralt Active Member

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    Market value is just that - what people in the market are willing to pay for something. Basic supply and demand will dictate the price of the used market. If someone thinks they can get it cheaper somewhere else, they will and at some point the prices will likely go down, but as long as there are people willing to pay high prices, the prices will stay high. I have no idea why someone would pay near MSRP on a used car for something they can wait 2 months for and get new, but I guess some people are just impatient like that.
     
  12. pgiralt

    pgiralt Active Member

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    Why are you double-posting (and this one in the wrong forum at that)? Mods - can you please combine the two threads?
     
  13. yobigd20

    yobigd20 Well-Known Member

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    These cars should have very high resale value. The difference is that a Model S with its electric motor and aluminum body may last you 20-30 years where a typical ice car may only last 7 years or so before it's ICE engine starts falling apart. When tesla repairs cars, they do so by replacing every single part with a brand new one to match a brand new car rolling off the line. Plus there's the whole demand factor. I don't see why this car needs to follow the typical depreciation rate that ICE cars follow. These are going to hold up so much better and be so much more reliable over the years.
     
  14. GDH

    GDH Banned

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    This is thread should be moved to the Model S section and not be in the for sale section.
     
  15. JohnQ

    JohnQ Active Member

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    Exactly this. All that matters is what someone will pay and what someone will accept.
     
  16. supersnoop

    supersnoop Tesla Roadster #334

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    You're depreciation model is based on an arbitrary residual backed by Elon's wallet. That is not realistic. eight year old Roadsters are still selling for 50%-75% of their original price. Nobody knows what type of value these cars will hold, but, at the moment, it's more than you're willing to pay.
     
  17. JonathanD

    JonathanD Member

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    Bottom line is that we consumers are not very good at waiting these days. People with more money than patience will spend an extra $10k or more just to get what they want immediately.

    Still surprising though since you can go find a well equipped demo car and still get the tax breaks. Oh well chalk it up it ignorance.
     
  18. theganjaguru

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    The only problem with your calculation is that you are using a metric more appropriate for ICE vehicles. You are not factoring in free fuel via super charging, reduced fuel costs if you plug in at home or the fact that there is less maintenance required. For those reasons a Model S with 12,000 and even 20,000 miles will have a very high asking price when compared with an equivalent ICE vehicle.

    Plus you do not factor in supply and demand. There are too many people (like you and me) who would be interested in buying a used model S and so few MS's on the road. Thus demand for used MS's will remain high along with the price. You will not see a price drop on used model S's until there are a lot more on the road Even then you won't see a price drop until a new feature such as AWD is added or the Model X is on the road.

    Even with ICE vehicles I still find error with your calculation. My 2005 Toyota Tacoma has a much higher residual value than a equally equipped Chevy Colorado. Why? My Tacoma has better safety and reliability ratings than the Colorado. Thus demand is higher.

    We could try and use your metric when making an offer, but I think the only answer we'd get back would be "no low ball offers please"
     
  19. Dutchie

    Dutchie Member

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    Supply - Demand. Nobody forces you to buy a used MS at that price... Apparently there are people who do.
     
  20. cantdecide

    cantdecide Member

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    Soon only made that guarantee not expecting to buy back all the teslas... He wanted to give piece of mind and set a minimum value... He probably expects the actual price to be 5k or 10k higher.

    Also, the 1% and $1/mile formula is designed to have all cars sell within 6 months so that the loaners are always under that age. So that is supposed to castle underestimate the value of a car at any significant age.

    My estimation method would be...
    Take the price for a new p85.
    First subtract the money from the government.
    Then mentally split the car into a $30k battery and a $70k car (exact values dependent on options).

    Now the battery should depreciate fairly slowly in that it would take maybe 15years to get down to being equivalent of a 60kwh battery which would probably be $20k new now. Let's raise this a little for new tech and call it $1k/year.
    Now the other $70k should depreciate slower than a normal $70k car... The motor is lower maintenance than an ICE. Perhaps it loses 40% of $70k in 3 years.

    Hence I would expect a p85 to lose value of government credits on day 1, then lose $10k/year for 3 years.

    Of course at the start supply/demand will push the price up in the early years, that is natural.
     

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