Was I wrong?

[mattjs33]

If $5 a month breaks you maybe a new car is a bad idea?

If you're financing a car for 84 months, then it's already a bad idea.

I appreciate all your math, but my point wasn't about cost/benefit to buying a MR car now vs. waiting for an SR. My point is that lopping the tax credit off the price of an EV to say "Hey it's only $X now", is not really how it works in practice.

You can't tell me that someone who can't afford a $40K car, CAN afford it at "$32,500" by getting two separate loans which total $40K anyway, clever as that may be.

Every time I see an ad or a story for an EV where they say "it'll be $X, or only $X-Y after the rebate", it drives me crazy. It doesn't make it any more affordable for people who can't afford X. Increasing their income tax refund is a nice little prize but it doesn't change the amount on the monthly loan payment slips.

I suppose you could put the rebate portion of the income tax refund into a hypothetical jar and dip into it every month to help make the payments, as you say (good idea). But I guarantee most people getting that income tax refund won't do that. They'll pay some bills or put in a pool like Clark Griswold.

People who can afford a Model S and have also bought a Model 3 just for kicks might not see it this way. But mass market people live differently. This is the market Tesla is jumping into now, although this obviously doesn't affect Tesla alone.

I still think subtracting the rebate off the list price to arrive at "actual purchase price" is disingenuous.

 

[Knightshade]

If you're financing a car for 84 months, then it's already a bad idea.

Sure. So is leasing for most (non business) folks. But plenty of people do both because as you pointed out, all they care about is a "monthly payment they can afford"

I appreciate all your math, but my point wasn't about cost/benefit to buying a MR car now vs. waiting for an SR. My point is that lopping the tax credit off the price of an EV to say "Hey it's only $X now", is not really how it works in practice.

I mean, it is though. That's why I showed the math. Once you get the tax refund you can apply it in monthly installments to the loan payment- resulting in the lower payments I called out in said math.

The only "pain" is a couple of months (3-4 months worth in my MR example) where you're paying 90-something bucks extra.

This comes back to if $90 over 3-4 months kills you you probably don't need any new car- buy used.

But if you can get past that 3-4 months, the monthly price difference is almost nothing month to month for a better car (and doubtless better resale too)

You can't tell me that someone who can't afford a $40K car, CAN afford it at "$32,500" by getting two separate loans which total $40K anyway, clever as that may be.

I can though, when the second largely loan goes away after just a few months (which again I showed the math for)-

This is often called a bridge loan, it's common, and is essentially what you're doing here...you're "borrowing" the extra $7500 (or 3750 now) that you'll get back from the IRS in a fairly short time frame.

Every time I see an ad or a story for an EV where they say "it'll be $X, or only $X-Y after the rebate", it drives me crazy. It doesn't make it any more affordable for people who can't afford X.

yeah, again, it measurably does

See again the math provided.

Increasing their income tax refund is a nice little prize but it doesn't change the amount on the monthly loan payment slips.

I suppose you could put the rebate portion of the income tax refund into a hypothetical jar and dip into it every month to help make the payments, as you say (good idea). But I guarantee most people getting that income tax refund won't do that. They'll pay some bills or put in a pool like Clark Griswold.

Ah, see, now you're moving away from the math (which DOES change the loan payment amount using exactly that method) and into "people who handle money badly"

I can't help those people.

But "buyer is stupid" doesn't change the raw numbers. Where you absolutely can count the rebate as discounting the cost of the vehicle in fairly short order... (moreso for the October MR buyer than the January one since he doesn't have to wait nearly as long, but same principle)

I still think subtracting the rebate off the list price to arrive at "actual purchase price" is disingenuous.

I think you'd need to add in the cost of what is essentially the bridge loan between initial loan and tax rebate check... but that's not going to add up to much. After that it's a pretty honest way to do the math.

 

[mattjs33]

Sure. So is leasing for most (non business) folks. But plenty of people do both because as you pointed out, all they care about is a "monthly payment they can afford"

Ah, see, now you're moving away from the math (which DOES change the loan payment amount using exactly that method) and into "people who handle money badly"

I can't help those people.

But "buyer is stupid" doesn't change the raw numbers.

"Buyer is stupid" = people who would get an 84 month loan = "people who handle money badly"

These are the people who Tesla is (or hopes to someday be) selling to now.

These people are not going to be smart enough to get a bridge loan. I dunno, maybe they are. I can just picture folks sitting down to sign the papers and being surprised to be paying full price. It just seems not really cut-and-dried to say the $40K car is $32,500.

You've certainly made your point, and I appreciate the answer. I just know from my own experience that lots of people who buy stuff from me that's discounted with a mail-in rebate, have not paid enough attention to realize that the sale price quoted is "after mail-in rebate". And they always leave a little miffed. Advertising a can of brake cleaner for $2.00 gets people really excited until they realized it's not really $2. That's all I'm saying with regard to EV rebates.

Luckily EV buyers don't have to mail anything in. Then they'd be really confused.

 

[Knightshade]

"Buyer is stupid" = people who would get an 84 month loan = "people who handle money badly"

That depends on the terms.

Some auto loans last year were going for 2% or less... if you're at all decent with money you can do better than that elsewhere, so taking such a loan, for as long as possible would make a lot of sense rather than paying cash on hand.

For that matter- even if you didn't have any cash on hand, at a loan rate that is at or below inflation (as some of last years car loans seen here were) you're saving money taking as long a loan as possible at that low rate since the $ you pay with later is less valuable than the $ you pay with today.

These people are not going to be smart enough to get a bridge loan. I dunno, maybe they are.

That's the nice thing about the tax credit- it's effectively a bridge loan they don't have to do much to take advantage of (other than remember to claim it on their taxes).

Folks who bought the hypothetical MR in October as I describe effectively got a $7500 bridge loan as part of their car loan, and will receive the funds to repay that bridge loan when they get their tax refund early this year.

Now- if they're able/willing to dole that refund out monthly to lower their payment (or if they need to) will vary person to person.... but the "effective" price, minus the very minor cost of the bridge loan, ends up being original cost minus the tax refund as a result.

I can just picture folks sitting down to sign the papers and being surprised to be paying full price. It just seems not really cut-and-dried to say the $40K car is $32,500.

Well, the buyer would know the full price well before that- you're told what it is as part of your actual order process with Tesla...and obviously if arranging a loan you need to know that amount too.

But in the end it effectively is 32.5k (plus the small bridge loan cost-basically the interest on $7500 at 2% or whatever- which again as long as it's at/lower than inflation isn't really a cost anyway)

You've certainly made your point, and I appreciate the answer. I just know from my own experience that lots of people who buy stuff from me that's discounted with a mail-in rebate, have not paid enough attention to realize that the sale price quoted is "after mail-in rebate". And they always leave a little miffed. Advertising a can of brake cleaner for $2.00 gets people really excited until they realized it's not really $2. That's all I'm saying with regard to EV rebates.

Luckily EV buyers don't have to mail anything in. Then they'd be really confused.

I agree, if the refund was a lot more complex, or restrictive, it could be a lot more problematic... and I'm sure there's some weird edge cases of say a guy who somehow can afford a $40,000 car, but also doesn't have even $35,000 in taxable income so he can't get the $3750 credit available today.... but that's going to be a super edge case.... the math of the credit effectively reducing the price of the car virtually dollar for dollar stands up in probably 99%+ of cases- so I don't find talking about it that way especially deceptive.

 

[StealthP3D]

View attachment 368406 Yes they tried to push me into canceling. That didn’t feel good. Why would they think I want to cancel? I’m waiting patiently for almost 3 years for my order

Fer cryin' out loud! They didn't try to get you to do anything, they are just trying to get some visibility on what percent of the remaining reservation holders are serious buyers. They are simply asking if you're still wanting to hold your reservation, absolutely nothing wrong with checking in.

Tesla takes it in the chin whether they communicate with their customers or ignore them!