Affording to purchase the Model 3

Mark C

Well-Known Member
Joined
Aug 26, 2016
Messages
264
Location
Arab, AL
Country
Country
#1
Tax Credit. Whatever you owe in Federal Taxes gets reduced by $7500 (or less when the phase out begins). If you owe less than $7500 in federal taxes, you cannot get the remaining credit back as cash. (and you probably shouldn't be buying a Tesla)
I hate it when these generalizations are made like this, the part I added the bold to, BTW. This seems to assume that if you only have a tax liability of $7300 +/-, buy a Bolt, oh impoverished one. There are other reasons to have items on your income tax return that affect the amount of tax you owe, like installing a new solar aray to be a little bit "greener," and having a 30% tax credit. Another way to see it, a person with a $50k income with zero debt who has been saving for this day and can put 50% down on the Tesla purchase, is still not deserving? Not every place in the US has the cost of living as Southern CA, and if they are not wasteful in their habits........

If I took these to heart, I couldn't / shouldn't buy a Tesla either. Thank God, I am not in the "generally speaking" category! :)
 
Last edited:

MelindaV

☰ > 3
Moderator
Joined
Apr 2, 2016
Messages
9,676
Location
Vancouver, WA
Tesla Owner
Model 3
Country
Country
#2
I hate it when these generalizations are made like this, the part I added the bold to, BTW. This seems to assume that if you only have a tax liability of $7300 +/-, buy a Bolt, oh impoverished one. There are other reasons to have items on your income tax return that affect the amount of tax you owe, like installing a new solar aray to be a little bit "greener," and having a 30% tax credit. Another way to see it, a person with a $50k income with zero debt who has been saving for this day and can put 50% down on the Tesla purchase, is still not deserving? Not every place in the US has the cost of living as Southern CA, and if they are not wasteful in their habits........

If I to these to heart, I couldn't / shouldn't buy a Tesla either. Thank God, I am not in the "generally speaking" category! :)
while I do agree, I also expect come next April, we will hear a ton of those first group of owners who have been hearing '7500 until the phaseout...' and don't actually have that amount of tax liability and will be coming back to complain how they were 'fooled' into thinking they had $7500 coming back. I have no doubt that will happen. many times.
and to @Brokedoc's point, I'll go out on a limb and guess they are the same group of people that will be living paycheck to paycheck to cover the debt of not only the car but everything else they can't live without. people make dumb financial choices.
 

SoFlaModel3

@Teslatunity
Moderator
TOO Supporting Member
Joined
Apr 15, 2017
Messages
9,819
Location
Florida
Tesla Owner
Model 3
Country
Country
#3
while I do agree, I also expect come next April, we will hear a ton of those first group of owners who have been hearing '7500 until the phaseout...' and don't actually have that amount of tax liability and will be coming back to complain how they were 'fooled' into thinking they had $7500 coming back. I have no doubt that will happen. many times.
and to @Brokedoc's point, I'll go out on a limb and guess they are the same group of people that will be living paycheck to paycheck to cover the debt of not only the car but everything else they can't live without. people make dumb financial choices.
Agree, I think the overarching point here is that outside of people with special tax situations the most likely common denominator of someone not having a $7,500 tax liability is that they probably shouldn't be buying a car that is this expensive.

So 2 things...

1) I say probably because everyone has to make their own decision on what's good for them, and
2) I'm cautious to note "special tax situation"
 
Joined
Jul 28, 2017
Messages
17
Location
Texas
Country
Country
#4
At the risk of being highly flamed, I would say that if you can't afford to pay cash for a vehicle, you can't afford it. And if you're depending on the tax credit to buy the vehicle, you shouldn't buy it.
 

SoFlaModel3

@Teslatunity
Moderator
TOO Supporting Member
Joined
Apr 15, 2017
Messages
9,819
Location
Florida
Tesla Owner
Model 3
Country
Country
#5
At the risk of being highly flamed, I would say that if you can't afford to pay cash for a vehicle, you can't afford it. And if you're depending on the tax credit to buy the vehicle, you shouldn't buy it.
That's "technically correct", but well then there wouldn't be a lot of new cars sold each year.
 

SoFlaModel3

@Teslatunity
Moderator
TOO Supporting Member
Joined
Apr 15, 2017
Messages
9,819
Location
Florida
Tesla Owner
Model 3
Country
Country
#7
Or people would just buy what they can afford.
Hence my point ... there would not be a lot of new cars sold.

Anyway counter point to your point .... with interest rates as low as they are I would suggest paying cash for the car almost makes no sense as you should be able to make more money with your money.

That's my plan.

Technically speaking I could pay cash for the car. However on the same $50k I'm making 10-15% annually.
 
Joined
Jul 28, 2017
Messages
17
Location
Texas
Country
Country
#8
Hence my point ... there would not be a lot of new cars sold.

Anyway counter point to your point .... with interest rates as low as they are I would suggest paying cash for the car almost makes no sense as you should be able to make more money with your money.

That's my plan.

Technically speaking I could pay cash for the car. However on the same $50k I'm making 10-15% annually.
I guess I meant that people would buy new cars that they could afford. Anyway, maybe people would buy less expensive new cars, or they would shift to used cars, either way I'm not sure how that makes my original statement "technically correct". Whether or not new car sales decrease, that has nothing to do with my statement about how much one can afford.

And as far as your 'counter point' to my point. I didn't say whether or not you should pay cash for a vehicle, there are arguments either way. I did say that if you can't afford to pay cash for a vehicle, you can't afford it.
 

SoFlaModel3

@Teslatunity
Moderator
TOO Supporting Member
Joined
Apr 15, 2017
Messages
9,819
Location
Florida
Tesla Owner
Model 3
Country
Country
#9
I guess I meant that people would buy new cars that they could afford. Anyway, maybe people would buy less expensive new cars, or they would shift to used cars, either way I'm not sure how that makes my original statement "technically correct". Whether or not new car sales decrease, that has nothing to do with my statement about how much one can afford.

And as far as your 'counter point' to my point. I didn't say whether or not you should pay cash for a vehicle, there are arguments either way. I did say that if you can't afford to pay cash for a vehicle, you can't afford it.
You're right. I misread your statement that if you can't afford to pay cash for it you can't afford it.

It's a true statement. It's just unrealistic in today's day and age. Much like home purchases.

If people only bought cars they could truly affford you're right they'd gravitate toward used cars or less expensive new cars.

That would mean less Tesla's on the road. Not more...
 
Joined
Jul 28, 2017
Messages
17
Location
Texas
Country
Country
#10
You're right. I misread your statement that if you can't afford to pay cash for it you can't afford it.

It's a true statement. It's just unrealistic in today's day and age. Much like home purchases.

If people only bought cars they could truly affford you're right they'd gravitate toward used cars or less expensive new cars.

That would mean less Tesla's on the road. Not more...
At least with homes, they appreciate in value, usually faster than the amount of interest you're paying. At least that's been my experience. So I can justify a loan on a home. I'm not sure how we got to the point where it's acceptable to have large long term loans on vehicles.
 

mkg3

Active Member
Joined
May 25, 2017
Messages
158
Location
SoCal
Country
Country
#11
........Technically speaking I could pay cash for the car. However on the same $50k I'm making 10-15% annually.

Yes, if you don't touch the initial $50k.

To make the comparison apples to apples, you need to reduce your principal invested amount by equivalent of monthly payments (e.g., $800/mo) so the invested amount reduces each month. At the end of the first year, your investable amount is roughly $40k and not $50, then down to roughly $30k at the end of the 2nd year and so on.

You just need to compare net future value using your fixed payment+rate vs payment equivalent and anticipated invested return %.


At least with homes, they appreciate in value, usually faster than the amount of interest you're paying. At least that's been my experience. So I can justify a loan on a home. I'm not sure how we got to the point where it's acceptable to have large long term loans on vehicles.
You must be on the younger side of life... Historically, mortgage rates have been significantly higher than today. Average home price, historically, appreciates 3%~6%/yr (depending on when to when and if its national average or regional), while average long-term historical mortgage rate in US for the past 30 years is around 8%. That's the reason why we have 5/! ARM and other financial instruments to meet affordability.

These days, however, rates are lower than appreciation (depending on what part of the country you're in), which is what you've pointed out.

The long term loans for vehicle is, in my mind, is one of the dumbest thing for such a depreciating asset. But its how people afford higher price tags for shinny new transportation!
 

SoFlaModel3

@Teslatunity
Moderator
TOO Supporting Member
Joined
Apr 15, 2017
Messages
9,819
Location
Florida
Tesla Owner
Model 3
Country
Country
#12
Yes, if you don't touch the initial $50k.

To make the comparison apples to apples, you need to reduce your principal invested amount by equivalent of monthly payments (e.g., $800/mo) so the invested amount reduces each month. At the end of the first year, your investable amount is roughly $40k and not $50, then down to roughly $30k at the end of the 2nd year and so on.

You just need to compare net future value using your fixed payment+rate vs payment equivalent and anticipated invested return %.
That's a good point... my returns will still outpace the measly 2.00-2.74% interest rate I will end up paying on the car though.
 
Joined
Jul 28, 2017
Messages
17
Location
Texas
Country
Country
#14
May savings account has an interest rate of 0.75% and day trading is scary. Hardly anybody I know in my area owns a house.

I guess I should just keep driving the ICE car I have.
If you're set on an electric car, I see on Craigslist you can get a used Leaf for under 10k.
 

SoFlaModel3

@Teslatunity
Moderator
TOO Supporting Member
Joined
Apr 15, 2017
Messages
9,819
Location
Florida
Tesla Owner
Model 3
Country
Country
#17
I’m curious, if you’re willing to share. How do you get 10-15% rate of return?
I will preface this with a "I'm not a financial planner" and "market volatility is a factor", but really nothing fancy...

A mixture of some speculation (stock picks), various index funds, and to a lesser extent (especially now with low rates) CDs.

It's worked well for me.

The market has been on a run and obviously if that changes returns will suffer but with it comes more buying opportunities.
 

Model34mePlease

Well-Known Member
Joined
Jun 3, 2017
Messages
274
Location
Monterey, CA
Country
Country
#18
I will preface this with a "I'm not a financial planner" and "market volatility is a factor", but really nothing fancy...

A mixture of some speculation (stock picks), various index funds, and to a lesser extent (especially now with low rates) CDs.

It's worked well for me.

The market has been on a run and obviously if that changes returns will suffer but with it comes more buying opportunities.
It hasn't been too hard over the last 5 years to get that kind of return. An S&P index fund would have done:

upload_2017-8-15_9-54-34-png.2914


That is about a 12% return. If you started before the 2008 crash, it would look somewhat different, and whether the future will be like the past 5 years is definitely conjectural.
 
Joined
Apr 5, 2016
Messages
18
Location
New Jersey
#19
The truth is this mentality can easily be blamed on Tesla themselves!

If you look at their website trying to get an idea and building lets say a model S, they will conveniently display how much your imaginary payment is AFTER $7,500 fed. refund and AFTER local incentives (if any) and AFTER fuel savings, making one believe that those savings come upfront and in full.

While I do blame them as root of this mentality issue, I don't blame them for doing it. Its simply a sales tactic, and everyone loves to get something for nothing, therefore if they already love the car, these "incentives" are a great final push.
 

Model34mePlease

Well-Known Member
Joined
Jun 3, 2017
Messages
274
Location
Monterey, CA
Country
Country
#20
The truth is this mentality can easily be blamed on Tesla themselves!

If you look at their website trying to get an idea and building lets say a model S, they will conveniently display how much your imaginary payment is AFTER $7,500 fed. refund and AFTER local incentives (if any) and AFTER fuel savings, making one believe that those savings come upfront and in full.

While I do blame them as root of this mentality issue, I don't blame them for doing it. Its simply a sales tactic, and everyone loves to get something for nothing, therefore if they already love the car, these "incentives" are a great final push.
Tesla is correct in their representation on a net basis. The problem is a cash-flow issue which, unfortunately, can be serious for some people.