Just Invited to Configure, Thinking of Giving Up Reservation

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Carl_P

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#1
All,

I am a day one reservationist, who put down $1k thinking that I was going to buy a $30-$35k beautiful, glorious, mostly standard Model 3 (after all fees/taxes/7.5k rebate).

Two years later, I have run the numbers and don't see any way I pay less than $40k, and that's assuming I wait all the way until the standard model SR is available and the rebate scales down.

I was just invited to configure last week, but of course, this will be for a $46k car, after all-in taxes/delivery/rebate.

So, I'm (sadly) thinking of giving up. Of course, being resourceful and knowing that I hold something of value - a Model 3 reservation that's ready-to-configure - I'm trying to figure out what to do with it.

Would you:
1) Try to sell the reservation itself? Maybe get 3-4k for it
2) Actually buy the first production car, THEN immediately sell it for slight profit?
3) Simply wait to see if anything changes about SR, maybe hope the 7.5k credit lasts into the 4thQ?

Thanks,
Carl
 

Dr. J

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#2
All,

I am a day one reservationist, who put down $1k thinking that I was going to buy a $30-$35k beautiful, glorious, mostly standard Model 3 (after all fees/taxes/7.5k rebate).

Two years later, I have run the numbers and don't see any way I pay less than $40k, and that's assuming I wait all the way until the standard model SR is available and the rebate scales down.

I was just invited to configure last week, but of course, this will be for a $46k car, after all-in taxes/delivery/rebate.

So, I'm (sadly) thinking of giving up. Of course, being resourceful and knowing that I hold something of value - a Model 3 reservation that's ready-to-configure - I'm trying to figure out what to do with it.

Would you:
1) Try to sell the reservation itself? Maybe get 3-4k for it
2) Actually buy the first production car, THEN immediately sell it for slight profit?
3) Simply wait to see if anything changes about SR, maybe hope the 7.5k credit lasts into the 4thQ?

Thanks,
Carl
As you may know, your reservation is transferable only with Tesla's approval:

"Your Reservation is not transferable or assignable to another party without the prior written approval of Tesla." I doubt Tesla would agree to you profiting from your reservation, but I could be wrong.

If you can afford to hold on, I would advise that. It's not clear to me when the tax credit will be halved, when the SR will be available to someone like you, etc. Too many variables. But it's your money, not mine! :)
 

Carl_P

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#3
As you may know, your reservation is transferable only with Tesla's approval:

"Your Reservation is not transferable or assignable to another party without the prior written approval of Tesla." I doubt Tesla would agree to you profiting from your reservation, but I could be wrong.

If you can afford to hold on, I would advise that. It's not clear to me when the tax credit will be halved, when the SR will be available to someone like you, etc. Too many variables. But it's your money, not mine! :)
Thanks! That sounds like it rules out #1...

I can definitely afford to hold on to the reservation. It is more the fact that I never *wanted* to pay $40k+ for this car (or any car). I felt $30-35k with a tax credit would get me more down into the range I wanted to spend on a vehicle, and really liked this one.
 

Dangermouse

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#4
All,

I am a day one reservationist, who put down $1k thinking that I was going to buy a $30-$35k beautiful, glorious, mostly standard Model 3 (after all fees/taxes/7.5k rebate).

Two years later, I have run the numbers and don't see any way I pay less than $40k, and that's assuming I wait all the way until the standard model SR is available and the rebate scales down.

I was just invited to configure last week, but of course, this will be for a $46k car, after all-in taxes/delivery/rebate.

So, I'm (sadly) thinking of giving up. Of course, being resourceful and knowing that I hold something of value - a Model 3 reservation that's ready-to-configure - I'm trying to figure out what to do with it.

Would you:
1) Try to sell the reservation itself? Maybe get 3-4k for it
2) Actually buy the first production car, THEN immediately sell it for slight profit?
3) Simply wait to see if anything changes about SR, maybe hope the 7.5k credit lasts into the 4thQ?

Thanks,
Carl
I’d suggest that you run the numbers for total cost of ownership before you cancel based on initial cost. $46k is not the whole story.

I ran a 6-year cost of ownership comparison of my $55k configuration versus my 2012 PlugIn Prius, and it was a wash. The biggest factor was the resale value. They both worked out to about $5,800/year.

Your situation may be different, but it’s worth crunching a few numbers to see.
 

Carl_P

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#5
I’d suggest that you run the numbers for total cost of ownership before you cancel based on initial cost. $46k is not the whole story.

I ran a 6-year cost of ownership comparison of my $55k configuration versus my 2012 PlugIn Prius, and it was a wash. The biggest factor was the resale value. They both worked out to about $5,800/year.

Your situation may be different, but it’s worth crunching a few numbers to see.
Do you have any advice on how to calculate total cost of ownership? I understand how to calc electric vs gas, but what else have you factored in? How much lower will maintenance costs be? I assume no oil changes, but would still have to assume same schedule for tires, brakes, etc., right?
 

Dr. J

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#6
Thanks! That sounds like it rules out #1...

I can definitely afford to hold on to the reservation. It is more the fact that I never *wanted* to pay $40k+ for this car (or any car). I felt $30-35k with a tax credit would get me more down into the range I wanted to spend on a vehicle, and really liked this one.
You may know this as well, but it is not the case that the US tax credit ends in December (assuming it's not repealed in the interim). Instead, the full credit is available the calendar quarter that Tesla makes its 200,000th US delivery, plus one more quarter, then there is a phase out period over the next 12 months (two calendar quarters with a half credit and two more quarters with a 1/4 credit).

Let's make your optimistic assumption that #200,000 happens in July. In that case, you could receive the full credit through December 2018, and be assured of a half credit ($3,750) through June 2019. If you hang on through, say, November, you can run the numbers based on what's available then. As of now, I can't foresee what choices will be available to someone in your situation. You can rely on Tesla's guesstimate, but they're habitually late and they change their mind, making the future less than fully predictable.
 

Uricasha

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#7
It doesn't make financial sense to buy a Tesla. It's more for the coolness/driving the future factor.

If somebody wanted to save the Earth, their money would be better spent elsewhere. If you want to support Tesla, buy some stock.
 

garsh

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#8
It doesn't make financial sense to buy a Tesla.
Caveat: they do hold their resale value very well.

You might consider buying a used Model S instead. It will be expensive, but with the low cost of ownership (no gas, no oil changes) and high resale values, you'll get most of your money back when you go to sell it.
 

Stacks

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#9
Now that Tesla is getting close to 5k/wk, your reservation wouldn’t have much value anyway. Someone might pay $500-$1,000 if they could.
 
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Dangermouse

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#10
I came up with this spreadsheet because I am already getting the “oooooh, you’re getting a Tesla” type comments, implying high cost. I always thought it would not be that much more, but I wanted some math to back me up.

I ran all of the numbers assuming 9% total inflation since 2012 (I did check that). Total fuel costs for me are about half, coming from an already crazy efficient car. Insurance, tires, and yearly tax are all slightly higher, which basically cancel out the fuel savings (again, for me). I am using 17k miles a year. The Prius numbers are actual numbers for the past six years. Electricity, taxes, insurance are all based on actual numbers for me.

I didn’t figure in equal maintenance items like wipers and air filters. I included savings for no oil changes. The Tesla miscellaneous maintenance number is a swag for now; my Prius had no issues, and I am assuming the Model 3 will have something that needs fixing after six years; so far the Model 3 maintenance schedule only has a couple visits and maybe one fluid change after 100k miles. If you are coming from a non-Toyota/Honda, maintenance might be in the savings column for you.

Depreciation is based on Model S and anticipated Model 3 numbers from an Electrek article a while back that had the values at 50% after 100k miles...I have deducted a few thousand there for a trade in penalty. This is one area where over the air updates help...I am constantly driving on roads that aren’t on my six year old car’s nav system. FSD may upend this for the better as well...

After all of this, I am still getting a car that is twice as fast, twice as fun (that may be understating it), has Autopilot, has a glass roof, has power seats, has cabin preconditioning, has a frunk, and used half the energy.

Seems like a good value, looking at the big picture.
63b90f5c-1c15-424e-8c99-528793b2a370-jpeg.7690
Do you have any advice on how to calculate total cost of ownership? I understand how to calc electric vs gas, but what else have you factored in? How much lower will maintenance costs be? I assume no oil changes, but would still have to assume same schedule for tires, brakes, etc., right?
 

mtdoak

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#11
Caveat: they do hold their resale value very well.

You might consider buying a used Model S instead. It will be expensive, but with the low cost of ownership (no gas, no oil changes) and high resale values, you'll get most of your money back when you go to sell it.
To be fair...there is no way to guarantee resale value of the 3. Right now demand is high because of the waiting list . When that goes away who knows what happens to the value?

To answer OPs question...wait and see where the rebate is when you get invited to get SR . 35k minus "only" 1750 is still a lot less than 55k- 7500 . Interest one 1k isn't that much over a year.
 

SoFlaModel3

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#12
Late to the party here, but my recommendation is to hold the reservation and “wait and see”.

As has been covered you can’t “sell” your reservation.

Buying the car and flipping it is possible. Now remember you’ll be responsible for all taxes and fees up front. Now that production is ramping up the window to make a profit flipping the car is closing (and/or has closed) and don’t forget you’re still 3-6 weeks away. You would qualify for the full tax credit in that scenario (assuming you have a tax liability of $7,500). Now it’s a bit of a gray area there and one I wouldn’t personally mess with as you’d be buying the car with intent to sell it and technically shouldn’t collect the credit, but again it’s a gray area. You could buy it and “change your mind” and clear that hurdle.

At the end of the day, I still say hold for a wait and see and take into account total cost of ownership as others have mentioned. I save $121/month on gas to electricity alone and when coupled with the $7,500 tax credit (spread monthly for math purposes), the Model 3 at $56,500 barely costs me more than my $33,000 Hyundai Sonata that I traded in. Long term maintenance costs should be lower and resale value higher as well.

Then there is the fun factor and you can’t measure that ;)
 

BigBri

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#13
Can't take money with you so why not enjoy it? My rule of thumb is to write down a list of major problems in your life. If there is a major problem there which that money could solve, might be better to tackle that. One example is I had a house without a furnace and electric heat is crazy expensive so I froze in the winter out of sheer principle. Getting a house with a furnace was above a Tesla.

Depreciation is impossible to know but the ModelS has been better then almost any car in its class. Having a build to order system helps. You generally can't walk into a Tesla dealer and walk out with a car like you can a Dodge. This creates a natural demand as there are always people that need things RIGHT NOW and will pay a decent penny for a used car. I'm personally planning to keep mine for a long time to get a lot of value out of it while also enjoying the pride of ownership. I don't feel 'cool' driving my Leaf haha. More 'quirky'.
 

TheTony

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#14
It doesn't make financial sense to buy a Tesla.
It's arguable that it doesn't make financial sense to purchase a car in general. However, being most people's method of transport, it is ultimately a tool for people to accomplish other objectives in their lives, so for most it's viewed as a necessity for all intents and purposes.

I don't think anyone can successfully argue that a Tesla is better than an ICE, financially. However, it could possibly be argued that it's not financially any worse, compared to many other vehicles, when considering the full costs of ownership.

Nevertheless, while I do think if one's main (or only goal) is frugality, they're not going to achieve it with a Tesla (or most EVs available currently, save for used Leafs). So there's certainly a "splurge" factor, among the non-financial intangibles.
 
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TheTony

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#15
I assume no oil changes, but would still have to assume same schedule for tires, brakes, etc., right?
I'm not about to suggest there's no maintenance on the 3. However, your schedule for brakes will be significantly less than a non-EV, simply due to a lot of the brake wear being avoided by the regenerative braking system in most EVs.

Of course, you may offset that with more frequent tire replacements, if you're a "spirited" driver :D
 

TheTony

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#16
My take on your original question: trust your instinct. You decided that you were interested enough in the car to put a reservation down. However, in doing that, you set some hard limits for what you were willing to spend. If that was important to you, I'd say you should stick to your guns. Other than the rebate, which would be offset by the higher price for early production, you're not really missing out on anything, because you can go back and order a SR 3 in the future should your opinion change.

Also, if you really want a 3 but not the high sticker, just make the generally wiser financial decision and purchase a SR on the secondary market. You'll have to wait longer but could still potentially hit your price point and won't have to eat the initial depreciation hit.
 

SoFlaModel3

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#17
I don't think anyone can successfully argue that a Tesla is better than an ICE, financially. However, it could possibly be argued that it's not financially any worse, compared to many other vehicles, when considering the full costs of ownership.
Actually I think it’s very easy to make the argument that Tesla is better than an ICE financially and you did it with your last portion of the last sentence.

Assuming we compare apples to apples. So for instance I take a $50k BMW 3 series and a $50k Tesla Model 3, the Model 3 already wins on gas versus electricity right off the bat. Then you throw in reduced long term maintenance expense and finally the federal tax credit as icing on the cake.

I feel like Tesla’s, well especially the Model 3, are compelling enough on their own but we have to remember to compare apples to apples. It’s an entry level luxury car and should always be compared against that segment and not inexpensive ICE cars.
 

Uricasha

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#18
From a financial standpoint.

I could buy a $25,000 Honda Accord and buy $25,000 of SP500 index stock.
  • Assuming I get an annualized 7.5% return from the stock, I could buy myself another Honda Accord every 10 years with that same money invested.

Resale Value (using KBB values)
https://clark.com/cars/the-12-best-cars-to-buy-for-2017/
Tesla is not on the list

I want to agree with you DangerMouse but the EV vs Non-EV numbers don't add up in 2018. Here's to hoping that EV costs come down to true parity in the future.
 

TheTony

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#19
Actually I think it’s very easy to make the argument that Tesla is better than an ICE financially and you did it with your last portion of the last sentence.

Assuming we compare apples to apples. So for instance I take a $50k BMW 3 series and a $50k Tesla Model 3, the Model 3 already wins on gas versus electricity right off the bat. Then you throw in reduced long term maintenance expense and finally the federal tax credit as icing on the cake.

I feel like Tesla’s, well especially the Model 3, are compelling enough on their own but we have to remember to compare apples to apples. It’s an entry level luxury car and should always be compared against that segment and not inexpensive ICE cars.
I think you captured the issue with this argument pretty well. It currently only holds up when the competition is luxury vehicles, even if it's entry level luxury. It's why I hedged my statement and avoided suggesting EVs beat ICE unconditionally.

Don't mistake my statement as being bearish on EVs - quite the opposite. We're still in the early days of this trend/shift. As a result, as the technology drives down market and continues to make a compelling case, the argument that it's a more financially sound decision will become much easier than it is today. Fortunately, we've got companies like Tesla who are holding the establishments feet to the fire and proving that not only is this possible, but people also want it. They're proving there's a real market and making the transition almost an inevitability.

Of course, as I alluded to, there's plenty of intangibles that are also compelling reasons that get people to splurge and consider a Tesla - technology, green-ness, simplicity, autonomy, etc
 
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SoFlaModel3

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#20
I think you captured the issue with this argument pretty well. It currently only holds up when the competition is luxury vehicles, even if it's entry level luxury. It's why I hedged my statement and avoided suggesting EVs beat ICE unconditionally.

Don't mistake my statement as being bearish on EVs - quite the opposite. We're still in the early days of this trend/shift. As a result, as the technology drives down market and continues to make a compelling case, the argument that it's a more financially sound decision will become much easier than it is today. Fortunately, we've got companies like Tesla who are holding the establishments feet to the fire and proving that not only is this possible, but people also want it. They're proving there's a real market and making the transition almost an inevitability.

Of course, as I alluded to, there's plenty of intangibles that are also compelling reasons that get people to splurge and consider a Tesla - technology, green-ness, simplicity, autonomy, etc
Absolutely and case in point my mother wants a convertible. There is no compelling EV for her to get right now. I think EVs and Tesla’s hold their own within their class, but the bigger issue is that there are so many pockets of vehicles missing right now.