Tempted, but wary...

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JasonF

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#1
I've never looked at the lease options on the Tesla web site before tonight. Once I did, it raised an interesting question...

I have a mid-2018 RWD long-range model with almost dead-on 10,000 miles, no AP, no FSD. The KBB Blue Book value of it is apparently $44-$46k (that sounds high, but whatever).

The lease payment for a new dual-motor model with the same options (except AP is now included) is significantly less than I'm paying now, for "more car" (dual motor, standard AP). If the trade-in is higher than I'm expecting (not based on the KBB value, around or just under $40k) the difference in payment could be much bigger.

I have always been someone who finishes paying off a car completely before buying another one, and hope that the trade-in value is enough to make the next monthly payment reasonable. But this time around, I'm one of those people doing what @TrevP refers to as the "Tesla stretch". So a lower payment is very tempting. But it also feels like it's too good to be true. Like I'm missing something that would make such a transition much more costly than I expect, or maybe make it impossible. The fact that Tesla's ordering is entirely through an inflexible web site makes the complexity of it even more intimidating. That's the "wary" part in the subject line.

So for those of you more math-inclined than I am...what am I missing? Or am I second-guessing this for no reason, and it really is a good way to reduce the payment?

Also, as a side question the web site doesn't answer - does the lease come with a buyout provision at the end?
 

FRC

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#2
Don't overlook...how long do you have to continue your current payments vs. total payments on a new contract. And, what do you own at the end of your current contract vs. a new contract?
 

Gordon87

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#4
I don’t know whether you should do this, but it has been reported that Tesla leases for the Model 3 do NOT include a lease-end purchase option. Tesla envisions taking back all the leased cars for its autonomy service. (I’m not commenting on whether or not that expectation will actually come about.)
 

NR4P

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#6
“Please note, customers who choose leasing over owning will not have the option to purchase their car at the end of the lease, because with full autonomy coming in the future via an over-the-air software update, we plan to use those vehicles in the Tesla ride-hailing network.” – Tesla
 

Bigriver

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#7
Yeah, as said above, the thing you are missing is that you then own nothing at the end of the lease. So you lose whatever down payment you put on your current car and it blows your whole scheme of having a trade in to soften the payments on the next car. At a minimum, you’d need to be stashing away the delta on the 2 car payments to have some down payment for the next car.

And if you got a new model 3, it would make noise at low speed. First new feature that has made me glad that I already purchased. 😁
 

shareef777

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#8
I've never looked at the lease options on the Tesla web site before tonight. Once I did, it raised an interesting question...

I have a mid-2018 RWD long-range model with almost dead-on 10,000 miles, no AP, no FSD. The KBB Blue Book value of it is apparently $44-$46k (that sounds high, but whatever).

The lease payment for a new dual-motor model with the same options (except AP is now included) is significantly less than I'm paying now, for "more car" (dual motor, standard AP). If the trade-in is higher than I'm expecting (not based on the KBB value, around or just under $40k) the difference in payment could be much bigger.

I have always been someone who finishes paying off a car completely before buying another one, and hope that the trade-in value is enough to make the next monthly payment reasonable. But this time around, I'm one of those people doing what @TrevP refers to as the "Tesla stretch". So a lower payment is very tempting. But it also feels like it's too good to be true. Like I'm missing something that would make such a transition much more costly than I expect, or maybe make it impossible. The fact that Tesla's ordering is entirely through an inflexible web site makes the complexity of it even more intimidating. That's the "wary" part in the subject line.

So for those of you more math-inclined than I am...what am I missing? Or am I second-guessing this for no reason, and it really is a good way to reduce the payment?

Also, as a side question the web site doesn't answer - does the lease come with a buyout provision at the end?
You’d have to sell privately to get anywhere near $40k (no chance if you trade in). A new 2019 AWD goes for $46k after the federal incentive. Contrary to what Elon states we all lose value, especially when they continue to drop the price of new units.
 

JasonF

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#9
Don't overlook...how long do you have to continue your current payments vs. total payments on a new contract. And, what do you own at the end of your current contract vs. a new contract?
Right now I have it financed, it has around 4.5 years left. At the end of that, I would own the car, but the value of it would be unknown right now. At the end of a lease, of course, it's worth zero.


Have you checked with Tesla to see what they would actually give you for a trade in?
That's where the web site comes up a little short. I didn't see any way to find out the trade-in value without putting down a deposit first.


remember though, you don't get anything in the end from a lease, except the temporary use of the car. compared to owning the car in the end when you buy.
That's part of what gives me pause. I wish I knew the future here though, because Elon Musk indicated once that cars would become too expensive for most people to purchase soon. I assume he means they would all be leases soon (because contrary to what GM says, it would be stupid for car companies to make cars that they would own, and sell rides to people), and then I don't know if previous purchased cars would be worth more or less.
 

JasonF

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#10
You’d have to sell privately to get anywhere near $40k (no chance if you trade in). A new 2019 AWD goes for $46k after the federal incentive. Contrary to what Elon states we all lose value, especially when they continue to drop the price of new units.
That wouldn't be worth it to me, if Tesla lowballs the trade-in. I have the car financed, and if the trade-in value is too close to the amount that's left to pay, the transactional costs will make me lose too much to be worth it.
 

garsh

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#12
That's where the web site comes up a little short. I didn't see any way to find out the trade-in value without putting down a deposit first.
Unlike dealerships, Tesla isn't in the used-car business. They will generally only offer wholesale prices for your trade-in. I'd be extremely (and pleasantly) surprised if they offered you KBB money.

As @shareef777 says, you'll probably need to sell the car yourself privately to get that kind of return.
 

TrevP

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#13
Tesla trade-in values are extremely low, my contacts there pretty much told me straight out they don't want to be in the used car business because it's a liability on their books when they're trying to cut costs to be profitable.

Sell it privately. Sure it's a hassle but you'll get more.
 

shareef777

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#16
Been there, done that. Never again
Agreed, I’ve been buying new cars for almost two decades and usually trade in after 3 years. My last trade in (for my 3) was only a year old. Even with all that said, I’m always ahead when compared to going with a lease. I’m never over the mileage limit, but you lose so much residual value on a lease that buying/financing, and then selling yourself is always more cost effective. IMO, leases are for those that want convenience and a new car every few years, regardless of cost penalities.
 

MelindaV

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#17
Leases only (financially) make sense for businesses that can write them off. Individuals that lease nearly always come out way upside down compared to buying. Exception may be the car manufacturer throw away lease deals, like when Fiat was offering the e500 for something like $90/month for 36 months. That you could hardly turn down if you needed a car or not ;), but most other lease “deals” are not so much of a deal at all.
 

JasonF

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#18
That form doesn't have Tesla on the list. Kind of funny, really. It also says it's KBB based.


I'd be extremely (and pleasantly) surprised if they offered you KBB money.
I always take KBB's amounts with a huge grain of salt. And that's even AFTER I purposely don't give it the best chances of a high number - I select "Trade In Value" and then the condition just below Excellent (because that generally means it's never been driven or outside).


Leases only (financially) make sense for businesses that can write them off. Individuals that lease nearly always come out way upside down compared to buying.
That's one of the things that makes me wary - that 3 years from now I'll pay for it big time. I might not have as good a down payment, or the price of the car might be higher, or the lease or purchase interest rate might be higher, so my next monthly payment might be much higher. I might get a lower payment for 3 years, but only by robbing Future Self to do it. With a financed car I'd probably keep it longer after it's paid off, but then it might lose so much value that it's not much of a down payment either (especially with possible advances in battery tech in 6-8 years). Either way it's a gamble - I'm weighing which side of the gamble is safest.
 

MelindaV

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#19
That's one of the things that makes me wary - that 3 years from now I'll pay for it big time. I might not have as good a down payment, or the price of the car might be higher, or the lease or purchase interest rate might be higher, so my next monthly payment might be much higher. I might get a lower payment for 3 years, but only by robbing Future Self to do it. With a financed car I'd probably keep it longer after it's paid off, but then it might lose so much value that it's not much of a down payment either (especially with possible advances in battery tech in 6-8 years). Either way it's a gamble - I'm weighing which side of the gamble is safest.
but with owning the purchased car, you at least OWN it regardless of what it's end value is. with the leased car you own ZERO at the end and you are back to square one. do the math over something like 10 years and see how it works out. you are much better to buy. always.
there is an old thread here from 2016 with calculations comparing two scenerios (before a Model 3 lease was an option and we all were just speculating), but you can see the leasing is essentially just a perpetual payment with no value to it besides the use of the car for that moment.
 

shareef777

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#20
but with owning the purchased car, you at least OWN it regardless of what it's end value is. with the leased car you own ZERO at the end and you are back to square one. do the math over something like 10 years and see how it works out. you are much better to buy. always.
there is an old thread here from 2016 with calculations comparing two scenerios (before a Model 3 lease was an option and we all were just speculating), but you can see the leasing is essentially just a perpetual payment with no value to it besides the use of the car for that moment.
Exactly. With a lease, you have absolutely nothing to show for it after 3 years. Whereas with a financed vehicle, the slightly high payment will give you a vehicle that should still be worth more than you owe. Odds are the slightly higher payments made over those 3 years are more than offset by the value of the car.

For example, you can lease a car for $100 cheaper per month. After 3 years you saved $3600, and then repeat another lease for 3 more years for a total savings of $7200. If you'd bought the vehicle from the start, after 6 years you'd have a paid off vehicle that'll likely still be worth well over $15k (double your lease savings). The only con to this is that you'd be driving a 6 year old car. Though with the lease, you'd have no car at all after 6 years.