A better way to finance a Model S? decide.

A better way to finance a Model S? decide.

I have a Tesla reserved and can't wait to put my order in...however, I've been having a very difficult time trying to figure out how Tesla financing is a good deal vs. financing through my credit union. I am buying the car to use 100% for business and may have figured out a way to lease the car for the least expensive way possible--and it's not through Tesla. If I am missing something, I am all ears--hopefully someone can explain it to me. Here is my example...

The Model S I want is $78,820 (base $71,070, $7,750 in options).

Through Telsa financing I would have to put down 15% ($11,823) and would finance $66,997 at 2.95% which would make my monthly payment $1,016.43.
Comparing apples to apples, if I put the same 15% down with my credit union, their rate is 1.99% which would make my monthly payment $987.94.

After 36 months with Tesla financing, I would owe $32,018.97 to pay the car off.
After 36 months with my credit union, I would owe $32,499,69. Almost the same, except that my monthly payment would have been $28.49 less each month AND I would have paid $1,506.42 less in interest!

Now, I understand that the real selling point of Tesla financing is the buyback. I get it. However, they are going to value my car at $38,867.50 based on their 50% base/43% option formula. If I sold it back to them at 36 months, I would net $6,848.53.

With all of the hype and scarcity around this car you would have to be an idiot to think a $79k car is going to be worth $39k in 3 years. Conservatively, if I sold it for $45,000 on my own after financing it through my credit union, I would pay off my balance and net $12,500.31 which more than covers the original $11,823 down payment. So, all I paid over 3 years to lease the car is $35,565.84 ($987.94x 36 months). This $36,565.84 can come right off my taxes as a business loss. If I fall in a 33% tax bracket, that means I only paid $24,133.45 to lease the car for 36 months through my credit union = $670/month.

Does anyone have another example or a better way to afford a Model S?

penguino35 | 08. Juni 2013

I did a little analysis like this too and my numbers are very close to yours. Here's an .xls spreadsheet with some work I did.

Yes, I also agree that we're going to do better selling the vehicle in the open market. It's probably the same value proposition of going to gazelle for selling your iPhone, you'll do way better selling on ebay. So I think we'll net quite a bit more in the open market, to the tune of 12 - 14K.

jat | 08. Juni 2013

The guaranteed buyback is really just a form of insurance. Like most insurance, you shouldn't buy it if you don't need the thing being insured. So, if you don't plan to sell your Model S in a few years or you think it will be worth more than that, there is no need to buy the insurance.

johnyoung1234 | 08. Juni 2013

@penguino35--thanks for the reply and your spreadsheet. I'm glad there are others that figured out something similar. I also forgot to take into account the $7500 federal tax credit in my calculations which I think makes the actual "lease" price $600/month!

Mathew98 | 10. Juni 2013

You can also get a loan from Alliant Credit Union for 1.49% for 6 years. All it takes is a $10 donation to a selected charity. They will process the loan within 2 days of receiving all your paperwork.

Some of the other owners are also very satisfied with the speed and rate that ACU provides.

riceuguy | 10. Juni 2013

The only flaw I see in this approach (aside from the fact that if it's a true lease you can't deduct a loss, but you can deduct the payments, and if it's not a true lease then there's a whole different set of issues) is that the buyback could be very valuable if in three years a substantially better battery is available or if the Gen III vehicle is 80% as good as Model S with 50% of the cost.

Bighorn | 10. Juni 2013

The other factor is that Tesla financing is often dropped below the advertised rate of 2.95%.

nyannitello | 10. Juni 2013

@ Bighorn...To expand on this a bit. Where you finance plays a huge role as well. For example...I live in DC and US Bank can't lend here because there isnt a "local branch" to finalize paperwork. Wells Fargo on the other hand (I have my mortgage through them) can only offer a bottom line rate of 2.99% for 6 years. So while US Bank may be able to drop below the TM Advertised rate Wells Fargo can't.

DouglasR | 10. Juni 2013

As it's not a true lease, you would not deduct your payment. You would deduct the interest plus depreciation. I haven't computed it, but it might actually be better for you, depending on which depreciation methodology you use. There are limits for "luxury vehicles," but the depreciation is still accelerated.

timmsteiner | 10. Juni 2013

riceuguy nailed it. there WILL be a newer, cheaper Tesla in the future...not sure if it will be in 3 or 4 years. Is someone going to buy your used model or a brand new one for the same price. that is the question you need to ask yourself. you are paying a little more to ensure that you can get rid of your car after 3 years.

RDoherty | 10. Juni 2013

I was surprised to learn that the minimum you can finance is $30,000. I am trying to finance only $20k, so I have to look elsewhere.

Brian H | 10. Juni 2013

Elon said they would follow the industry model of a new design in about 6-7 years, and a mid-course significant update in about 3-4 years.

riceuguy | 10. Juni 2013

Good point Bighorn...I've heard as low as 1.95%

riceuguy | 10. Juni 2013

@Brian H, I was referring to Gen III; there are always those that prefer a previous generation to a new generation, so the update doesn't worry me too much.

@RDoherty, that's so you don't finance $10k just to get the guarantee...

AmpedRealtor | 13. Juni 2013

By the time Gen III is announced, the Model S will hit its mid-cycle refresh. Also remember that the Gen III is going to be a smaller vehicle. So in three years, the most likely choices are going to be between paying $40k for your large Model S or the same money for a smaller, but new vehicle. I'm assuming a new Model S in three years is still going to cost at least as much as it does today. So you are basically banking on your used Model S being more attractive than a Gen III due to size.

Brian H | 13. Juni 2013

There is a whole new "demographic" at that price point. Plenty to absorb both!

ajayv | 15. Juni 2013

To the OP,
Since you mentioned you are planning to use the car 100% for business, curious if you have figured the best way to take the depreciation (Section 179) deduction?
My understanding is that if the title is with the corporation, credit unions aren't financing those and insurance also goes up. Have another thread on this topic but haven't got a definitive answer.

AlMc | 15. Juni 2013

ajay: Also, if titled in the Corporation's name the corporation is taking the Federal tax credit.

MichaelN | 16. Juni 2013

We used Alliant Credit Union - easy to become a member, just ask how - 1.49% with direct withdrawal - all done on the phone and with email - they will loan up 100% - a second option is Pentagon Federal Credit Union, also easy membership, up to $70K loan, 1.99% - if buy back is important to you then Tesla financing through WF or US Bank is an excellent choice at 2.95% -