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Understanding the per month savings for Guaranteed Resale value on the Tesla website

Understanding the per month savings for Guaranteed Resale value on the Tesla website

Hi all, hoping someone can shed some light on my question so I can get myself into a model S and know the true costs. The Tesla I priced out is $74770 (price with 7500 tax credit). The page on the website with the effective monthly cost shows that I save $48 per month due to the guaranteed resale value. I've done the math over and over calculating the total payments over 36 months (1,270 per month) and using the guaranteed resale value (43% of price) and just can't figure out where the $48 per month comes from.

3 people at Tesla have been unable to answer my question. So, has anyone on this board figured out the math behind this? The reason I ask is because my calculations show different savings.

GeekEV | 12 April 2013

Are you calculating on the price before or after the tax credit? Are you including sales tax? Their calculations likely are. I suspect it represents the difference between the guaranteed residual at 36 months minus the amount owed on the loan then divided by 36 to get a monthly "savings". Though that would really only count if you do give it back at 36 months.

jat | 12 April 2013

@GeekEV - that makes sense, basically lets you treat the purchase as a 3-year lease.

roberto1 | 12 April 2013

Thanks for responding Geek EV and Jat! I did it before tax credit and without sales tax (given I figured they don't get the tax and it doesn't pay down the loan).

I will run some other numbers tomorrow in light of your comment to see if I can replicate theirs but so far I can't.

I had calculated $82,270 (total price) times .43 to be $35,376--what they pay me for the car at least if I decided to sell back.

I had calculated the total payment of 1270 times 36 months to be $45720 and the purchase price of $82,270 minus the payments--$45,720--to be $36,550.

This calculation of course leaves me owing more on the loan than Tesla is going to pay me (and it doesn't even take into account that some of the payments are interest so I presume the amount remaining on the loan is actually higher). So I must be doing something wrong, maybe I need to go to MIT and get a PHD in mathematics.

prytog | 12 April 2013

I think Geek EV's logic is correct, but the Tesla arithmetic is sensitive to how the monthly interest is calculated..
A base mode 85MS costs $81,070. Put 10% down and you finance $72,963.
The monthly payment using monthly interest of 2.95%/12 over 63 months (the months currently on the Tesla calculator) is $1251.56/month, which Tesla rounds up to $1252.
Now if you pay $1252/month for 36 month your remaining loan balance is $32,639.76, but Tesla will buy your car for 43%*81,070 = 34,860.10, so you get net $ $2,220.34 in cash when you turn your car in, which divided into 36 monthly increments is $61.67 (not the $47 per Tesla).

A delay in your first monthly payment, or delay in the final settlement could possibly change my calculated $61 down to the Tesla number of $47.

Or maybe they are doing more than dividing the windfall cash out by something other than 36, perhaps to take into account time value of money.

GeekEV | 12 April 2013

Ah, there you go. I bet he wasn't accounting for the 10% down.

flar | 12 April 2013

@roberto1 you are confusing the money you paid to the bank with the amount of the car you've paid off. You can't add up your payments and assume that you owe "purchase price - accumulated payments" as much of those initial payments went to interest and didn't affect the amount of the car you'd paid off. Each payment pays the interest you owe on the remaining balance first and then what is left over pays down the amount you owe on the car. You also can't just apply a factor to account for this since the distribution of interest vs. principal of each payment shifts slightly as you pay off the car slowly and thus owe less interest on each subsequent payment.

Unless you know the (not very simple) formula, you have to use a loan calculator that shows an interest and principal breakdown and then find the "payoff" amount or the "residual value" at the 36 month mark.

Mark2131@CA-US | 12 April 2013

@roberto1....

Enough with the math! Just buy it already! You don't need to be an accountant to calculate the "fun factor" of this car. If you're looking for a financial justification for buying this car, then you're looking in the wrong place. There are plenty of other "better deals" to be had with ICEs. That's NOT why you buy a TESLA. While you're doing spread sheets and calculating ROI's, I'm enjoying my commute in a car that FAR exceeds my expectations. (I don't know how to put that into a spread sheet!)

roberto1 | 13 April 2013

Thanks everyone for the great input, much appreciated. And Mark2131, in the end, you are right.

Brian H | 13 April 2013

Any economic good, tangible or intangible, is worth what someone will pay for it. It may be that the "fun factor" has more economic value than anything else about the car.