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10 year financing on a new model 3? I wish...

10 year financing on a new model 3? I wish...

So a $40,000 car over 10 years would make a monthly payment of  $333.00 a month plus the finance charges. Subtract in the difference between the cost of gas and  electricity, for 100,000 miles, and the numbers start looking very attractive, especially if you could pay it off early!

The real cost of ownership costs are the car payments minus the savings in gas. Maintenance is also reduced depending on how the EVs fare over the coming years.

A ten year term is virtually unheard of right? That's why it would work, cause it would disrupt the leasing and auto financing industry too. And it is a super powerful way to make the technology available to the most people.  Tesla can get its costs down only so far, then financing is the next and final way to get the costs down to an affordable compelling level.

At some point, Tesla may even extend some of its warranties, as the cars get older and as we see how well they age.

So at 100 k miles, the savings over gas would bring cost of ownership down another 180 a month conservatively, yeilding cost of ownership less than a cheep gas compact ICE, or around $150.00 to $180.00 a month. Even low wage earners could get a model 3 or a successor.

Hopefully soon, some smart insurance company will offer a less expensive tailored insurance solution for Tesla owners that will take into account the safety factors inherent in Teslas, and reduce cost of ownership even more.

Of course even an eight year term would be fantastic and would still set the bar low enough for cementing the model 3 a place in history.

grega | October 26, 2014

I think there could be some interesting ways of presenting the savings, but people don't see these things very clearly really.

I just plugged in some of your figures figures on $40k over 10 years and get $450/mth - a little higher as it includes 6% interest. Expensive Australian petrol would cost me $220 month if I travelled that far (I don't), and the electricity would cost me $58 a month (26c/kWh!).. so save $162/mth

Calculated the OTHER way... if I was saving $162/mth in petrol, that's the same as paying off $14,300 over 10 years.

A little interactive phone app that takes current gasoline spending, price, mileage, electricity costs and tells you your savings by switching to a Model ≡ could be very interesting. Add in some trends on gasoline prices, electricity prices, changes to interest rates and we could interactively find the right conditions to justify the purchase :)

ghillair | October 27, 2014

My calculator says $40,000 for 360 months is $111 a month plus interest. Where do you get $333?????

ghillair | October 27, 2014

Sorry my bad!

vgarbutt | October 27, 2014

Haha 120 months right?

Anyway you can see the magic that can happen when you do a 10 year term, and low interest, and a car that can easily live that long.
After 10 years, just pop in a new longer range battery and your good to go for another 10! Or just run it into the ground. And drive for free! (Virtually)

Grinnin'.VA | October 27, 2014

@ vgarbutt | October 27, 2014

Anyway you can see the magic that can happen when you do a 10 year term, and low interest, and a car that can easily live that long.

Does anyone know where people can borrow money for a car a low interest rate on a 10-year deal? I'd guess that a financial institution that offers such a deal could get a lot of business without much advertising.

Go Tesla!
Ron :)

vgarbutt | October 27, 2014

Hey maybe Tesla will build a financing arm!!!?

Anemometer | October 27, 2014

You missing 1 point. There's going to be a 2 year waiting list to get a Gen III. That's for cash buyers. I don't think they'll be wanting to worry about 10 year finance deals.

It would have to be through a 3rd party anyway - otherwise they are giving away billions of dollars worth of cars in the hope you pay them back one day... and they would need to raise the finance to do that and take the risk on whether everyone would keep paying for 10 years, when the Gen III.2 and III.3 have been released.

Telsa can't be everything to everyone. 1 step at a time. Just wait till the Gen IV comes out. A Ford Focus rival, or the Gen V - a Toyota Yaris rival. both at the ICE equivlaent pricing. Same as Model S has done, and Gen III will do. ;-) Then you won't need to take out a 10 year finance deal.

Red Sage ca us | October 28, 2014

I rather despise the very notion of amortization, especially for a depreciating asset. Seven year auto loans are too long as it is... I can't imagine being saddled with payments on a car, even at low interest rates or minimal monthly payment, for a full decade. Better to wait three years, buy a used car off lease, and pay it off in three years, if you must finance at all.

Grinnin'.VA | October 28, 2014

@ Red Sage | October 28, 2014

I rather despise the very notion of amortization, especially for a depreciating asset.

Red, your preference for avoiding car payments matches mine.
But we're in a rather small group. Overwhelmingly, most people borrow money to buy their cars.

Go Tesla!
Ron :)

holidayday | October 28, 2014

Easy solution:

Start paying yourself (or savings) that 333, 450, or whatever per month. By the time Model 3 comes out, you'll have a significant down payment saved up and then you only need to finance 4 or 5 years.

Or, then you can get a 10 year term on a pimped out Model S.

grega | October 28, 2014

People will always have different ways of purchasing. Vgarbutt's 10 year loan question reflects more that he expects the car to have a longer life.

If you know how much you can afford now (whether outright or loan etc), then it's useful to know how much EXTRA you can genuinely afford based on fuel savings - in that the gasoline savings every year has a direct dollar value. Actually maybe the word "afford" is wrong... since if you use a loan you literally buy a more expensive EV than an ICEV at no extra monthly cost.

Iowa92x | October 28, 2014

Right, if you can't pay a car off in three years, then question whether you can afford it. Cash or nothin' for me. If you bought Tesla stock early, you can get a free car.

grega | October 28, 2014

@iowa... We're getting into financing philosophy though .

Like an iPhone costs about $1000, but most people don't realise. Really you shouldn't buy an iPhone every 2 years unless you can afford $1000. The fact that its hidden in the network fees is irrelevant. The world generally doesn't see it that way though.

Blueshift | October 28, 2014

Interesting though experiment I guess:

10 years at 6% = $13,289.84 in interest, or $1,3290 / year I would have to save in gas.

Here (where gas is $3.37 and electricity is $.115 / kWh) looks like I would have to drive about 14,500 miles / year to break even. But I only drive 7,425 miles / year (average past four years).

In any case I think better to pay cash and keep your $13,289.84.

Captain_Zap | October 28, 2014

The problem with cars is they can be wrecked and totaled easily.

There are not many things that are worse than being upside-down on a totaled vehicle.

Let's say you have a totalled car, insurance pays you the $6,000 that they think it is worth. Yet your still owe $18,000 on the car due to a long term loan. Ouch.

The impacts are not as traumatic in these days of cheap interest rates but, not too long ago people were getting rid of vehicles and just asking others to take over the payments because they were upside-down.

Learn "The Rule of 72". It works for making money on interest and for estimating the amount something will cost over time.

Brian H | October 28, 2014

CapZap;
Yeah, that would make an interesting financed MS license plate: "RULE72"!

Smogavc | October 29, 2014

Its about time Tesla makes a more afordable car. With the same range as Tesla S or X without the need for luxury. More functionality represented by lower price, better loans. But no reduction in security,space n range ofcourse.
Stefan Smogavc

vgarbutt | October 29, 2014

Many, many, many people keep their car for over 10 years. They make 30-50 k a year and lease or rent their abode. They are the 75% i postulate. When i think about it, this venue of the 25%, ( maybe a bit high), of persons that can 'easily' buy a 90,000 dollar car, may not be the best place to strategize the least expensive monthly purchase solution.

It might require some sympathetic creativity. The idea that if you can't pay off 40,000 dollars in 3 years, you should buy a 15,000 ICE' or bundle up and take the bus is a bit elitist, and exposes one as a classist.

People need cars, the planet needs electric cars, and mass adoption doesnt mean mass adoption by the rich, it means for the masses, which the ultra rich need to be kept at 30,000 a year, to keep raking in the cash.

Of course i don't want to paint with too broad a brush, but the companies get richer while, or even by, keeping wages low and jobs unskilled and part-time, and reducing benefits etc. All this especially after 2008 crash.

Everyone deserves the right to an affordable electric car. If not Tesla, then someone else will do it.

vgarbutt | October 29, 2014

Captaizap,

I never thought of that, its a great point, but that has been true for decades. How is it any different with regards to electric cars?

Brian H | October 29, 2014

smog;
"About time"? They've spent a few years accumulating the capital and tech and market credibility essential to the effort. Would your magic wand work better?

Red Sage ca us | October 29, 2014

Smogavc wrote, "Its about time Tesla makes a more afordable car. With the same range as Tesla S or X without the need for luxury."

Tesla Motors is not a luxury car company.

"Tesla's goal is to accelerate the world's transition to electric mobility with a full range of increasingly affordable electric cars." -- Tesla Motors

See?

vgarbutt, "It might require some sympathetic creativity. The idea that if you can't pay off 40,000 dollars in 3 years, you should buy a 15,000 ICE' or bundle up and take the bus is a bit elitist, and exposes one as a classist."

Dude. I really take issue with the way that 'elitist' is used in this sentence. I am a Citizen of the United States of America. That means I have no class. This is not a feudal society. I am not bound to land or to a lord by oath. I abhor the very notion of a class system and I do not abide by it.

I do not engage in preventive social maintenance. No one is below me. No one is above me. The only person I can be 'better than' is myself.

My understanding is that it is a good idea to strive for excellence. Those who are 'elite' have achieved it typically through hard work, determination, or sheer luck. Some choose mediocrity as their goal, and they rarely fail in reaching it.

Some purport to believe in the concept of 'personal responsibility' and keep outstanding debt low or nonexistent. Others believe it is just fine to 'make the payments' and remain in eternal debt. Both strategies have their advantages and it is up to the individual to choose their path.

vgarbutt | October 30, 2014

Red
Actually i was talking generally, not actually to you personally. Sorry if you took it that way, and i actually dont remember what the hell i was thinking. Peace eh!

Red Sage ca us | October 31, 2014

vgarbutt: Y'aight. No problem.