How big down payment for your M3

How big down payment for your M3

Hi, I am just curious how other people plan to pay for their Model 3. I am quite conservative when comes to loans. I was quite shocked how many people take for granted that they will take a loan to buy this car. I personaly does not plan to take any loan and already saving heavily to be able to afford pay the car from by savings( currently at 33k$). So please write down in percentage how much money do you expect to take as a loan. So in my case I would write 0%. Thanks. Also If you dont mind you can write your nationality. I am from Czech republic.

cquail | August 25, 2016

What are car loan interest rates in the Czech Repuplic? In the U.S. car loan rates are under 2%.

flekoun | August 25, 2016

Car loans are around 6% in Czech republic. Well 2% is quite low comparable to mortage.

PhillyGal | August 25, 2016

It'll depend on the interest rate as well as the value for my trade-in. It's very hard to say at this point when we don't know exactly when the car will be ready.

charles_gingras | August 25, 2016

Dobrý den flekoun,

My answer is, I expect to borrow as less as possible, but it depends on many other factors, but realistically it will still probably be around 75%

charles_gingras | August 25, 2016

And I'm Canadian

jefjes | August 25, 2016

Set up a separate savings account toward the purchase of about 10% per year so the number of years it takes to get my M3, the less I'll need to borrow. 1 year = 90%, 2 years = 80%, etc. etc.. So if it takes 10 years I'll borrow zero but I hope it doesn't take that long. The monthly amount I'm putting aside now can be applied to monthly loan payments so the time it takes to get the car could also affect my choice of options I may decide to add or not. USA

dsvick | August 25, 2016

I expect to finance 75% - 80%, after my down payment and trade-in. I'm putting some away for a downpayment but we're also paying off other debt that has a much higher interest rate than what a new car loan will. That's also what we'll apply the tax credit too.

Red Sage ca us | August 25, 2016

0%. Amortization be Da DEBiL!

Woodsonpd | August 25, 2016

I expect to take a 50% loan, but i'm doing what i can to get that lower.

bmalloy0 | August 25, 2016

However much a $15k loan works out to. That's what I can afford, and Ibwant as many bells and whistles as I can afford

bmalloy0 | August 25, 2016

I want*

Fat-thumbed the keyboard

damonmath | August 25, 2016

The initial deposit and not a penny more.

stevenmaifert | August 25, 2016

I will pay cash, just like I paid for my MS. No, I'm not filthy rich, just had lots of time to save between placing the reservation/order, and delivery of the car.

tedirelan | August 25, 2016

I sold cars for Nissan for a while. I noticed most people put between 5 and 10 percent down. I know banks in my area really like you to put down 20%.

lomunchi | August 25, 2016

Plenty of time to save. Debt sucks regardless of the interest rate. I'm at a point in my life where I'll have cash waiting! The amount will drive the add ons I can afford!


bj | August 25, 2016

Cash for me but I am in the fortunate position to be able to do that. Borrowing money to purchase an asset that rapidly depreciates in value is generally not considered to be "a good thing", if one has the choice.

codyb12889 | August 26, 2016

u nsu re if 50% down or 100%

Se cond M3 for a cou sin gra du a ting colle ge . Proba bly pa y ca sh for this bu t ne e d to look into the pa pe rwork the re .

I wish I cou ld ha ve e la bora te d more the re . I know this is not a ppropria te bu t scre w you Mollom you a re ma king ba sic conve rsa tion not possible .

firetree_99 | August 26, 2016

If i remember correctly i think Tesla is charging around 5% interest for financing. I believe i found that somewhere on the website.

KP in NPT | August 26, 2016

Cash here too, like with our MS. Haven't financed a car since 1994.

Mailrail707 | August 26, 2016

@jefjes That's exactly what I'm doing. I figure I've got a good 2 years + before my car will be ready (mid-August reservation) so I'm socking away as much as I can in a separate savings account to lower my amount to be financed. And I plan on keeping my options to a minimum (Autopilot. MAYBE dual motors) so I hope to finance 50% or less.

dsvick | August 26, 2016

@firetree_99 - "If i remember correctly i think Tesla is charging around 5% interest for financing. I believe i found that somewhere on the website."

If that's the case then they probably aren't financing very many sales. That's the sort of number I'd expect someone with relatively poor credit to receive, not what I'd expect to see advertised. And if that is their best rate most people will go else where since you can find pleny of other places with rates at or under 2%.

danbry39 | August 26, 2016

Yeah, I'm going to hopefully have enough set aside to buy it without a loan. We'll see.

jamilworm | August 27, 2016

I'll probably finance 60-80%, assuming I can get a low interest rate loan as others have mentioned. I will probably have enough cash in savings to pay most, if not all, of the cost up front, but I don't want to be left with $0 in savings the day after i get my car.

firetree_99 | August 27, 2016

@dsvick i am not sure if u can easily find a car loan under 2%. At least not in Canada. U can get one easily if u finance a car at dealership. If u want to get one from bank, it's a different story.

SoFlaModel3 | August 28, 2016

So in my position, I have the cash to buy the car outright but with interest rates presumably still being fairly low I anticipate being better served borrowing the money for the car and continuing to invest that money rather than directly injecting it into a depreciating asset.

My plan...

$41,000 sticker price
$2,460 tax
$43,460 total sale
$3,460 down ($1,000 already as deposit)
$40,000 principal loan
5 year auto loan (60 payments)
Say the interest rate is 3%

The total interest spend after 5 years is $3,124.86. If I can't make $40,000 become more than $43,124.86 then I am doing something wrong with my investment strategy

Of course that base price could jump to $45k-ish ... we'll have to see what the options are. I was in line pre-reveal as well so if I qualify for the $7,500 (or at least the $3,750) that's just icing on the cake.

bj | August 28, 2016

@michaelrbodner - that's not any different from paying cash for the car and borrowing $40k to invest. If you believe you can beat the market, then that works out. If you end up not beating the market, then it doesn't. So from that perspective, paying cash (if you have it) and borrowing $0 has lower risk of downside.

SoFlaModel3 | August 28, 2016

@bj - well of course investing is risky, but let's not forget buying a car isn't an investment.

In my example say I buy the car for $43,460 outright. I incur a 9% loss driving off the lot. Then that jumps to a 19% loss at 1 year, 31% loss at 2 years, and 42% loss at 3 years.

I'm only buying the car because I drive 22,000 miles a year and plan to keep it at least a decent amount of time (past the point where I'm not upside down on it).

Seriously though you can buy an index fund and make an average annual rate of return around 7% so again why wouldn't you borrow money at 3% to buy the car and use the cash to invest it?

In your example I borrow money to invest with. Well if I'm wrong now I'm really a loser. What is the collateral for that loan? If I'm wrong now it's compounded. Sounds more risky to me...

flekoun | August 28, 2016

michaelrbodner - If it would be that easy to beat the market then you would be a millionaire by now. Just gather loans for 3% and beat the market with that money and repay the loans. It sounds easy to earn 3k$ form 40k$ in 5 years. But is is not. If you invest these 40k$ into market then you put them in jeopardy for 5 years. It may go well and you earn your 3k$ or you may as well lose 3k$, that is for sure. Its just a different way of gambling with your money. I personally does not like to play Wall street games. I rather focus on increasing my actual income then investing my savings and then worrying about the markets.
So if I were in your position I would pay 40k$ from my savings for the car and focus on increasing my income so that these 40k$ would be just something like 2 month salary in my future income.

SoFlaModel3 | August 29, 2016

@flekoun, who said anything about beating the market? An index fund literally is the market. You're investing in the entire market. A decently conservative strategy when one does not have enough capital to diversify themselves and thus they truly are gambling "picking stocks".

Here is how I look at it:

I finance the car with $3,460 down and $40,000 principal loan
5 year auto loan (60 payments) and say the interest rate is 3%
I pay $718.75/month

After 5 years, I have paid $3,460 (down payment) + $40,000 (principal payments) + $3,124.86 (interest) = $46,584.86
The car would be worth ~$17,384 (40% of new car price).

If I sell it then my total spend on the car would have been ($46,584.86 - $17,384) / 60 = $486.68, which is very comfortable.

At the end of the day buying a depreciating asset is never going to make sense. It's simply a matter of what your personal preference is and determine a monthly amount that makes sense for you. I can't lease because I drive too many miles, so buying is it. I also anticipate keeping this car longer than my recent trends of car longevity so I am that much more comfortable.

Think about it another way... With $3,124.86 in total interest spread over 5 years, I am literally paying $52/month to borrow the car versus just paying for it out of pocket at delivery. That sounds fair to me. Again I will say if my investments cannot make me $52/month then I am doing something seriously wrong.

flekoun | August 29, 2016

michaelrbodner - yes,I understand what 3% interest over 5 years is. You either pay 40k$ in cash and pay 0$/month or you take a loan and pay 666$+52$/month. I rather take the 0$/month.
Then there is this idea that you can earn more than 3% with your 40k$. If you can, go ahead, it is a no-brainer. But I feel that in reality it is not that simple. You must fist earn these 3% so you will end up with the same money as the one who does not take the loan. You should also take into account the inflation which is 1%/year. Also does not ignore time spent with taking care of your investment and managing the loan as well as the monthly drain of over 700$/month from your account.
I understand that loans are needed. Without them the economy would stall. I just want to point out the disadvantages which should everyone keep in mind and does not ignore them.

SoFlaModel3 | August 29, 2016

I hate to sound like I'm not nitpicking, but what exactly are the drawbacks of the auto loan if the consumer can afford the payments? Obviously it's clear if the consumer cannot afford the payments and is overextended you're talking about hurting your credit, repossession of the car, loss of any shred of equity, etc.

If you can afford the payments what exactly are the drawbacks at that low of an interest rate?

marcelvtuijl | August 29, 2016

Prob 50% cash and 50% loan depends on the options and euro price

jamilworm | August 29, 2016

@michael the drawback is just that you lose some money in the form of interest on the loan. Like in your example you said that the total interest over the life of the loan is $3,124.86 so that's extra money spent compared to if you paid cash outright.

Of course I understand your argument that by paying cash you lose the ability to invest that cash, and so if the money earned by investing would be more than the money lost in interest then of course you should take the auto loan. But not everyone has the know-how to invest large sums of money for a likely return of better than 3%. And people may be risk-averse and so the 3% interest that you save by paying cash upfront might be more appealing than the potential extra that you could earn by investing.

Obviously there is no right answer, it is a matter of preference. I am by no means a financial expert, but all I know is that almost every financial advisory recommends having some liquid cash in savings to get by in case of emergency, so it is probably not wise to spend one's entire savings to buy a car outright.

andy.connor.e | August 30, 2016

I consider this car an investment. My current car is too small for me, and instead of buying another used car i am going to invest in an electric.

My goal is $10,000+ down payment by the time i get mine (predicted mid-2018). In the next 2 years i will be saving alot of money for this car to reduce the loan requirement, but regardless i am going to do it.

Linemanap | August 30, 2016

100% 35k - 5000 colorado tax credit

Nexxus | August 31, 2016


A simple High Yield Bond fund will net you 6% a year + increase in share price (if any). That's double the 3% loan amount and if you qualify for the 1.5% loan, that's four times the money you'd pay on the loan. There are also a lot of mutual funds that garner 8% a year or better.

andy.connor.e | August 31, 2016


How do you qualify for different levels of interest rate???

Nexxus | September 1, 2016

Qualification depends on your credit score. 800+ you should have no problem qualifying for the 1.5%. Anything less may be iffy and you'd be charged a higher rate, I guess.

SoFlaModel3 | September 2, 2016

This is interesting... granted the car is still a solid 12-14 months away, where are you seeing a 1.5% interest rate?

This makes the loan that much more attractive. In a quick search online (granted I didn't look too hard), 2.99% was the best I found.

It's a slam dunk no brainer at 1.5%.

Haggy | September 2, 2016

There are many reasons to take out auto loans and it might have nothing to do with whether a person can afford to buy the car outright. Many people have money tied up in investments. Even a high yield bond fund pays many times the interest rate of a car loan, which can be close to 1% at a US credit union for somebody with good credit if they have a special EV rate. DCU is an example, and it gets that low as long as I have a checking account there and an automatic payment plan. That, and the fact that it's an EV, make the rate lower than the one you will see listed on their website.

In the US, if I need to liquefy appreciated securities, I have to pay a capital gains tax. If I have to pay 10% of my profits in taxes if I sell securities and buy a car, it's not as good as buying the car at 1% and leaving the securities alone. Even if they don't appreciate much, I'm still ahead, but if I merely do as well as the NASDAQ composite, that comes out to +1.92% over one year, +13.86% average per year over three years, and +14.78% per year over five years, which is the length of a car loan I would get. Good investors can beat that rate of return, making it pointless to sell securities and pay taxes when keeping the money invested leaves the person with more money at the end of the loan. Of course there's no guarantee that the market will do well over the next five years, but a high yield bond fund could be a good option for some.

flekoun | September 3, 2016

Haggy - Yes this is totally valid. However one must make distinction between a person who has money to buy M3 outright but he does not have liquidity versus person who does not have money for M3 with no investments he could potentially liquidate. I don't want to moralize here. I was just shocked when people I know which does not have money to buy a broken refrigerator want to take a loan to buy M3 and hope they will somehow squeeze the monthly payments for M3 into their budgets.

SoFlaModel3 | September 4, 2016

@flekoun -- overextension is the American way. It's all great until it's not great. See housing bubble of 2008...

Frankmoble | September 8, 2016

Lots of time to save for big down payment and keep Payments low as possible .
That's what I intend to do . And hope to get some kind of tax credit back , Hope .
So let wait and wait and wait some more .

Frankmoble | September 8, 2016

Lots of time to save for big down payment and keep Payments low as possible .
That's what I intend to do . And hope to get some kind of tax credit back , Hope .
So let wait and wait and wait some more .

makobill | September 8, 2016

$1K deposit, plus 50%+ at purchase, with a target of $50K cost. I'd like to have a sub-$500 car payment and will work the math when I get there. Might do more down as I likely have lots of time to save with my deposit going in mid-August....

dd.micsol | September 8, 2016

I would pay for 2 outright when I receive them in cash, but I'll only get them one by one. Bummer.

Red Sage ca us | September 8, 2016

For some the notion of living within their means (rather than just 'making the payments') is far more horrifying than being eternally in debt. Meh. Fear is the mind-killer.

warren_tran | September 22, 2016

I plan to finance 75% of the car. I would prefer to use my extra money for retirement investment and trading purpose.

I'm comfortable with my skillset and performance in trading so my personal choice is not to put more than 50% down payment even if I have the cash.

haack_jd | October 1, 2016

I'm in the same position as michaelrbodner. While I'll have the money needed to buy outright, I'll be taking out a substantial loan and just keep my money invested.

starcrusader | October 1, 2016

I'm trading in my 2011 Jaguar XJ 5.0 plus the balance in cash.