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Buying a Model S - Forget about resale value

Buying a Model S - Forget about resale value

3 year old S 85 72,000 Miles, Moonroof, Tech Package, Smart Air Suspension, Ultra Hi Fidelity Sound, Clear bra. Thought about upgrading to a 90D until I received an 35.5K trade offer from Tesla. The car may have miles but why should that matter with a transferable battery and power train warranty with unlimited mileage for another 5 years. This offer stopped me dead in my tracks. The car is pristine. No dings, dents, accidents or paint work. Don't get me wrong, the car has been thoroughly enjoyable with minimal service headaches, however, to be offered a paltry 40% of the original purchase price after 3 years is very unsettling.

robgorman | April 20, 2016

That's typical depreciation on a car. But remember, you are driving a "pristine" MS. You are very fortunate.

carlk | April 20, 2016

That's about the norm for a high end car. The good thing is deprecaition from here on would be much smaller and, unlike ICE cars, you will not be driving a dirty old gas guzzler.

sambstl | April 20, 2016

don't think its too typical for other cars. Fact is, tesla depreciates a lot. A lot. A lot of 100k cars do.

frankie.fingers | April 20, 2016

I keep reading stories like this. Since this appears to be common, I'm wondering why the residual value on a lease is in the 60% range.

harry pippic | April 20, 2016

@Amaganset. you don't actually mention the model year, any car/fax reports, condition of the interior. Remember the vehicle has been on the road, you sat in the seat and held the wheel for three years and 72,000 miles , also with out the desirable auto pilot feature.
Considering the car should have averaged 12,000 miles a year, totaling 36,000 - 40,000. miles I, and most others would consider this as a rough vehicle. And that is the major reason for your conceived low offer, this is how the car business works.
You drove the car for at least 72,000 miles, enjoyed it, took the mileage write off, now go out and buy a new one with auto pilot, and stop whining.

SbMD | April 20, 2016

Sell it on your own, as long as it isn't too much of a hassle to you. You will always do better with a private sale than with a trade in.

Bighorn | April 20, 2016

@frank
Residual is artificially high because they inflate it by the tax credit to reduce monthly payments.

@harry
That's utter BS.

EdwardG.NO2CO2 | April 20, 2016

You should look for a buyer because you should be able to come closer to this table privately.
EV retained values.......

Tesla retained value

Make...........Model.................1-Year Retention %
Tesla............Model S..............83%
Porsche.......Panamera S-E....78%
Toyota..........RAV4 EV.............71%
Honda..........Accord PHV........70%
Toyota..........Prius PHV...........69%
DATA SOURCE: NADA.

The top two-year results:

Make.............Model...............2-Year Retention %
Tesla.............Model S............71%
Toyota..........RAV4 EV............56%
Toyota..........Prius PHV..........54%
Ford.............Fusion Energi....46%
Ford.............C-Max Energi....42%
DATA SOURCE: NADA.

And the top three-year results:

Make..............Model................3-Year Retention %
Tesla..............Model S.............57%
Toyota...........RAV4 EV.............48%
Ford..............Focus Electric....32%
Chevrolet......Volt.....................31%
Nissan...........Leaf...................25%
DATA SOURCE: NADA.

This last table is particularly relevant. For context, the resale value guarantee assures that the value will be at least 50% of the vehicle base price, plus 43% of all options (including upgrading to a larger battery). Based on NADA's data, Tesla should have a cushion of about 7 percentage points after three years, on average.

The long and winding road
At the end of the day, all of the lease accounting and fuss about the related non-GAAP figures are much ado about nothing. They're simply byproducts of Musk reassuring customers that Tesla vehicles would hold value -- which they are.

harry pippic | April 20, 2016

@Amaganset. Have you forgotten about the $7,500.00 rebate you banked. Also try adding about a conservative .25 a mile over 36,000 miles = 9000.00. Let me see... $7500 (tax credit) + $9000 (excessive over mileage) =16,500 + 35,500 trade-in = $52,500. now are we getting close to what seems fair ??. Could be close to a 60%- 65% residual value, not too bad right ?
Now go out and buy yourself a new TESLA and enjoy life.

kwen197 | April 20, 2016

Harry pippic: I believe your numbers are very accurate.

trixiew | April 20, 2016

2 things my dad told us over and over when we were growing up. Don't buy anything but a house on credit, and cars are a bad investment.

SbMD | April 20, 2016

To help emphasize @EdwardG's point, here is the table from the NADA that he has reproduced in text, with dollar values:

aaronleider | April 20, 2016

You'll do much better with a private sale

inconel | April 20, 2016

Wow I did not know that a LEAF depreciates that much!

rxlawdude | April 20, 2016

I can attest to the Plug-in-Prius one year depreciation of 30%. Don't ask me how I know. :-)

Pungoteague_Dave | April 20, 2016

The issue is Tesla's 25% margin requirements for CPO's. They would resell your car for $45k after refurbishment, with a renewed warranty. Similarly, they offered me $49k for a 19-month old S85 with 33k miles when I upgraded to my P85D. I sold it directly for $63k (in Nov, 2014). Still a tough hit - a $95k car lost $32k in 1.5 years - a 34% drop. It is the nature of these things. Next year a '12 or early '13 S85 will be worth $25k on trade. The fact is that you lose the value of a new fully-optioned Prius in each of the first two years. There is no way to financially justify a Tesla, or any luxury car, despite lots of attempts and rationalization around here. The numbers quoted are correct - Tesla is leaving a margin and cost offset in making you a legitimate offer - a buyer of your car will get more from Tesla than you can provide directly in the private market.

RVC | April 20, 2016

I never factor in the resale value when buying a car. One less reason to pout. :)

TaoJones | April 20, 2016

Sounds like we pay approximately $1/mile to enjoy our rides.

Mas o menos, the effects of applicable rebates, tax deductions and/or credits notwithstanding.

Anthony J. Parisio | April 21, 2016

When buying an inventory car from tesla they take off 1% per month and one dollar per mile. If we use that means of calculating your car would be worth even less. I'm not saying that this would be accurate at all. What has been written abouve seems to be much more accurate. I hate trading in a use cars! They never seem to be worth what they should be. First and foremost we always have to remember that the buyer only wants to pay wholesale value.

tes-s | April 21, 2016

Exactly!! If you are concerned about resale value, don't buy the car - lease it.

A car is not an investment. It is an expense.

Silver2K | April 21, 2016

check your car's trade-in value on KBB, that's what they go buy.
as per kbb for a 2013 with your specs

43-50k excellent
42-49k very good

2013

Silver2K | April 21, 2016

those are trade-in values

http://www.kbb.com/tesla/model-s/2013/sedan-4d/?category=&intent=trade-i...|true|5012913|true|6193657|false|5013021|true|6193664|true|5012866|true|6193662|true|5012993|true|5012999|true&path=&vehicleid=378824&mileage=72000

drax7 | April 21, 2016

Yeah right, buy a new tesla and move to sag harbor

Tstolz | April 21, 2016

There is a solution if you are worried about it ... just keep it and drive it into the ground. Teslas are really solid cars with simple drivetrains ... they 'should' last far longer than an ICE. I'm hoping to see at least 500,000 km before my 8 yr warranty runs out. It won't owe me a thing at that point :)

eye.surgeon | April 21, 2016

LOL. have you ever owned a luxury car before? 40% at 3 years with DOUBLE the typical miles, plus your tax rebates-- be grateful for 40%. Try selling a 3 yr old 7 series with sky high miles. It's almost worthless.

Emobile | April 21, 2016

You farted in the seat, you sneezed all over the windshield and steering wheel, you spilled coffee in the center console and you've driven it $72K miles. What do you think it's worth?

PhillyGal | April 21, 2016

I'll beat their offer by $500 right now if you want to keep it in the family :)

Muzzman1 | April 21, 2016

wow @Pungoteague_Dave Our story is 100% the same. Same timeline, same sale, same car sold, same prices, exactly the same. Although I replaced my 2014 with an 85D, and have not looked back. The best car buying decision I've ever made for the sake of the AP stress relief!!

Run4Waffles | April 21, 2016

@PG - You can't be serious about the + $500 after what @Emobile revealed? Wait, was this the same car that was behind me last week and you made an intriguing remark???? HUGE GRIN on that one....

PhillyGal | April 21, 2016

@waffles - I can buy leopard print seat covers and a fuzzy pink steering wheel cover.

Run4Waffles | April 21, 2016

@PG - how am I going to get any work done this afternoon now?

Grin

PhillyGal | April 21, 2016

Psh - once the navigate to the forum on your browser, work goes out the window anyway :)

NoMorePetrol | April 21, 2016

40% of purchase value after 72,000 miles. Using straight line depreciation that means the car would be worth zero at about 120,000. And depreciation is always front loaded, not straight line. Sounds reasonable to me . . .

lolachampcar | April 21, 2016

$1/mile is what I have seen on just about every BMW that preceded my MS purchases. My wife and I normally keep a car for 3 years and 36/45k miles. It is standard practice if you buy new in this or a higher market segment.

That said, Tesla under bids fair wholesale market because, as PD points out, they are horribly inefficient and need to make more money than the average high end used car outlet. My Tesla WHOLESALE bid was $9k less than a competing WHOLESALE bid from one of Tesla's own wholesale partners (you know, the ones they send the ICE trades to) on a 20K mile P+. Put simply, Tesla's rips off their own return customers. I've been posting about it for what seems like years now.

david | April 21, 2016

The Leaf is much worse on depreciation than the numbers above. When I turned mine in last month I did the whole eval of keep/return etc.

The "stated residual" from the end of the lease was $14k.
Nissan offered me "$5k off" if I would buy the lease (they recognize the depreciation problem)
I searched online and people are selling 2013 Nissan Leaves for $8k

The issue is the range. When I bought my leaf it was 88mi range. At the end of my 3 year lease it was 75mi. I'm assuming if the next guy drove it about the same at the end of 3 years it could be under 60mi. Keep in mind the car starts scaring you (WARNING!) when you get under 20mi range. This isn't an issue with a Tesla. Even if the battery did lose 20% over 6 years you'd still have more than enough range that the car is still useful.

ivo.welch | April 21, 2016

so, I am on the other side. thinking about buying a used one. alas, this one isn't it for me, because I need the autopilot. this may be part of the issue with this particular car---a lot of buyers want teslas for the autopilot feature.

looking at the used car listing on the web, I cannot find a 1.5 year old Tesla for anything close to 65% of the purchase price minus the tax rebate. a new 70 with autopilot costs $75k. a used one should cost ($75k-$7.5k)*0.65 <= $50k. (the older one was the 65 model, and the price difference between a 65 and a 70 should be about another $4k.)

I understand that the dealer takes a cut, but nothing I see advertised is anywhere close. the market for leases on used cars or lease takeovers on used leases is similarly small.

/iaw

rxlawdude | April 21, 2016

@ivo.welch - Yes, a base 70D costs $75. You did say you wanted autopilot, right? Add $2,500.

church70 | April 21, 2016

I was in a similar situation not that long ago I had over 80,000 miles on my MS 2013 I decided to sell it privately and then bring your buyer to Tesla and they can do a convenience Sale and you'll save the tax it helps make things a little bit better
They will charge you a $500 fee for this

lolachampcar | April 22, 2016

church,
Could you please fill in some details on that convenience sale? I tried this on my P+ and Tesla flatly refused. The entity receiving my car was one of their wholesale partners so there was no financial/liability risk for Tesla. Tesla even explained how trading with them would get me the Florida Sales Tax offset for the value of my trade so I really should just trade into them. Put differently, they were using MY sales tax credit as leverage to buy my car on the cheap.

Which store were you working with when you did your courtesy trade?

Thanks, Bill

jvs11560 | April 22, 2016

There does not seem to be a very good market for a pre owned Tesla. I just traded in my 2011 Escalade ESV Platinum for a new one. It had 41,000 miles. I bought it new in September of 2010. They gave me $40,000. for the trade. With the tax benefit my car depreciated less than 50%. Never brought it in once, for anything. I changed the oil myself, once a year (Mobil 1). My boys and I do our own maintenance even though its free from Cadillac.

If anyone owns a MS, and they are thinking about trading up, they know that the resale doesn't compare (In the real world). Just look at this example:

http://www.nissanofstcharles.com/used-vehicles/#action=im_ajax_call&perf...

VIN # 5YJSA1H40FF082065

This is a P85D with all the options and lists new for over 141k. How come they cannot get 114k for it? It only has 22 miles on the odometer and is located at Nissan of St Charles in Illinois. Although this is just one example, there are many more out there.

I believe the reason for the low resale is the introduction of new Battery packs and features at will. Everyone wants the latest and greatest. The P85D took a 30% hit the day the P90D arrived. Something to think about....

jvs11560 | April 22, 2016

BTW VIN # 5YJSA1H40FF082065 According to car-gurus, this car has been for sale at this dealership, for over 280 days.

Silver2K | April 22, 2016

@lolachampcar

it seems that $9k is the liaison fee :)

church70 | April 22, 2016

The details I wanted to trade my car Tesla offered me 50k. I laughed. Tesla said it was more like 57 because of the tax savings which is true sales tax in Ontario Canada 13%
I posted the car for sale privately found a buyer for 65,000
Had my buyer make a certified check to Tesla and did the deal through Tesla for 65,000+ the tax savings. I don't know if convenient sale is the right term for it
But this is very common you can do this with any dealership and they usually charge a fee of $500 to be the middleman

lolachampcar | April 22, 2016

church,
I agree that it is common; I've done it many times in the past especially when selling a previous car to a friend or family member. I've only had one BMW dealer decline and I simply went twenty miles down the road and bought my new car from the neighboring BMW dealer.

Tesla, on the other hand, flatly refused to do it all the time using my FL sales tax credit as a reason to trade to them. I went further up the food chain and was told that Tesla did not want cars going elsewhere as they wanted to control the second hand buying experience.

lolachampcar | April 22, 2016

and thank you.... Sorry, I should have started with that. I really wish there was an edit function.

SbMD | April 22, 2016

@jvs11560 - most people do not go to conventional dealerships seeking a MS. They more often go to Tesla's site for a CPO or to other EV-centric sites where people may advertise their cars. Your two examples of where people do not look for a Tesla are not representative of the Tesla used market. It appears they may be moving rather well, with a number of people commenting that a significant number of them have been taken off the market recently.

w.bow | February 17, 2017

Have a 2014 S85 original price is 94K. 43K miles and 15 visits to the service center during the 28 months of ownership. Have it for sale for 57K and no one is interested in it. Great condition too. Extra set of rims and tires. Elan really missed the boat on this resale value stuff. Ill never buy another new Tesla again. Used is the only way to buy. I really fell for the sales pitch on this car

Captain_Zap | February 17, 2017

Where is your ad?

reed_lewis | February 17, 2017

I never purchase a car thinking about resale value. To me I buy a car because I want to drive it, and enjoy it.

So when I see the 'lists' about cars that you should not purchase because of low resale value, I ignore them.

I keep cars for a long time.

reed_lewis | February 17, 2017

In fact if you are concerned about resale value and want to have a new car every few years, then a lease is a much better solution.

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