If the Model 3 becomes an appreciating asset, how can it be insured?

If the Model 3 becomes an appreciating asset, how can it be insured?

Elon has stated that a Model 3 will soon become an appreciating asset, the premise being that as the price of the FSD software increases, the value of the car increases. If that is true, how can the car be reliably insured? If I buy a Model 3 today with the FSD package ($6,000), I am paying ~$54,000. If the car is totaled 5 years from now when the car has presumably "appreciated" in value because new Model 3s now sell for significantly more $s, the insurance company is certainly not going to pay out for an appreciated asset. How can a Model 3 be replaced with an insurance payout? If they do pay for an appreciating asset, that would imply that the cost of insurance (and premiums) would increase significantly each year.

shank15217 | July 17, 2019

Yes it would, appreciating assets have appreciating insurance payouts and costs.

Magic 8 Ball | July 17, 2019

Buy Tesla stock. Only insurance you will need.

ReD eXiLe ms us | July 17, 2019

In the case of being irreperable, totaled...?
Replacement. Not payout. Especially if used on the Tesla Network, and insured... by Tesla.

eplaskett | July 17, 2019

Only the market will determine whether it's an appreciating asset or not. Not Elon. I, for one, am not a believer in that particular notion, but I will probably add FSD if it truly does become a $3,000 expense on top of the $5,000 I already paid for EAP.

If used Model 3s of our vintage with our options are selling on the secondary market for more than we paid for them (still unlikely, in my book) then I would think that insurance would value them as such. Insurance pays out based on the present value of an asset. But yes, if that's the case, then the collision and comprehensive portions of our insurance premiums will probably go up a bit over time.

Mike83 | July 17, 2019

Taxi insurance can be costly $5000/yr. but that is probably due to taxi driver assaults. Like any insurance it depends on location, car make, drivers' record, private or public, etc.
But like ReD said the Tesla Network would be the way to go. In fact with no driver costs would be much lower IMO.

carlk | July 17, 2019

How do you insure your house? Just update the value every year when you renew the policy.

AWDTesla | July 17, 2019

Pretty big if.

howard | July 17, 2019

Longways off and should Tesla not be providing the insurance since you will have to be part of the Tesla Robo Taxi Fleet to be appreciating? Perhaps Tesla is providing insurance across the board by then.

Bulldawg | July 17, 2019

I’m still trying to figure out why an appreciating asset would become uninsurable.

howard | July 17, 2019

It won't be uninsurable just need to capture the replacement appreciated cost. Is that not the question? This is all wild speculation anyway.

gballant4570 | July 17, 2019

I'm still waiting for the pickup truck reveal.....sorry, wrong thread.....

shank15217 | July 17, 2019

@AWDTesla, it's not a pretty big if, the entire success of the company rests on autonomy, that's their #1 priority. The car value will definitely increase after they pull off autonomy.

ReD eXiLe ms us | July 17, 2019

AWDTesla sneered, "Pretty big if."

'IF' is not an agent of Doubt, but an ally of Hope.

ReD eXiLe ms us | July 17, 2019

eplaskett opined, "Insurance pays out based on the present value of an asset."

My understanding is that traditional insurance pays based upon 'claimed' value, which is determined and set when the vehicle is first insured and rates are set. There was no way for an insurance company to know in 1970 that a 1969 Camaro SS might one day sell for over $300,000 at auction through Meijer's. Your 1970 insurance policy would not be based upon the car's perceived value circa 2015, but at its initial purchase. It doesn't matter what 'someone would have paid' for your Camaro, had it been or remained pristine, 'some day'. After they bought it, if it had appreciated at that point, the new owner would insure it for the appropriate amount relative to what THEY paid.

Time exists so everything doesn't happen all at once.

eplaskett | July 17, 2019

@ReD eXiLe ms us "My understanding is that traditional insurance pays based upon 'claimed' value, which is determined and set when the vehicle is first insured and rates are set."

Yes, but with car insurance, you renew every six months, usually for a slightly different premium. The insurance company's actuaries are, in theory, reviewing the value of your car every six months and are also reassessing the risk level both you and your car present. So the premium they charge you is usually fairly closely related to a pretty recent assessment of the car's value. Of course, most cars depreciate over time, so if Teslas do end up appreciating (again, I am skeptical), we will all want to have a chat with our insurance agents to see what their view is - do they agree, or are they just following some generic depreciation schedule?

It's a very interesting question, and I guess we will have to see how it plays out!

vmulla | July 17, 2019

I like the house insurance analogy by @carlk

rwa | July 17, 2019

Tesla doesn't have their scene reconstruction nailed yet, so FSD is not close. So don't worry about it.

TranzNDance | July 18, 2019

The house insurance analogy doesn't work if the appreciation came from the land, not the structure, which would depreciate. One might have to increase coverage to account for the increase in costs for labor and parts to rebuild the structure, but insurance isn't paying for the land appreciation.

AWDTesla | July 18, 2019

@shank15217, byt the time that happens (full autonomy) the current model 3 hardware will be very outdated. You think these cars will still be at the top of the game 10 or 15 years down the road when we will actually see autonomy?

I'm in Canada, full autonomy isn;t anywhere near close for us. Maybe in 20 years....

I wont have a model 3 then. Guaranteed. And the model 3 wont be worth 250k as some have implied. Guaranteed.

Fredvanngo | July 18, 2019

A very BIG IF : the reality is the car is just a car and will not be an appreciated asset like a house. All are depreciated overtime...

thedrisin | July 18, 2019

TACC and Autosteer are stil beta. There are 17 warnings alone for TACC in the manual. HW3 is not going to change this overnight. Level 5 is more than a few years away. I have FSD because I am hopeful some features may increase safety and comfort.

shank15217 | July 18, 2019

If it takes 15 years then Tesla has already failed. They are betting on it becoming a success within the next 4 years.

AWDTesla | July 18, 2019

@shank15217 might happen in some states, doubt it will be nation wide and it certainly wont be ready or allowed in Canada in the next 4 years.

AWDTesla | July 18, 2019

@thedrisin, exactly, still very BETA. Long ways away from FSD.

terminator9 | July 18, 2019

The only way Tesla car would be an appreciating asset is if a brand new same model is being sold for much more. Otherwise one would just buy a new right? In the past 2 years there has been a steep decline in new car price with Elon claiming what we want to make Tesla cars affordable for masses. Just 2k reduction in tax credits results in a price reduction for cars. If they start selling the 40k model 3 for 60k because FSD is here, it won't be affordable anymore by Tesla's own claims so that isn't happening. FSD realization does not make people start earn more to afford the car.

rwa | July 18, 2019

"FSD realization does not make people start earn more to afford the car."

Wel, that's the entire basis of the claim, is that it will, since a FSD car is a money printing robotaxi.

Make your own judgment as to the veracity of that claim.

spuzzz123 | July 18, 2019

I don’t think Elon means cars will appreciate year over year like real estate. He means once full self driving is real, Tesla is going to dramatically increase prices of fsd or make it a crazy subscription model. That will boost the value of any car grandfathered in with lifetime full self driving possibly above purchase price. Again speculative anyway.

thedrisin | July 18, 2019

In order to have a robotaxii, FSD features could no longer be beta and no warnings for the driver to be ready to take over, which would defeat the purpose. This is a huge leap of faith. Manufacturer could be liable for a computer malfunction. Owner would have a strict maintenance and calibration service intervals. Insurance may be prohibitively high at least in the beginning. Ths hoops for robotaxi may be above the average Joe.

terminator9 | July 18, 2019

>>Wel, that's the entire basis of the claim, is that it will, since a FSD car is a money printing robotaxi.
>>Make your own judgment as to the veracity of that claim.

Yeah, similar to Uber (not same but similar). A bet most of them are printing money and can buy $70k cars now! No one is getting bigger loans to get expensive cars and driving for Uber in hopes that it will make them rich in this model.

gmr6415 | July 18, 2019

The only cars I've ever seen appreciate are when they are decades old, that particular model becomes considered a classic and they're in pristine condition.

M3BlueGeorgia | July 18, 2019

Someone over on TMC was posting about a 40 kWh low mileage Model S for sale.
You could upgrade it to 85 mWh with a third-party install, or maybe to 60 with an OTA from Tesla, then the market price would jump and you have, for a brief moment, an appreciating asset.

Otherwise, not at all sure how something subject to wear and tear does anything but depreciate.

thedrisin | July 18, 2019

If the price with FSD goes so high that no one can afford fo purchase one new, and new sales go to 0, the remaining cars will become rare and increase in price. /s

Iwantmy3 | July 18, 2019

The whole idea that the car will appreciate over time doesn't make sense.
Yes, it may be able to generate income in the future that it can't generate now,
Yes, it may provide more value to the owner in the future than it provides now.
The option will continue to exist to buy newer, more advanced vehicles from Tesla that are likely to sell at similar costs to what they are now. Basic competition won't allow for anything different.

As long as it is possible to replace them with something better at the same cost, then the older cars can't appreciate.

More likely, as more and more Tesla taxis (or equivalents) enter service, the cost of using them will be driven down to the point where the benefit of providing autonomous taxi service will be minimal. The market will balance itself out. That is basic economics.

TranzNDance | July 18, 2019

If Tesla is the insurer, it could make the insured whole by replacing the car with a comparable one. In return, what would have been a total loss could be worthwhile to be repaired if it could continue the remainder of its years as a robo taxi, where riders won't care about the car's history as long as it is safe and clean.

bj | July 18, 2019

I think there is conflation between a FSD Tesla being able to generate income and “appreciation” of a capital asset. Assuming the FSD / robo taxi narrative becomes true, then while the income generated might make the owner feel like his/her car has appreciated in value, it actually hasn’t. The capital asset has depreciated in value, but it’s generating income that more than offsets it. Capex and opex are different things.

Very, very few cars have capital appreciation.

Fredvanngo | July 19, 2019

Do not forget that other cars include ICE also develop their own FSD autopilot to compete with Tesla as well...