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Price Justification For You?

Price Justification For You?

If anyone needs a car, we all know we would be able to buy a car for $36,000 to $50,000 and get a pretty nice vehicle AND we know we would be able to pay for the gas for many years before reaching the price of the S and possibly would never meet the price of the S, SOOOO how are you justifying the price? I feel it has less to do with price and more to do with wanting a new technology.

I try to always do things that make financial sense but once in a while something comes along that just pulls me in to the point that I throw the financial aspect out the window. The Model S has done this to me (hence my upgrade to sig) so whats your justification? Financial or Want????

Want - but plan on keeping the car forever to satisfy my sound financial reasoning on everything I do. Also I upgraded to sig to try to re-coup my investment (keep the car forever and the sig will be worth money)

Is your purchase financial or want?????

Larry Chanin | 2 januari 2012

Hi,

How many people do you know that buy an expensive luxury car and with a straight face use financial arguments to justify the purchase? ;-)

It seems only the folks on this forum engage in these sort of rationalizations. I've done it, I think we've all done it. Don't get me wrong I do think that there are legitimate economic aspects to buying a Model S, but if we are really being fair there are even better economic reasons for buying a Leaf. Especially if we correctly consider the opportunity cost of money when making our buying decisions.

My reasons are:

Its finally time for me to buy a luxuy car.

The fact that the Model S will have unprecedented performance and safety is a big bonus.

There is a good chance that a lot (maybe not all) of my up front costs will be offset by the reduction in operating costs, especially if the cost of oil continues to escalate.

Getting off of oil is long overdue for any number of good reasons, not the least of which are for the health of our loved ones, and to assure our country's strategic security.

Larry

ThomasN | 2 januari 2012

I'm looking forward to smiling every time I drive by a gas station. I really don't think it will get old.

Schlermie | 2 januari 2012

I had already budgeted $50k for an ICE car before I discovered the S. Over the life of the S, I expect to save at least $20k compared to the cost of ownership of the ICE car I was considering, so now I've justified $70k. So far, it looks like I can get at least $12.5k in federal and state tax rebates from getting an EV, so that bumps it up to $82.5k. A number of my friends and neighbors own a fun, impractical, high performance car that they drive on weekends and special occasions, but it's too impractical to drive on a daily basis. For another $10k, I can get the sport edition of the S, and the S is still practical enough to drive daily, so that saves me at least $40k over getting a secondary "fun" car. Time I save not going to gas stations, additional maintenance visits, and ability to drive in the HOV lane for a few years all count for something as well.

Furthermore, the last time I purchased a car for myself was 1995, and it's been a lucky year financially, so I don't feel too bad splurging a little.

Jason S | 2 januari 2012

What Larry said. I thought about this and pretty much comes down to wanting a nice car first and foremost with bonus intangibles of it built near where I live and fueled from my own garage.

But mostly what Larry said. I looked at a Leaf and just want something nicer.

Discoducky | 2 januari 2012

Don't want to support oil/war as much as I don't wanna support tobacco (and that is saying a lot since both have killed too many people in my family).

I salute those that buy into this car, company and dream!

David den Boer | 2 januari 2012

I actually tried using a financial argument with my wife, and she saw through it immediately. She know's I'm a tech guy -- that I love having new shiny stuff. She gets it. My kids think it's cool that Dad is getting the hottest car. Me, I'm just anticipating it by going on this forum and the other at least once a day...

phb | 2 januari 2012

I want it, it's better for the environment than my current ride, I want it, it will lessen our dependance of foreign oil, I want it, I'll save a bunch on gas over the life of the car, and.... I want it.

Erik M. | 2 januari 2012

@David, LOL. This would actually be a useful thread on this forum: how to convince your wife...

mdennick | 2 januari 2012

I can agree/relate to everything Schlermie put in his comments (save the weekend car and going for the Perf S...still too rich for my disire). For me the wake up call was the first time I had to spend $100 to fill up my SUV, that's when I discovered the world of EVs and ultimately the Model S. I could certainly go cheaper but I "want" to go luxury and performance, within reason. The financial calcs Schlermie list get me there. I'm very closely tracking my family gas use, since last year, so I have my hard numbers to compare with. My wife is onboard, but mostly because I just want it.

I also very much want to by American. I'm willing to pay a little more as long as the quality is there. What better place to do that than with a new car company; with vision, innovation, ability to execute and the business need to impress.

I too find myself watching these forums on a daily basis...not like the diehards but I'm keeping tabs on you ;-).

Michael

harryjsommer | 3 januari 2012

I hate going to the gas station. I have a 55 mile rt daily commute - enough to have to fill er up every 3 to 4 days. The schedule isn't regular enough that I instinctly know whether it's time to go to the local station. So every morning, I check the damn gauge to see if it's time to make my pilgrimage. I hate the smell of he station, I hate the 'surprise' of what gas prices will be that day, I hate spilling the last drops of gas on my hands or pants. Everyone talks about 'range anxiety' in an electric car. Well I have it in my ice.

I have no other piece of electric equipment, other than my car, that I have to take somewhere outside the house to power up. The ice techlonolgy is 100 years old.

Yes it cost more for a tesla s that an ice car, but I'm guessing when the first refrigerators came out, they cost more than an ice box.

Time to upgrade.

David M. | 3 januari 2012

I don't want to buy any more gas. The automotive industry has had 100 years with one choice of fuel. Enough of that. When I saw what happened to the EV1, I said that's the last straw. I don't want to spend $85K on an EV, but if we all said that, Tesla would go away, and we'd be buying gas for the rest of our lives. Shame on us. If not for Tesla, there would be no Leaf or Volt.

For me, there is no price justification. Either pay the money to support EVs, or hope enough other folks do, until EVs become available as a viable alternative for the average guy. I will spend the money and be the best ambassador possible for EVs, AND I will smile everytime I drive past a gas station. No more smelly hands at the pump! Perhaps less dependence on foreign oil.

Discoducky | 3 januari 2012

Oh, and if you don't want to justify any price difference, invest in TSLA stock. I've already covered the difference in my $65250 Model S vs. a $52K Odyssey (That my wife and I thought we needed prior to finding Model S).

David M. | 3 januari 2012

@Discoducky,
Done. Looking for a bump up after the Detroit auto show next week, when the Model X prototype is unveiled?? Fingers crossed.

Mycroft | 3 januari 2012

Model X won't be revealed until Feb 9.

My5bAby | 3 januari 2012

It's not about luxury tech or savings, for me it's about being part of changing the paradigm. Beyond helping the environment and getting off oil (not supporting the middle east who are not even nice to their own people) it's about waking up the USA AND OUR AUTO INDUSTRY ! Don't for a minute think they will stand idle and allow this to happen without putting up a fight. This will be good for jobs and remind the industry that they do not have to take 10 years to up date technology or design.

Lastly, I would not underestimate the potential impact of this event. Consider it this way, this is the beginning of decentralization. Our lives are very controlled by outside influences, with solar panels on a house we now can truly get off of the grid. no need for gas, no need for electricity for the utility companies, rain is available for water in most places etc. and with all of these types of technologies no need for frequent repairs.

OK I'm rambling because I'm so excited !

P 2576

Robert.Boston | 3 januari 2012

I started by saying, "Oh, isn't the Aston Martin Rapide gorgeous. Let's get that!" Then I was able to say, "Oh, look, the Tesla Model S is nearly as gorgeous and a fraction of the price. What a bargain!"

It's all about setting expectations....

Discoducky | 3 januari 2012

Maybe NAIAS...

Tesla is a confirmed exhibitor: http://www.naias.com/the-2012-show/exhibitor-list.aspx

And I thought I read somewhere that the Earnings Report should be Feb 2nd as opposed to Feb 9th. But can't find it...

mcornwell | 3 januari 2012
toto_48313 | 3 januari 2012

You can't use the financal argument to buy an EV car. There is a part a belief in a new technology. However if you expect to have a luxury car with good performance, the Model S is one of the cheapest total cost of ownership car for that category... otherwise I'll buy a honda fit, hich may be much better financially (but that's all)

David M. | 3 januari 2012

@Mycroft - "Model X won't be revealed until Feb 9".

Thx. Any other inside info?
Heard anything on the timing of unveiling the final interior on the Model S? To me, that's more exciting than the Model X prototype reveal.

Mycroft | 3 januari 2012

Nope. A friend thinks it will be during the auto show. We'll see.

CurrieG | 3 januari 2012

Costs me about $80 a week for gas => Model S will cost me about $8 / week (10%) that is a difference of about $3600 / year in 10 years at least $36K savings not counting oil changes, longer dives at only 10% the cost, etc... Very good value!

David M. | 3 januari 2012

Wow, an oil change used to cost $19.99 Now many cars require synthetic oil, costing as much as $100 each time.

Mycroft | 3 januari 2012

True, but my Mercedes gets 10,000 miles on that expensive oil change.

Charged_Up | 3 januari 2012

There is no pure financial justification for buying the Model S. I've driven a Mercedes E-Class for over a decade, which I bought with 10k miles on it when I had a long commute and my wife insisted I get a quality and safe car (that just goes to show how important it is to marry the right woman!). It would almost certainly be cheaper and more efficient now to buy a low mileage off lease Mercedes E diesel - including fuel costs given my level of current mileage - than to buy the "S" - let alone the Signature version. And both Teslas are turning out to be a bit more expensive than I thought they would be.

However, I've been thinking about going electric for a while - not just for the potential fuel savings, but because electric helps lessen foreign oil dependence and improves our balance of trade, makes our cities more pleasant and healthy, and improves national security. For me, the tipping point was test driving the roadster. It was just fun (but hard to get in and out of!) Fortunately, I had a sports car when I was young, so I fought off that urge - but knew I wanted the electric sedan to follow. Do I expect that I will be paying a premium regardless of which version I choose? Yes - but as my wife said, I almost never buy anything for myself and she offered that it was time for me to give myself a present (at age 54).

All of that said, I still reserve the final decision until I can actually drive the car. And it better have a reasonable cup holder!

Sudre_ | 3 januari 2012

I've wanted a long range electric car for 10 years. I don't really like small cramped sports cars so the Roadster was out.

Now I'm getting one and to top it off it's a luxury car.

I'm sure we all have spreadsheets of excuses why it's economically feasible. It gives our wives a good chuckle.

Teoatawki | 3 januari 2012

I'm projecting 32K miles for the first 12 months after I get my Mod S. My current car would use $8300 worth of fuel at current prices. Mod S electricity at current rates, $935. Savings of $7365. With no change in either rate, that's $73,650 just in fuel savings over 10 years. That doesn't take into account where I can halve my round trip cost by plugging in at the other end or along the way.

For instance:
My current car costs ~$40 round trip to a camp where I volunteer. My mod s should be ~$7 round trip ($3.50 1 way) since I can plug in there to at least 30amp service. Now I'm saving 90% on those trips.

This is the best and most expensive vehicle I'll ever buy for myself.

More economics:
$106,900 My car as hoped.
-$10,155 (saved sales tax)
-$7500 fed tax credit
-$73,650 fuel savings (10 years)
===========
$15,595 net

Timo | 4 januari 2012

@Charged_Up There is no pure financial justification for buying the Model S.

I think there is. It all depends on what you use as baseline. What is the minimum you want from a car? Considering car performance, Model S performance version is a bargain. I can't right out think any five adult premium family car with 4.4secs 0-60mph that costs only $90k-$100k depending of options you choose.

Seriously. Look it up. There just isn't any. Porsche Panamera GTS gets close, but it is only for four people, and it costs more.

David den Boer | 4 januari 2012

@Teoatawki,
Where do you get the sales tax back? I'm looking at at least 8.25% unless we vote for higher taxes this year.

Brian H | 4 januari 2012

Timo;
Good comparison. Apples to apples, and the 'S' is a big apple, indeed!

Teoatawki | 4 januari 2012

@David den Boer,

If I bought an ICE at the same price, I'd owe that much sales tax. In WA, EVs are exempt from the state sales tax, so I'm not literally getting those $ back. So maybe it's not really fair accounting, but that's the way I see it.

If you take that out, the net is only $25.750. That's without the price of gas going up any over 10 years. If the average price over 10 years is $5, instead of the $3.50 I most recently paid, I'm about 10K to the good.

jbherman | 4 januari 2012

At Timo-
You won't get the sales tax back. I confirmed this yesterday with my Tesla Customer Advocate. If you take delivery in your home state, you will pay a delivery fee (as yet unknown), registration fee, and state sales tax.

Timo | 4 januari 2012

I think you mean Teoatawki, not me. I don't get any tax reductions for buying EV, quite opposite: I actually have to pay more. For taxes cheapest car here is ordinary low consumption gasoline burning ICE car. If the car uses something else than gasoline you need to pay extra yearly tax of something like 361 EUR for Model S (5.5 cents/100kg/day) + 43 EUR base tax. Great isn't it? :-(

Good thing is that sales tax seems to be based on CO2 measures, so EV gets lowest tax which is 5%. Add in that 22% VAT some import taxes etc. and suddenly premium starts to sound really premium.

JohnQ | 4 januari 2012

@Teo
Everyone seems to forget that there are battery replacement costs that have to be factored into this. You will be replacing your battery (several times) during that 320,000 mile time period. Granted, you would probably need an engine overhaul at least once on an ICE plus other maintenance expenses to replace worn out powertrain parts. If I had to guess, that's probably a $20k positive for the ICE over the course of the mileage you're talking about.

Mycroft | 4 januari 2012

I agree with those who say that there isn't really a financial justification for this purchase.

The wants, on the other hand, are very strong. I want a quiet electric car with enough range to meet my needs and enough storage space to meet my family's needs. The performance aspect is sheer luxurious opulence that I'm able to afford.

Brian H | 4 januari 2012

@Timo;
There's talk in the US of switching gasoline taxes to mileage taxes to 'capture' the EV usage of roads, etc. I assume Norway(?) is thinking along those lines.

@JohnQ;
Yes, how to offset/account for battery replacement is an open question. Is it part of the drive train, or the equivalent of a gas tank? Or part of the fuel cost? IAC, the cost/mi. of the battery can be expected to drop, maybe plummet, over that timespan, which is the opposite of any ICE component or fuel you match it with.

jbunn | 4 januari 2012

I'm very much getting it for the cost savings. My last car was new in 98 for 45 K in 1998 dollars. It gets 17.5 mpg, and now has over 200,000 K on it. Purchasing the same car today, and assuming an average fuel price of 4.00 per gal over the next 14 years will cost an 45 K in fuel over the life of the car. 63 K for my S with no state sales tax will save significant money over the life of the car. I expect gas to continue to rise. So long as I'm not off there, This should be a money saver.

David70 | 4 januari 2012

I'm also in WA, but don't expect any overall savings unless gas goes to at least $10/gal. and future battery technology gets much less expensive. For me it's all about want and dislike of big oil. People who complain about the $7500 tax credit for electrics must be forgetting about a big tax break for Hummers during the Bush administration. The announcement of that break convinced me to buy me Prius.

I want a large, safe comfortable car. I'd never pay even $50k for an ICE with the appropriate size, safety, and comfort. As for gas, a Prius V would serve me almost as much as the Model S, with probably slight decrease in comfort, and room. But I'd still be using gas. I'd get a new Prius before a Volt or Leaf, because of my 20,000+ miles per year, at least 6000 miles is on long distance (over 1000 at a time) road trips. The Model S is expected to be the last car I ever buy. Buy the time the pack capacity of the 300/310 mile car is down to 70% charging infrastructure should be good enough that I can still use it for long trips. I hope (not necessarily expect) that I can use the car up to 15 years before doing a pack replacement.

Teoatawki | 4 januari 2012

@JohnQ,
I was only looking at the fuel savings. Good news on the battery front, though. 10 years 320,000 miles is, at most, 1 battery pack replacement on my dime. 3 cheers for the 8 year unlimited mileage battery pack warranty!

Common sense, or personal finances, may kick in and keep me from getting the performance option, which makes more economic sense. BTW, common sense is spelled wife.

The miles driven in my Sig expectation drops if I get my wife an X or the $30K car.

Robert.Boston | 4 januari 2012

A key question in the "financial savings" question is, "what would you buy if you didn't buy the Model S?"

If your answer is, say, an Audi A7, then it's easy to construct a model where the Model S is cheaper.

If your answer is, say, a Kia Forte, then it's nearly impossible to find cost savings.

Volker.Berlin | 4 januari 2012
Volker.Berlin | 4 januari 2012

Everyone seems to forget that there are battery replacement costs that have to be factored into this. You will be replacing your battery (several times) during that 320,000 mile time period. Granted, you would probably need an engine overhaul at least once on an ICE plus other maintenance expenses to replace worn out powertrain parts. (JohnQ)

I agree that the cost of battery replacement is probably significant, although nobody can tell exactly today, and that is is sometimes not included in back-of-the-envelope TCO calculations, but should be.

There is just one additional note that I think is important to make: If there isn't any serious fault (hopefully covered by warranty), the battery suffers "graceful degradation": Assuming Tesla's battery warranty declares a battery with 70% of nominal capacity "healthy" (the fine print has not yet been published, but 70% is a frequently-mentioned number), then the battery had better 80% nominal capacity on average by the age of 8 years (unlimited mileage on the 300 miles model) or otherwise Tesla will be bitten by their own warranty. Whichever model you choose to extrapolate battery life, it will be a looong time before a 300 mile battery degrades to the degree that a battery replacement is "required" in the sense that the car does not have any more value without it. If the cylinder head gasket of your ICE requires repair, you'd better replace it immediately or the entire engine will be scrap soon. If your nominal 300 mile battery degrades to 70%, 60%, 50%, ... who cares, really? You still have more range than a new 2011 Leaf! So you can safely procrastinate the battery replacement until significantly newer/cheaper tech becomes available, and/or you see fit in your personal finances.

gagliardilou | 4 januari 2012

I hope to get at least 15 years out of the 300 mile battery. I feel 5 years of extra battery life justifies the 10K increase in price over a 230 pack.

gagliardilou | 4 januari 2012

There definitely are price justifications that work for some but I have to say the price justification will not work for most. My guess would 10 to 15% can justifiy the price (closer to 10%) and 85 to 90% cannot.

Therefor the answer to my original question?

WANT

is the main reason for buying the model s - whether for green reasons, not wanting to go to the gas station, first adopters, attention wanters, or whatever other benefits we will be able to get out of owning the car - which I feel will be many.

MitchL | 4 januari 2012

A few people have talked about replacing the pack when it degrades after 'n' years, and 'n' is a value like 10 or so.

Do I really believe that Tesla will still make battery packs that fit the first 20K cars they built ten years from now? I wonder.

The skateboard design does give the chassis some longevity over many model iterations, but eventually they will produce new cars that don't use the same size pack. Maybe packs can be refurbished (internally they are composed of smaller bricks, which might be standardized).

I'm not really worried about it, but I do wonder how this is going to work.

I've never tried, but can you buy critical components for 10-year-old ICE cars from a US, Japanese, or European automaker?

To keep this on-topic, part of the price justification must be to speculate about the ability to refurbish our early cars to amortize the cost out even further.

/Mitch.

gagliardilou | 4 januari 2012

That I agree with Mitch. That is why I told my oldest son (12) to just keep fixing the car whether it needs carpet, or new seats or whatever because I will make this purchase financially justified (even if it takes 50 years!) and its a sig.

Now you got me thinking - how many years do you think it will take to really financially justify the car. For me and my driving I will say 18 to 20 years. Although by then, maybe you will be able to buy a cheaper electric car for the same price as a new battery pack?? Its possible.

CurrieG | 4 januari 2012

Referring to my earlier post of a savings at least $36K over ten years; you will note this will more than pay for the cost of a replacement battery after 10...+ years (Another way to look at the numbers)

William13 | 4 januari 2012

If Tesla is still in business in the future they are required to ensure parts availability for 10 years after manufacture. There may not be any financial limits to this "availability." Maybe Tesla could charge $100,000 and still be in the letter of the law. Someone will supply parts if there is a market.

Here in South Bend we have a store that sell both new old stock and new parts for Studebaker cars which stopped being made in 1962.

StephRob | 4 januari 2012

I don't see how anyone could really justify the purchase of a Model S purely in terms of cost. There are far less expensive ways to get from A to B safely and reliably.

But I REALLY WANT this car!! I really can't stand gas stations and their smelly, dirty, germy gas pump handles. I am just counting the days until I don't have to stand there pouring that nasty stuff into my car. I hate polluting the environment too and I really think we should do everything possible to leave all the carbon we can locked away underground. I'm installing solar panels within the next month on my garage to that end and my electric utility generates a large portion of their power from sustainable (non-hydrocarbon) methods.

Plus, it looks really beautiful and roomy. I know many (almost all?) the posters on this forum aren't in the same boat because of gender, but I carry a purse and I love how it seems like there will be room to put it next to the driver's seat. :-)

I really want to drive the car of the future, which is what I believe this car is. I think the world needs more visionaries and I think that's what Elon Musk seems to be. I really hope he and the rest of the Tesla organization succeeds.

So, no, can't justify this as cheap transportation, but there are MANY other reasons to buy this car!

MitchL | 4 januari 2012

StephRob: I'm with you, there isn't really a good way to justify the cost. It's about the vision... the frame in my mind goes like this (it'll be familiar to you :-) ):

- I'll be part of the generation that leaves internal combustion behind
- I'm buying my first American car, designed by Silicon Valley geeks, built right here in California.
- I'll power it from the sun (8KW array on the house after our remodel next year, more if I need it).
- It's a _real_ car. I can actually drive it every day and save the van for trips to Yosemite.
- I'm a techie. This sort of stuff is hard to resist.

The image in my mind is too perfect to ignore

Is it expensive? Yes. Never in my wildest dreams did I think I'd find a way to justify this kind of cash for a car. It'll hurt writing the check, but I suspect the pain will be gone by the time I get home from the showroom/factory or wherever we pick it up.

BTW, The convenient purse storage was among the first few comments my wife (and spending regulator) noted when she got to sit in the beta before I got the OK to reserve.

/Mitch.

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