Same principle as above. Buy a brand new BMW, MB, Audi, etc and rack up a ton of miles in 3 years. Or try to get rid of it within the first two years. You’ll eat those costs for sure, it just won’t be itemized on an invoice.
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Model 3 - Makes more sense to Lease vs Finance...here's the numbers
- Thread starter Tezla1
- Start date
Jeremy3292
Active Member
The depreciation cost per miles is far less than a lease overage cost per mile. This is common sense bc the car dealership has to recoup the extra depreciation (miles) you put on the leased car by going over the allotted amount PLUS recoup extra to be able to resell that vehicle. Anytime you add a middleman to a transaction the cost is higher. Same reason trade in values are less than resale values. The car dealership is not the end user and will never pay market value.
Thats actually a bit backward, as the cost per mile for mileage overages is typically less than the cost of depreciation over that same time frame.
In any case, This OP posted the same "lease vs Buy" discussion that has been going on in car forums since there WERE car forums, and the same arguments are being made by people that have been made for both sides of that equation since before there were forums to post about this argument.
Jeremy3292
Active Member
Depreciation is generally around $0.08 cents per mile per the academic sources I can find. Any car dealerships I’ve ever seen charges way more than that per mile overage. Just logically why would a dealership charge you less than depreciation? That doesn’t seem to make any good business sense. However, I agree with you the discussion is always moot.
Im coming from the "german car" leasing background, which is the same background a lot of people are coming from (because german cars leases are usually structured with abnormally high, non realistic in most cases residual values).
I should have said "leasing cars in this class" which normally would not have depreciation numbers of 8 cents. In any case, I likely shouldnt have responded to this thread at all, because as I said "its the same discussion it always is" so I will bow myself out of it, now.
Don't forget opportunity cost with cash up front transaction. That is, your cash cant work for you during the 3 year period.
Meant to add -- leasing is typically favorable if you upgrade every 3 years. Especially if you can deduct all or part of it as a business expense. I decided to lease for these two reasons knowing that with the way tech is changing so fast I'd want to upgrade every few years.
thinktwice
Member
Doesn't Tesla also charge an acquisition fee for leased vehicles? I know some states (like mine) also levy a personal property tax on leased vehicles. In my case, comes to around $650/yr for a $50k car.
Eeek..... I remember I leased a BMW 3 series when I lived in Rhode Island and I had to pay the property tax every quarter and the tax on the property tax! in which BMW paid and I had to reimburse BMW separately. I didn't own this car and I had to pay that tax. It was a Nightmare! The only pro was you could buy more miles at any time.
There are no federal incentives for Tesla at the moment.
NJ and NY rebates are only for their residents, and can be applied to leases AFAIK.
SageBrush
REJECT Fascism
Just to add my two cents after finding this thread:
Typically I view leasing vs. buying as making a decision around paying a capped amount of depreciation (lease) vs. a variable amount (buying). The lease buyout option usually means that the depreciation paid via the lease can be less if the car doesn’t actually depreciate in value as much.
Without a buyout option, I view Tesla’s lease as a fixed amount of depreciation. Seems high relative to historical amounts and other cars. Could be less than what transpires for sure. But it’s a different decision to me without having the buyout option - one that allows Tesla to artificially set low residual values in their lease contracts without much downside, and a profit generator as returned cars don’t depreciate as much.
Typically I view leasing vs. buying as making a decision around paying a capped amount of depreciation (lease) vs. a variable amount (buying). The lease buyout option usually means that the depreciation paid via the lease can be less if the car doesn’t actually depreciate in value as much.
Without a buyout option, I view Tesla’s lease as a fixed amount of depreciation. Seems high relative to historical amounts and other cars. Could be less than what transpires for sure. But it’s a different decision to me without having the buyout option - one that allows Tesla to artificially set low residual values in their lease contracts without much downside, and a profit generator as returned cars don’t depreciate as much.
Gauss Guzzler
Safety Score = 42
First, you didn't account for the indirect costs of a lease:
- You're either paying for mileage you didn't accrue, paying disproportionately for overages, or - like most people - you are imposing upon your spouse/kids/bicycle/etc. to stay under the limit.
- You're losing all possible resale value benefits that might come from good care or upgrades.
- You're paying for stuff you don't need like premature tire replacements or whatever else they want to ding you for upon return. Most dealers will only back down from these fees if you agree to pay full price for the next lease.
- You're paying fines on any non-OEM maintenance or repairs, such as different tires or aftermarket glass.
- You're risking financial loss if your life situation changes in any way, even just a simple change in your commute will have financial repercussions amplified by a lease, but if your life changes in a more serious way a lease can complicate it significantly.
- Last but not least, a lease is the most permanent commitment you can possibly make to a car. That in itself is a huge cost because it amplifies all of the above points and controls every aspect of your life, right down to the fact that you have to plan vacations around your lease end date. How sick is that?
That's obviously the only number that matters in your calculation. All that other stuff about taxes and interest rates makes no difference when you can just pull a resale value out of thin air and sway the equation any which way. And that's really what a lease is - it's the manufacturer's prediction of - and attempt to influence - the resale value. Kelley Blue Book and others use the lease residual value as one of the dominant metrics in determining the private resale value.
With billions of dollars at stake, you can bet that one of the most critical things to every automaker's profitability is to have a huge team of the world's most brilliant financial analysts working year-round to determine the perfect lease pricing. You can't compete with that - all you can do is guess "60%". And you know what? The house always wins. The odds are stacked against you and that too is part of the lease profit strategy - they know you're drawn to the lower monthly payment and reduced sales tax so they use that advantage to get a little more profit from each lease than they would from a similar sale. Think about it - why wouldn't they? A lease is a hardship on them - they want cash, in full, today - especially growing companies like Tesla. Of course they're going to price their leases at a higher profit point than their sales. Come on.
So unless they screw up, you will always pay more for a lease than a purchase. Sure, it's possible that Tesla could screw up - they're very arrogant, most EV's depreciate faster than average, and other rapidly evolving consumer technologies like phones, computers, and TVs lose value incredibly fast. But don't bet on it. They know what they're doing and the market isn't going to be flooded with EV competition in 3 years. All these new EV's that just barely exist today (Mustang, Polestar, Bolt, etc.) will still barely exist in 2025. Their planned production numbers are tiny, just a few hundred thousand per year. Even Tesla isn't going to flood the market anytime soon - they're going wide, not deep. They have an entire world to supply before they can get around to overproducing here in the US.
- You're either paying for mileage you didn't accrue, paying disproportionately for overages, or - like most people - you are imposing upon your spouse/kids/bicycle/etc. to stay under the limit.
- You're losing all possible resale value benefits that might come from good care or upgrades.
- You're paying for stuff you don't need like premature tire replacements or whatever else they want to ding you for upon return. Most dealers will only back down from these fees if you agree to pay full price for the next lease.
- You're paying fines on any non-OEM maintenance or repairs, such as different tires or aftermarket glass.
- You're risking financial loss if your life situation changes in any way, even just a simple change in your commute will have financial repercussions amplified by a lease, but if your life changes in a more serious way a lease can complicate it significantly.
- Last but not least, a lease is the most permanent commitment you can possibly make to a car. That in itself is a huge cost because it amplifies all of the above points and controls every aspect of your life, right down to the fact that you have to plan vacations around your lease end date. How sick is that?
That's obviously the only number that matters in your calculation. All that other stuff about taxes and interest rates makes no difference when you can just pull a resale value out of thin air and sway the equation any which way. And that's really what a lease is - it's the manufacturer's prediction of - and attempt to influence - the resale value. Kelley Blue Book and others use the lease residual value as one of the dominant metrics in determining the private resale value.
With billions of dollars at stake, you can bet that one of the most critical things to every automaker's profitability is to have a huge team of the world's most brilliant financial analysts working year-round to determine the perfect lease pricing. You can't compete with that - all you can do is guess "60%". And you know what? The house always wins. The odds are stacked against you and that too is part of the lease profit strategy - they know you're drawn to the lower monthly payment and reduced sales tax so they use that advantage to get a little more profit from each lease than they would from a similar sale. Think about it - why wouldn't they? A lease is a hardship on them - they want cash, in full, today - especially growing companies like Tesla. Of course they're going to price their leases at a higher profit point than their sales. Come on.
So unless they screw up, you will always pay more for a lease than a purchase. Sure, it's possible that Tesla could screw up - they're very arrogant, most EV's depreciate faster than average, and other rapidly evolving consumer technologies like phones, computers, and TVs lose value incredibly fast. But don't bet on it. They know what they're doing and the market isn't going to be flooded with EV competition in 3 years. All these new EV's that just barely exist today (Mustang, Polestar, Bolt, etc.) will still barely exist in 2025. Their planned production numbers are tiny, just a few hundred thousand per year. Even Tesla isn't going to flood the market anytime soon - they're going wide, not deep. They have an entire world to supply before they can get around to overproducing here in the US.
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The above definitely is not true on a BMW or Mercedes. When leasing BMW’s it is most always better than buying, especially, since I get new cars every three years. My wife on the other hand pays cash and keeps hers. I can even make a case I am better of leasing a BMW every three years and still better than hanging onto the car for 6 years owning it.
Tesla - I agree. Just can’t make the lease numbers work compared to buying a Tesla. However, really dislike buying a Model S. No idea of what it will be worth in three years when I trade it in and the technology is like an iPhone changing every year. Same with how many miles they per charge. Buying it just does not give me a comfortable feeling and really wish Tesla had better lease numbers.
Tesla - I agree. Just can’t make the lease numbers work compared to buying a Tesla. However, really dislike buying a Model S. No idea of what it will be worth in three years when I trade it in and the technology is like an iPhone changing every year. Same with how many miles they per charge. Buying it just does not give me a comfortable feeling and really wish Tesla had better lease numbers.
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