Tesla’s prices may hurt, but not as badly as depreciation.
When we go to buy a new car, most of us are fixated on what it will cost to drive it off the lot. If that car is a Tesla, it’s obviously not cheap. A brand new Tesla Model S Performance with Ludicrous Mode will set you back a whopping $119,000 before tax credits. But what will that six-figure investment be worth in five years’ time? You may be surprised (and not in a good way).
Let’s look at someone who owns a Tesla, Alex Chalekian. He is the owner of Lake Avenue, a financial firm based in Pasadena, California, and he owns a 2013 Model S. As you do from time to time, he poked around to see what his car was worth should he decide to trade it in. He bought his base model, 60 kWh Model S in 2013 for $79,770.
Five years on, with 82,699 miles on the clock, Tesla offered him just $16,100 for his car. Even if math isn’t your strong suit, that looks like a huge loss. And it is — that represents a whopping $63,670 gone in the time he’s owned the car.
And that’s just in depreciation. That’s before you factor in charging costs, tires and other maintenance costs related to keeping the Tesla Model S in good working order. Chalekian points out that a similarly aged Mercedes-Benz S-Class has a trade-in value over $20,000. That’s terrible as well, but it doesn’t hurt as badly as the Tesla Model S.
What about a fully-loaded Model S?
After seeing that, I decided to poke around on my own and see what a top Model S would be worth five years on. I went to Kelley Blue book and NADA guides to see what the damage was. Bear in mind, a fully optioned out 2014 Tesla Model S P85D cost around $130,000 new.
So, let’s say I drive an average amount of distance with my Tesla each year — about 12,000 miles. With 60,000 miles on the clock and keeping my car meticulously maintained, both sites offered up a similar trade-in estimate for the car. Kelley Blue Book estimated the car is worth between $37,720 and $44,412. NADA, on the other hand, estimated $37,050 for a “clean trade-in”.
There’s no easy way to put this: That’s 100 grand completely gone. Poof. And that’s $100,000 in depreciation alone — again, that does not factor in maintenance, charging costs, registration or anything beyond mileage and general condition. My Tesla has lost almost three-quarters of its value in just five years.
Other things to consider
Now, I’m not saying don’t buy a Tesla Model S. They are good looking cars, they have an impressive range of technology, and they are stupidly quick. Plus, you can say you made the environmentally conscious leap to an electric car, and laugh in the face of us oil burners as we continue to curse the rising gas prices facing us with Memorial Day right around the corner.
It’s worth taking into consideration, however, whether you’re prepared to lose $20,000 a year in depreciation. That amounts to $60 gone every day. There are a few good reasons for that. It’s an electric car, which currently lose value at a much faster rate than conventional models. The Tesla Model S is also a luxury car, which also hurts its value over the years. Being both an electric car and a luxury car just makes the depreciation that much worse, it appears.
Then there’s the flip side: You could always buy one of these used. In fact, it’s worth looking into doing that with any car, as long as you aren’t bothered about having the latest and greatest.