Analysis: what is the depreciation rate of the Tesla Model S

Because of the 0rpm instant maximum torque and the super low center of mass car body, the Tesla Model S provides unmatchable driving experiences.

However the enjoyment comes with cost: the electric car’s resale value cannot matched the tradiontional vehicles which is powered by the internal-combustion engine. Due to the cost its battery. Below is a breakdown of different component weights in the Tesla Model S.

Whole car curb weight: 4647lb

Battery Pack
1323 lb

Aluminum Space Frame
~ 800 lb

Motor / Drivetrain
~ 350 lb – electric motor + inverter
~ 175 lb – differential
~ 250 lb – wheels and tires
~ 120 lb – brakes calipers, discs, lines
~ 80 lb – air suspension
~ 50 lb – rack and pinion steering system

Electrical
~ 120 lb – wiring and lighting
~ 50 lb – computer, electronics
~ 50 lb – HVAC

Interior
~ 200 lb – seats
~ 190 lb – windshield, windows, hatch
~ 150 lb – panoramic glass and assembly
~ 80 lb – carpet, padding, mats
~ 40 lb – dash, trim, panels

Exterior
~200 lb – doors, frunk, hatch, body

Misc
~400 lb – paneling, safety control units, air bags, steering wheel assembly etc.

Now you see, the battery has the highest weight percentage in the whole car. The money you spend in buying the battery is way more than what you spend on other components in the Model S.

So it is like electronic devices such as smart phones, laptops – they looks good and provide what you want when new; but when you want to get rid of them several years later and buy a newer and more advanced model, the second hand electronic stuff virtually worth much less, to the extend that you may even prefer to donate it to save some income taxes.

Today Tesla announced the Business Lease program, which is a 15k miles/year and 36 month term. Please do not be fooled by the $408/month rate displayed on the Tesla website. There are more story behind that: you need to pay a $5,000 downpayment, a $700 acquisition fee, and another disposition fee of $300. The total monthly payment is around $1,012 per month according to Tesla’s statement. But how come it can claim this is a $408/month lease? Because Tesla assumes you can save $261/month for gas, and get a business tax deduction of $343/month.

Despite arguing whether this lease is a deal or a rip-off, I am instead interesting to see what is the implied depreciation rate for the Model S, according to this lease program.

Model S 60kWh version MSRP: $69,900; After incentives: $61,070; Money Factor = 0.001; tax rate = 8%. And we plugin the downpayment, acquisition fee etc., and total monthly payment of $1,012, then solve for the residual value. A simple computer program will get you the answer: residual value after 3 year = 36% of the original MSRP.

Yes if you take the Tesla business lease program, then it means you accept this truth: after 3 years or 45,000 miles, your MSRP $69,900 car will lose almost 2/3 of its value. To be exact: you lose 64% of the MSRP value after 3 years (with the assumption that Money Factor = 0.001; tax rate = 8%).

 

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