By on April 3, 2013

Yesterday’s Tesla “lease offer”, (which turned out to be Elon Musk’s “big announcement”) was a classic display of Tesla’s penchant for theatrics. On the surface, the move is a smart one; most customers in the large luxury sedan segment tend to lease their cars, so Tesla’s move is nothing out of the ordinary.

The 5 year lease program will allow customers to keep making payments on the car as a means of buying it outright, rather than the traditional balloon payment used by most auto makers. And, as Wired’s Damon Lavrinc notes, you could technically lease the car with nothing down.

Depending on where you live, the initial payment could be as low as … nothing. Tesla’s financial partners in the program, Wells Fargo and U.S. Bank, take the $7,500 federal tax credit offered to anyone who buys an electric vehicle, roll that into the state rebates and include it all as your down payment. In California, for example, that comes to $10,000.

Where it gets interesting is some of the numerical gymnastics that, according to Tesla’s True Cost To Own lease calculator, can leave you with a net lease cost of -$2,000. To find out how that happens, check out EV expert John Voelcker’s excellent take-down of Tesla’s leasing program. Rather than summarize and butcher it at TTAC, you might as well head straight to the source. It’s not to be missed. Especially if your time is worth $100/hour, as Musk thinks.

Get the latest TTAC e-Newsletter!

57 Comments on “All You Need To Know About The Tesla Lease Offer, From People Smarter Than I Am...”


  • avatar
    romanjetfighter

    If time is worth that much, then he should really install more superchargers throughout America! By the way, there’s a guy with a white Tesla who parks in the same spot every time. It’s the most beautiful car in the entire hospital, and there are plenty of high-end cars at in the lots. It has proportions that are so distinctive. Good job, Musk.

    • 0 avatar

      Of course one problem is that if you do make those road trips, the 30 minutes you’re spending stuck at a supercharger is spending $50 instead of the $20-odd cost of a fill-up. Oops.

      But then again, how many Model S owners really want to make this kind of road trip? For distances over 300 miles, aircraft, whether private or (heaven forbid!) commercial are going to be much more cost-effective for anyone valuing their time at $100 an hour.

      D

      • 0 avatar
        romanjetfighter

        Rich people are weird as hell, so maybe they they DO like road trips? Especially the tech-nerdy progressive types that would buy Model S’s and old people who don’t have jobs so don’t need to fly on business a lot and have nothing really pressing to do, i.e. the leisure class. Did I use i.e. right?

      • 0 avatar
        Japanese Buick

        Can you point me to the gas station where any car’s typical fill-up costs “$20-odd”? Thanks in advance!

        • 0 avatar
          Luke42

          Any gas station that I visit with the Prius charges me $20 and some change….

          To be fair, I have paid $30-something coming on fumes on a day with expensive gas!

          [Ducks]

    • 0 avatar

      Anybody got $1050 a month to drive around in an electric car that looks great on the outside but has an interior as hard and unwelcoming as a last-generation Ford product?

  • avatar

    Well, to be fair, Musk’s time is probably worth considerably more than $100 an hour, and to have an income necessary to afford a Model S with its $1,500 a month payment, your time probably needs to be worth about the same.

    Of course whether this time is unproductive down time or time that would have actually been spent on something useful is impossible to determine. I can see how the calculator would be totally valid for someone like Elon Musk who, after all, runs something like ten companies and probably has to ration his time by the second.

    Still, I don’t see what the fuss is about this since it’s perfectly easy to plug my own assumptions into the calculator. If my time is worth $25 an hour, and I spend 10 extra minutes a day commuting, then I’m spending about $1,300 a month instead of $1,500 a month.

    It’s a fun tool and a clever marketing effort.

    But can I afford a $1,500 a month car payment?

    Sadly, no :(.

    Update: My monthly car payment is down to $761 when I realized that I hadn’t clicked on the checkboxes needed to add the time savings back into the calculation. Interesting. Now if this phantom saved time only had a way of sneaking back into my bank account, I’d be in great shape. It is only successful entrepreneurs like Elon Musk himself who can afford to think that way. Unsuccessful ones like me, alas, might find the money flowing in the wrong direction entirely :(.

    D

    • 0 avatar
      Landcrusher

      Exactly, I used to make over a $100 an hour, but I couldn’t just work another hour and make another $100 because I worked for someone else. A lot of doctors can add hours, but generally they see diminishing returns as well. Maybe if you earn 250 or more, cutting your commute will get you 100 per hour savings, but any EV with HOV privileges gets that. In many areas, you can pay a toll to use the HOV at a really cheap rate.

    • 0 avatar
      malloric

      But that’s kind of the point, isn’t it. The one with $1,500 payments is competing with BMW M5/Mercedes E63 which also have lease payments in that $1,500 range.

      I technically could afford it, although I seriously doubt I’d qualify. I put 20% of my net in my SEP IRA right now which is serendipitously close to that $1,500/month. It’s almost as if some greater power out there is telling me to buy one even though doing so would completely wipe out my savings. But hey! I could pocket the gas savings less electricity… which might add up to one month’s payment!

  • avatar
    Sundowner

    most people I know refill their car on the way to or home from work. There are many, many people who bill time on an hourly rate and that rate is much more than $100/hr. There are plenly of people who don’t value their own time. you can see them standing in long check-out lines at Wal-Mart every day. These people are not Tesla’s market demographic.

    That being said, the lease calculator is total BS. nice way to ratfawk a decent idea.

  • avatar
    CJinSD

    The time savings for avoiding monthly gas stops is hilarious when you consider the time spent tending to keeping an electric car charged. Even just keeping up with commuting consumption takes more time than a weekly stop at the gas station, and one long trip requiring an ideal stop at a Supercharger that happens to not require an extensive reroute still goes a long way towards eating any time saved in carpool lanes. There are very low expectations for the intellect of Tesla’s potential customers.

    • 0 avatar
      healthy skeptic

      Commuting consumption:

      * 5 seconds to plug your car into your garage in the evening
      * 5 seconds to unplug your car in the morning

      You can fill up at a gas station in less than 10 seconds? Impressive.

      • 0 avatar
        CJinSD

        Anyone that believes you gets what they deserve.

        • 0 avatar
          healthy skeptic

          Why wouldn’t they believe me?

          For long-distance supercharging trips, yes, it would definitely take more time than a gas station, but for commuting back and forth to your garage, no.

          • 0 avatar
            mcs

            When on a rare occasion when I do take a long car trip, I usually stop for more than 30 minutes. A bathroom break and grab something to eat. Not a big deal.

            By the way, the sharing services have really cut the cost of private jet travel. There’s one out there now that allows you to buy a seat or seats for a single flight rather than having to rent the entire plane.

        • 0 avatar
          redav

          “Anyone that believes you gets what they deserve.”

          What they “deserve” is to not waste time driving to/from and waiting at gas stations, and that’s exactly what they get. healthy skeptic is correct here.

          • 0 avatar
            CJinSD

            Go read the Tesla owners forum. They’re not saving any time while waiting for flatbeds or worrying what new delights will be waiting for them when they return to their cars. Will it have lost 40% of its charge overnight? Will the latest software update open the doors or roll down the windows in my absence? Will the black screen of immobility greet me after work? Will a bunch of unhinged believers attack me for listing my problems on a website about the car?

          • 0 avatar
            healthy skeptic

            I have read the owner’s forum. Most people seem thrilled with their cars. Makes me jealous.

            I’ve seen some of the problems posted too, and a few owners are disappointed, but most of the negatives seem like exceptions rather than the rule. Also, people are more prone to post problems anyway. No one’s gonna post “My car worked perfectly today”, whether it’s a Tesla or anything else.

          • 0 avatar
            gslippy

            @CJinSD:

            If the Model S is losing charge overnight (as alleged in the infamous NYT article), all I can say is that my Leaf does no such thing – ever. This winter, it sat outside the office every day and resumed driving at the same level I arrived at.

            And I can’t speak to the software glitches you’re referring to, either. My Leaf is bug-free so far.

            However, daily charging at home consumes about 5-10 seconds of my time, as healthyskeptic says. I have no illusions of taking the Leaf on a trip, however, unless a CHAdeMO charger network magically appears.

            As much as I want a Model S, both my income and my disposition are too modest to actually get one.

          • 0 avatar
            shaker

            gslippy:
            Most intelligent people who are aware of the limitations and “care and feeding” of an EV are quite pleased with their purchase, as are you.

  • avatar
    KixStart

    Oooohhh… what’s your time worth? What a neat trick.

    If I’m self-employed and any additional commuting time I free up can be turned into revenue time or allows me to spend more time growing the business, then it’s worth whatever my incremental earnings are.

    If I’m on salary and we’re only considering incremental earnings, then the time is effectively worth zero. I could listen to books on tape or pre-recorded language lessons and get something useful out of the time spent on the road.

    If it allows extra family time, then we could consider it priceless but I know more than a few people who have long commutes and 1-2 fewer hours of family time each day, just so they can afford a 3000 sq ft house instead of a 2000 sq ft house. I’m not sure how I’d come up with an hour figure but it’s clear that they don’t value the family time over all other things.

    If I have a mistress and the HOV access allows me to squeeze in a few extra boinks per month, maybe it’s worth a few hundred bucks per boink but the cost of boinks varies widely and $20 boinks can be perfectly satisfactory. Or so I’ve heard.

    • 0 avatar
      romanjetfighter

      Ugh. I’d kill for an HOV access sticker in California. =(

      • 0 avatar
        stuki

        Get a motorbike. You’ll get both the equivalent of an HOV sticker, and access to “lanes” no car cold hope to fit in.

        • 0 avatar
          blowfish

          I thought about that, but all u need is one clown that tries to turn on the phone or change channel on the TV please dont laugh is happening. Then u know u’ll be in the quickest ride to the shop, the speed is only rivalled by head of states.

    • 0 avatar
      Robstar

      Some of us take long commutes to actually be able to OWN a house instead of renting for life….

      • 0 avatar
        corntrollio

        Yes, but one should consider whether it actually makes sense for their individual situation. In California, it’s not clear that it is given how many house-poor people there are. Renting would actually be better for many people think they should own a house, and the recent housing boom/bust cycle proved that quite well.

        “If it allows extra family time, then we could consider it priceless but I know more than a few people who have long commutes and 1-2 fewer hours of family time each day, just so they can afford a 3000 sq ft house instead of a 2000 sq ft house. I’m not sure how I’d come up with an hour figure but it’s clear that they don’t value the family time over all other things.”

        Yeah, I never understand this attitude, and it seems misguided. A long commute is just dead time as far as I’m concerned. Maybe if it’s on a train, you can do work or read, but it’s a big drain on productivity otherwise.

        • 0 avatar
          ash78

          I eat breakfast and listen to NPR on my commute, so at least I get to enjoy a delicious bagel while occasionally choking on the liberal hatred. But it’s generally informative and I haven’t choked to death yet.

          Renting is indeed a solid proposition in parts of the country, notably around major cities. This is an endless argument, but if you can rent for substantially less than a mortgage, then do it. In most of the US, buying is simply cheaper than renting, assuming you don’t need immediate mobility.

          • 0 avatar
            corntrollio

            “Renting is indeed a solid proposition in parts of the country, notably around major cities. This is an endless argument, but if you can rent for substantially less than a mortgage, then do it. In most of the US, buying is simply cheaper than renting, assuming you don’t need immediate mobility.”

            That’s the operative point. There are some cases where owning makes more sense and there are others where renting makes more sense. I’ve done both, and it depended where in my life I was that one or the other made more sense. The problem is that people assume owning is always better, but it’s not.

            The reality, during the recent housing boom, is that tons of people in high-priced markets bought subpar houses intending only to live in them for a short period of time because they weren’t suitable for their life situation (i.e. the “starter house” fallacy). It worked fine when housing values were going up 20%/year or whatever, but was stupid in any normal market where you will lose huge money due to transaction costs with such a short holding period.

            The only people who benefit from people who can’t do math buying starter homes are realtors who get to churn more houses and make more commissions.

          • 0 avatar
            mnm4ever

            A similar operative point can be made for electric car ownership. For some people it makes sense, for others, not so much. We have been considering a Leaf, the lease special is stupid cheap and our driving habits match up pretty well to the range of it. But we also have 2 other cars for times when the Leaf wouldn’t work, such as road trips.

            But admittedly, the “lost time getting gas” is a dumb argument, and the only reason the Leaf works is the payment is very close to what I spend in gas monthly on one of our cars. A Tesla is not stupid cheap.

          • 0 avatar
            icemilkcoffee

            You should worry more about the danger of eating while driving and less about the danger of NPR.

        • 0 avatar
          Robstar

          My commute went from 7 miles public transit -> 30-35 miles driving. Time is the same.

          Owning 2300 ft^2 + finished basement, including prop taxes was $150 more/month than renting 1200 ft. I also ended up with more nature nearby, quieter, less crime, lower cost of living (except for car costs) and better schools.

          It was a no-brainer.

          • 0 avatar
            corntrollio

            If the time is the same, why did you say “Some of us take long commutes”?

            Your decision does seem like a no-brainer, but you’re not including insurance and maintenance, just as most people don’t.

          • 0 avatar
            Robstar

            Long as in distance, not in time….

            And you aren’t taking into effect the absolute horror of dealing with public transportation when it’s -10F outside & the bus isn’t due for 20 minutes….and the fact that a missed train or bus might add another 30+min on your commute at a moments notice.

            With an average commute of 45 min on public transport, a shortest possible case commute of 42 minutes & a longest case of 2 hours, it was ‘leave 75 minutes early to have a 98% chance of arriving on time’. I have to do no such thing in my car, so I guess in reality living 30 miles away & driving was adding about an hour of free time back into my day.

      • 0 avatar
        Luke42

        @Robstar:
        I work for a silicon valley dot-com in one of their remote offices, which happens to be located in the Midwest.

        I’m surprised the California people aren’t lining up to transfer out here because:
        1) My house cost 1/4th of the average silicon valley house. And its a nice one.
        2) My commute is 5 minutes.
        3) Kid-friendly everything.
        4) A university to provide culture and fast Internet connections.

        I acknowledge winter as a disadvantage, but having winter is way better than wasting my life in traffic.

        Also, being able to change jobs to other silicon valley companies easily as an advantage. But I’m basically happy with my employer, so that doesn’t seem likeba deal breaker – especially since we have a small tech cluster out here.

        I’m still wracking my brains trying to figure out why the California people put up with the tradeoff between serfdom and commute, when there’s such an obvious way to Escape. The only requirement is finding a job you don’t mind sticking with for a few years, which is what a lot of the California people in my company have already done.

        If they double or triple my salary, then California would be an OK place to live. But nobody out there has suggested that the pay disparity is enough to support my modest middle-class lifestyle in California’s high-priced economic environment.

        • 0 avatar
          stuki

          For those who fancy themselves “on the make”, being closer to those in a position to make promotion decisions, is probably considered a plus.

          Also, many SV’ers want to be i the loop when the next big startup is being formed, and stock options are being handed out. For those who live for something other than work, your arrangement does seem infinitely preferable, though.

        • 0 avatar

          Some people, like me, really, really, really, really hate winter. Despise it deep within the marrow of our bones. I moved from California to Pittsburgh for a few years and it was one of my life’s biggest mistakes. I’m now in South Florida and enjoying life again.

          On the other hand, if I were in a Silicon Valley company and they had jobs in a warm weather Southern state like Texas, that would be another thing entirely since I could keep so much more of my income from taxes while enjoying a crushingly superior housing experience at much lower cost.

          D

          • 0 avatar
            Luke42

            My company does have a location in Texas.

            There’s a lot of IT stuff going on in Houston. I did some consulting at an oil company in Houston. There is a lot of IT work for the energy industry there. In addition to lots of office IT and web work, they’re using big-data and supercomputing techniques to help find oil and gas and to avoid fracking mistakes. It’s not my idea of a good time, but the people I was there to see there were looking to hire skilled computer folk. That was almost two years ago, but they already knew that the natural gas boom was going to be a glut and they were hiring skilled people as fast as they could.

        • 0 avatar
          mnm4ever

          If people were lining up to move to the midwest then it wouldn’t be so cheap to live there. :)

          I am with @David, my wife and I HATE HATE HATE cold weather. We tried living in DC for a couple years and were miserable for 7 months of the year, and that’s not even a very cold area. I took a 40% pay cut and dramatically reduced career opportunities to move back to Florida. I have had job offers from Ohio and Huntsville, good ones with good pay but its more important to me to be happy.

          But California doesn’t interest me at all. mostly because of the crazy politics and crazy cost of living. I am sure the weather is amazing but thats why we dont visit, so we don’t get tempted. Here in FL I get year round mild temps and a pretty low cost of living too.

          • 0 avatar
            Luke42

            The Midwest is a big place. Chicago is probably half as expensive as the Bay Area. Where I am is less than half the cost of living in Chicago.

            But, while I enjoy sending pictures of snowy vistas to my Californian and Bangalorean coworkers, I do appreciate that Real Winter isn’t for everyone!

      • 0 avatar
        stuki

        Just rent until the majority of those who borrowe too much to own default and the DC rabble run out of ways to flaunt their idiocy. Then you’ll be able to own without making such huge sacrifices.

        • 0 avatar
          fvfvsix

          Yeah, but as the idiots in DC have proven – they can stay irrational far longer than we can stay solvent.

          Half a decade after the housing bubble collapse here in suburban Phoenix, it’s just now getting close to what I would call “reasonable” pricing. Even then, the too-big-to-fail banks with all the foreclosures on their books (B of A, I’m looking at you) have managed to swing backdoor REO deals with the big venture capitalists with a program called REO-to-rent. So, us little folk are still getting boned by the big guys with no end in sight.

  • avatar
    KixStart

    An often overlooked way to access HOV lanes is to actually, you know, drive a car with other people in it.

    • 0 avatar
      Landcrusher

      God Forbid!

      This can work really well for some people, but many others just can’t do it at all.

    • 0 avatar
      jkross22

      HOV = High occupancy vehicle, unless you’re a liberal weenie mooching off of others for a tax refund on your Prius.

      I”m all for using less gasoline, as it helps us all by doing so, but don’t come running to me to help you make your car payment.

      And get out of the HOV lanes!

      • 0 avatar
        CelticPete

        Ya know in Silicon valley you are allowed to live close to where you work. The reason why people aren’t lining up to move to Chicago is more then just the weather. Its the natural beauty of the area out here. You have Napa valley, Santa Cruz, Yosemite Park, Lake Tahoe etc.

        And I tell you what – the roads in SV are fairly well done. Where I live in Sunnyvale they have signs before the road sign. Seems stupidly simple – but its pretty nice. And also the left hand turns are sometimes offically “U-Turn” lanes.

        After leaving in both NYC and Boston – this California stuff seems pretty nice. Granted I rented a place close to work..

        • 0 avatar
          corntrollio

          The roads are shite in the Bay Area. The road signs are made irrelevant by the low quality of the roads. I’m not sure what your left-hand turn thing is supposed to mean.

          In any case, the increasing cost of living in the Bay Area due to artificial land restrictions is likely to result in fewer companies locating here as time goes on, even if it’s fertile start-up territory. San Francisco is already essentially Disneyland for the rich, even as it becomes a less desirable place to live due to the incompetent city government.

          • 0 avatar
            CelticPete

            [quote]The roads are shite in the Bay Area. The road signs are made irrelevant by the low quality of the roads. I’m not sure what your left-hand turn thing is supposed to mean.[/quote]

            They have a ton less left hand turn signals in Boston and NYC. In NYC you pull into the middle of the motorway and have to squeeze through after the light turns red – because when you yield on green you rarely get a chance to go.

            [quote]In any case, the increasing cost of living in the Bay Area due to artificial land restrictions is likely to result in fewer companies locating here as time goes on, even if it’s fertile start-up territory. San Francisco is already essentially Disneyland for the rich, even as it becomes a less desirable place to live due to the incompetent city government.[/quote]

            The cost of living in the bay area is high because its nice place to live and alot of people want to live there. Its the same with Upper East Side in Manhattan, or Beacon Hill in Boston.

            Everyone who lives in a inexpensive place seems to think other people suffer from a case of stupidity…

            Chicago isn’t bad (the suburbs)but I bet St. Louis is cheaper then that. Indiana is cheaper still.

            When I was living in NYC – there were many job opportunities in Raleigh, NC (in the tech industry). But the people in NYC LIKE NYC so they don’t want to move.

            The cost of living in general is often directly related to the desirablitity of living in such a place. Alabama is very inexpensive but not alot of people want to live there..

  • avatar
    APaGttH

    I had read that the residual value model was based off of the Mercedes S-class, which makes the resale value of a used Impala rental queen look good in comparison.

    • 0 avatar
      Dr. Kenneth Noisewater

      Yeah, I was thinking that that’s not something to be particularly proud of.. Now if they used, say, a Honda Fit or a Camry as a basis of comparison…

      • 0 avatar
        KixStart

        It is likey that battery prices will decrease enough and battery densities increase enough to make future EVs much more attractive, the expectation of which should depress current residual projections.

        • 0 avatar
          AFX

          I can’t see buying where a car like this and keeping it long term would make any sense, especially after the warranty runs out. Imagine buying a used electric car and not knowing the condition of the batteries, especially since battery capacity diminishes over useage and time. Whatever they quote for range figures is only going to go down over the years as the battery capacity diminshes. Leasing one of these things is the best idea for anyone considering an expensive electric toy for a car.

          The battery cells in this thing are just the standard 18650 sized lithium batteries made by Panasonic that are normally used in things like laptops. There’s nothing special, secret, or high tech about Tesla’s batteries at all. If I was looking to invest some money I wouldn’t buy a Tesla and keep it hoping that the price will go up. I’d put the money towards Panasonic stock instead, because these cars use a crapload of batteries to make up their battery packs.

          • 0 avatar
            Luke42

            How is having expensive unknowns is different from buying a conventional car?

            Seriously, that sounds exactly like every used car I’ve ever bought!

            If you were going to point out that there isn’t a mechanic familiar with Tesla vehicles in my area, you’d have a point.

            There’s no Porsche dealer here, either. (“Where do they get that thing serviced?!?” is actually my first thought when I see one of the Porches that appears to be owned by a local. I must have really gotten burned by my Volkswagen if I assume Porsche is the same with bigger bills and better customer service…)

    • 0 avatar
      Rod Panhard

      My thoughts exactly. The S-class resale is terrible. In fact, it’s so terrible that I wonder why people by the E-class when there are tons of very low mileage S-class sedans with the CPO etc. But I guess Musk figured he’s trying to “upsell” luxury car buyers who self-employed, i.e., surgeons and other well-paid specialists, attorneys, and such.

      It really was a hilarious pitch. I think they’d have gotten more mileage, so to speak, out of making a splash over the Tesla supplied powertrain in the B-Class Mercedes-Benz. To me, Tesla has a better opportunity as a powertrain provider than a car manufacturer. I’ve sat in the Tesla and as interesting as the Mega iPad From Hell dashboard is, the rest of the car just doesn’t seem that nice. The vast empty space between the front seats reminds me of a commercial van, rather than a luxury car.

      Really, if Mr. Musk wants to reinvent something, I wish he’d put his best people on reinventing the plumbing for the P-trap under the bathroom sink. Now THAT’s something I could use.

  • avatar
    redseca2

    All in know is that my Tesla stock has wildly outperformed my Apple stock.

  • avatar
    Ryoku75

    For $1500 a month I could pile up a fine amount of good beaters, or buy one car that’ll be out of fashion within 3 months.

    If I’m honest I’d rather go the beater route.

  • avatar
    Type57SC

    That calculator looks the something that started as a solid idea. the problem being that people need to think TCO to think these are reasonably priced if a buyer is buying on logic, so what can be done to show the TCO? Then the implementation doesn’t get really tested or evaluated and so goes live. Then we all look at it and find the “minutes saved” bits obnoxious. Fail.


Back to TopLeave a Reply

You must be logged in to post a comment.

Subscribe without commenting

Recent Comments

New Car Research

Get a Free Dealer Quote

Staff

  • Authors

  • Brendan McAleer, Canada
  • Marcelo De Vasconcellos, Brazil
  • Matthias Gasnier, Australia
  • W. Christian 'Mental' Ward, Abu Dhabi
  • Mark Stevenson, Canada
  • Faisal Ali Khan, India