By on July 1, 2015

Tesla Model S Center Stage

The National Automobile Dealers Association new electric vehicle retention list released last week has a tasty little tidbit in its roundup of value retention rates.

Tesla’s Model S, which topped the 3-year value retention rate list for EVs in the new list, also sported a better value rate for most cars on a similar list released last year for all segments, including mid-size luxury cars. That includes BMW.

But the news may not be all good, all the time.

According to the most recent NADA study, Tesla’s Model S retains 57.2 percent of its original value after three years based on dealer trade-in values. That figure is tops among mid-size luxury sedans, including BMW’s 5-series, in a study conducted last year.

Also noted in the 2015 study, there is a significant cliff after three years when most EV manufacturers’ powertrain warranties expire, meaning there’s good chance that the Model S’s value plummets after that.

The 2014 study by NADA (which examined all segments – including EVs) was comprised of only the Chevrolet Volt and Nissan Leaf — the only two cars that had been on the market for three years by the time the study was conducted. The Volt and Leaf retained 41.6 percent and 38.2 percent of their values respectively, due partly to price drops from their manufacturers and increasing competition in the segment. The 2015 study had worse news for Volts and Leafs on trade-in: those values dropped to 31.3 and 25.3 percent respectively.

As Tesla prepares to release their Model X, there’s no doubt quite a few Model S owners will be looking to replace their sedans. This could trigger a market saturated with Model S’s (or is it “Models S”?) at or nearing the end of their warranty lives — and it’ll likely have legitimate competition in the near future as well, further driving down retained values.

Tesla Model X Teaser

It’s no secret that Tesla has no significant cash flow, hasn’t turned a profit for more than one fiscal quarter in five years, and probably won’t have a cash-positive year until 2020.

That all could mean the bottom falling out for Tesla Model S values soon. Or not.

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25 Comments on “Used Tesla Values Could Be a Bubble Waiting to Burst...”


  • avatar
    jkross22

    The least expensive used Tesla on their website is a 2013 85 for $59,700. Here’s the issue – how many used car buyers are there that are going to spend that much on a used car?

    2013 BMW 535i’s and MB E350’s sell for between 35-40k.

    • 0 avatar
      hubcap

      “…how many used car buyers are there that are going to spend that much on a used car?”

      That’s not the issue. The issue is how many are going to by a Tesla. Take a look at used prices for 2013 Audi S6/S7s, BMW M5/M6, or Porsche Panameras.

      In this price range there are fewer buyers but they are there and are willing to spend for that which is desirous to them.

      • 0 avatar

        “…how many used car buyers are there that are going to spend that much on a used car?”

        A used $100,000 German car typically costs about $60,000 after the 2-year lease, 30,000 miles is over.

        As for the TESLA…there are too many unanswered questions about its reliability and there are wary buyers not wiling to pay just for the sake of exclusivity.

        Its interior is its most damning feature. too flat, too plain, too boring. Completely unlike a used S-class or used Audi. You can kinda get the “new car smell” back into a used German car, but the Tesla is an appliance that gets more-dated with each and every new product.

        It’s the perfect product for a nation of rebellious badgewhore fanboys who are desperate to line up for the newest product only this time around, the “new” ones are unaffordable and the used items would make you feel like a fool to buy.

        And let’s not even talk about the INSURANCE COSTS.

        • 0 avatar
          DeadWeight

          I believe Tesla now faces some truly epic hurdles, and you’ve hit on a few of the why’s.

          I admire much about Elon Musk & his pioneering spirit, but can not see how Tesla can survive much longer given its current business model (which is most likely the reason Musk is attempting to diversify Tesla’s business model – ala “cluster home generators” – and such as of late).

          Their cash burn is too great, distribution network too small, product development too expensive (and new models perpetually delayed), and economies of scale too small.

          • 0 avatar
            derekson

            Plus they’re screwed if all the other companies stop buying their ZEV credits and coming out with their own ZEV offerings. A huge part of what keeps them viable is selling their stock of credits to companies that don’t sell enough plug-in cars on their own, but the number of companies without an EV or PHEV offering is getting quite small now as the big 3 German brands add PHEV options for many of their cars.

          • 0 avatar
            redmondjp

            Bingo – the ZEV credits.

      • 0 avatar
        jkross22

        S6/7’s and M5’s don’t compete with base Tesla’s. The more pricey Tesla’s do.

        That’s my point. It’s 60k for the base Tesla, while it’s 20-25k less for upline CPO’d BMW’s and Mercedes.

    • 0 avatar
      teslatexas 42

      TTAC needs to double-check every “Tesla death watch” claim floated by self-interested groups like the NADA. Consider these facts: in August 2014 Tesla extended the drivetrain warranty on all 85 kWh models to the sooner of 8 years or an infinite number of miles. The 60 kWh models went to 8 years or 125,000 miles. So what is this so-called “3-year cliff”? Pure disinformation.

      Before any TTAC writer expresses–or repeats–another claim that Tesla is doomed, he should first disclose whether he has ever really driven one. This can be a radical consciousness-raising experience. As the well-known automotive columnist for the Wall Street Journal wrote not long ago: “I know a lot of gear heads. The only ones who don’t think the Model S is the best in the world haven’t driven one”. 

  • avatar
    Chocolatedeath

    Humm. Dont know which one I would be more afraid of. A ten year old Ford CVT or a 5 year old out of warranty Tesla.

    • 0 avatar
      Luke42

      A five year and Tesla is still within warranty.

      Remember that the US requires 8 year warranties an hybrid and EV batteries.

      Tesla warrants the their drivetrains for the 8 year period, as well.

      Those automatic door handles and the air suspension may be a different matter, though. The air suspension is optional, but I haven’t heard of a door handle delete option, yet.

  • avatar
    PrincipalDan

    What’s the battery warranty and is it transferable?

    • 0 avatar
      Luke42

      It’s 8 years, as is the powertrain warranty:
      http://www.teslamotors.com/blog/infinite-mile-warranty

      It looks like the warranty and the extended warranty are transferrable, too.

  • avatar
    VoGo

    People need to remember that residual value numbers are calculated as a % of MSRP. They get skewed when MSRP is significantly different from what a consumer typically pays. For example, a car that sells at MSRP will have high residual values, whereas one with 10% of MSRP on the hood will have much lower residuals.

    When we look at residual values for electric cars, we should keep in mind that the consumer price is $7,500 lower than what was paid, due to US Federal Government tax rebates. Even higher in some states that add to that amount, like the $2,500 offered by Massachusetts.

    So when you see a 2 year old Leaf selling for $16K, remember to compare that to a $24K new, not $32K.

    • 0 avatar
      Richard Chen

      IIRC the Leaf battery lists for $5.5k, if you own it long enough to replace it.

    • 0 avatar
      walleyeman57

      But 2 year old Leaf’s don’t sell anywhere close to $16K.

      • 0 avatar
        eggsalad

        In SoCal, used, low-mileage Leafs sell for $10k. The Mitsubishi i sells for about $8k.

        I’m waiting to see one in the $5k range that still has about 40 miles left on the battery. Perfect commuter.

        • 0 avatar
          Luke42

          The green car bloggers are predicting LEAF residuals will take a nosedive when the extended range Leaf debuts!

          Same with the Volt and the Volt 2.0, which should be coming out this fall.

          It seems te be nhat Tesla would be less affected, because their owners have been upgrading to the AWD Model S, and because Tesla’s appeal goes beyond its utility. But I sure hope the value craters, so that I can buy one. :-)

          The Model X is tempting, though, because it looks like it’s like a no-compromises Mazda 5 with a trunk, gullwing doors, infinity MPG, and enough power to win drag races… And it comes in attractive brown-like color. But, I’ve found the persuasive power of not spending a few dozen grand to be pretty powerful.

  • avatar
    360joules

    — Model S’s (or is it “Models S”?)–

    The newsbots really are getting better. Now they think about grammar :)

  • avatar
    carguy

    “Tesla could be a bubble waiting to burst”

    Fixed your headline for you.

  • avatar
    galaxygreymx5

    “…there is a significant cliff after three years when most EV manufacturers’ powertrain warranties expire”

    Even some casual journalism would reveal that there are actually no EVs on the market with a three year powertrain warranty. The Volt and Leaf have eight year powertrain warranties. In CARB states plug-in hybrids have 10 year, 150,000 mile warranties.

    Furthermore, Tesla’s warranty is eight years with the vast majority of Tesla models qualifying for unlimited mileage on both the battery pack and the drivetrain for those eight years.

    The precipitous drop in resale values of Volts and Leafs are mostly to do with goofy calculations necessary to account for what people actually pay for these cars and the price drops in MSRPs as the technology has advanced. A Leaf in 2011 ran about $38,000 but you can get one today for as little as $29,000. Most were delivered in California where the total of state and Federal credits is $10,000. Volts are similar in that they used to start at $41,000 and dropped to $35,000 over this period as battery costs have fallen.

    So the real equivalent starting point for determining a 2011 Leaf’s resale value is about $19,000 and, by that metric, their resale value retention rate is similar to other cars in its class like a Focus or Versa.

  • avatar
    stuki

    As long as Tesla (and most of their customers) retains access to pretty much free (to them) money, they’ll find a workaround. They’re too savvy a bunch of marketers to risk Cadilacization by having a Tesla in every ghetto driveway.

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