Automotive

Tesla impact on used and leased car market

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  • Oct 29th, 2019 1:53 pm
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Tesla impact on used and leased car market

https://www.forbes.com/sites/jimgorzela ... ar-values/

The article says that drivers of luxury European cars are trading them in for Teslas, thus lowering the value of used cars and making leasing more expensive, as residual values lower. What are your thoughts? I suppose I should look to the used car market for my next vehicle?
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redwings_patriots wrote: https://www.forbes.com/sites/jimgorzela ... ar-values/

The article says that drivers of luxury European cars are trading them in for Teslas, thus lowering the value of used cars and making leasing more expensive, as residual values lower. What are your thoughts? I suppose I should look to the used car market for my next vehicle?
Isn't that always the case? In most scenarios, people would rather buy used, ie; previously short termed leases than to take a hit on the depreciation, let the 'richer' absorb all the upfront costs.
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Basically people trading in their BMWs and Audis for Model 3s and saving boatloads of money on fuel and maintenance costs. If you're excited to save extra money on that used BMW you've had your eye on, you obviously haven't done the math.
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IntrepidRT wrote: Basically people trading in their BMWs and Audis for Model 3s and saving boatloads of money on fuel and maintenance costs. If you're excited to save extra money on that used BMW you've had your eye on, you obviously haven't done the math.
Haha!
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Just simple supply and demand. When demand is low for a particular used car and supply is high, prices will go down.
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IntrepidRT wrote: Basically people trading in their BMWs and Audis for Model 3s and saving boatloads of money on fuel and maintenance costs. If you're excited to save extra money on that used BMW you've had your eye on, you obviously haven't done the math.
Not everybody wants to drive a Tesla. Personally I'd prefer to use a Tesla for commuting and a BMW M2 for a track car.
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redwings_patriots wrote: https://www.forbes.com/sites/jimgorzela ... ar-values/

The article says that drivers of luxury European cars are trading them in for Teslas, thus lowering the value of used cars and making leasing more expensive, as residual values lower. What are your thoughts? I suppose I should look to the used car market for my next vehicle?
I'm reading the article, and at no point it says anything about higher or lower residual value.
It claims
it’s a definite disadvantage to those trading one in or planning to lease a new model.
but offer no details or explanation about this.

I understand if you purchase a car, and absorb all the heavy depreciation. But leasing a car has nothing with depreciation, at least in my opinion.
I am leasing 2 cars and planning to return both cars at the end of their leases, I in fact don't care about depreciation value, i care about how much I pay a month if I can afford that, and how long I am leasing the cars for.

The only thing different from 2018 and 2019 numbers for me was the cut off EV promo from government.
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Or if you are Mercedes, you double down and increase maintenance schedule interval on lower end products and increase the cost of pre-buy maintenance package to increase profit.

Case in point:

2016 C class - 20K/1year
2019 C class - 15K/1year
2020 GLE class - 20K/1year

They all the the same freaking 2L engine.

Back on topic. Yes, leases are not as good but it's due to many factors. And it's no doubt that all ICE will worth less and less going forward to the world switches over to EV.

EV will also have very poor residual since we are still in the cutting edge technology wise. Expect any EV with Li-Ion batteries to take a bath if Solid State Battery get released and adopted en-mass.

TLDR

Li-Ion EV will reduce resale of ICE
SSB EV will reduce resale of Li-Ion EV.
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redwings_patriots wrote: ... lowering the value of used cars and making leasing more expensive, as residual values lower.
Where is the cheap used BMW/Mercedes/Lexus? This is RFD, post the deal link!
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Jan 28, 2017
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While Model 3's could have some negative impact on used luxury car market, seems most customers are trading in mass market brands. Maybe due to the cool tech factor, ev savings, etc. but my guess is that used luxury brands are built so cheaply that it is diluting their brand cachet more than anything else. Models like F30 3-series or Benz GLA, are really cheaply built for a car with a "luxury badge" (note - don't own/have driven in any, but have sat in them and the quality feels like a mass market car but with a shiny logo on the steering wheel).

https://electrek.co/2018/08/01/tesla-mo ... e-in-cars/

From 2018, but top trade in's for Model 3 (non Tesla models)
  • Toyota Prius
  • BMW 3-Series
  • Honda Accord
  • Honda Civic
  • Nissan Leaf
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konsensei wrote:

I understand if you purchase a car, and absorb all the heavy depreciation. But leasing a car has nothing with depreciation, at least in my opinion.
I am leasing 2 cars and planning to return both cars at the end of their leases, I in fact don't care about depreciation value, i care about how much I pay a month if I can afford that, and how long I am leasing the cars for.
You are leasing 2 cars and you make the comment that leasing a car has nothing to do with depreciation? When you lease a car, it is the depreciation of the car that you pay for. So the more that the car depreciates, the more you pay for a lease.
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Premium to luxury ICEV resale values are really going to get beaten down compared to longer range, relatively maintenance-free BEV resale values. Used car buyers usually are more cost-conscious and practical. Dealerships may offer higher trade in values but that could be a the expense of lower discounting for the new car.

The same thing will happen to Tesla resale value if it's proven not to be as reliable once it's past the warranty period (hopefully it does). I think Tesla statisticians are still estimating repair costs and frequencies and may offer ESA before 2022 when the first batches of TM3's will be running out of their four year warranty. The ESA will help keep residual values of TM3's relatively high maybe until the 9th year.

As other upcoming BEVs show up in the market, people like me who don't really care much for the SCN and 0-60 in the 4 to 5 second range, will be comparing prices of used BEVs to new BEVs. If a five year old LR AWD TM3 will be selling for 60% residual (low depreciation with only battery and drive unit warranty intact), I might as well go with a new BEV from a competitor.
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I can't wait till we get Chinese electrics.
Hopefully there will be a beige Corolla of electrics in the future.
....
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But they will target China first and then Europe and Canada will likely be an afterthought, as usual.

I'd say best is to drive our already depreciated ICEVs into the ground while waiting for the the next batches of BEVs to set foot on our shores, depreciate, and cherry-pick the compelling ones like the Taycan haha.

Depreciation ICEVs/HEVs/PHEVs/BEVs > repairs > fuel cost for most of us who don't drive big trucks and pick-ups. Drive a reliable enough car of whatever propulsion and get the prerogative to wait for a used compelling BEV to come to market. I don't I want another ICEV but an AWD HEV with 60 MPG and <6 secs 0-100 I'd be open to (as if that's going to happen).
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redwings_patriots wrote: https://www.forbes.com/sites/jimgorzela ... ar-values/

The article says that drivers of luxury European cars are trading them in for Teslas, thus lowering the value of used cars and making leasing more expensive, as residual values lower. What are your thoughts? I suppose I should look to the used car market for my next vehicle?
ICE apocalypse is not far off - ICE vehicles are the Torquing Dead.
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As more and more electric cars and combos of electric cars become mainstream, demand for internal combustion engines is going to lessen. Who wants to buy outdated technology? The impact will depend upon the uptake of electric cars in each particular country. In Norway, for instance, plug-in vehicles represented 49.1% of new car sales in 2018. No reason to think that the market affect in the European countries won't eventually make their way here. The question is when? Will it be 5 yrs, 10 yrs, 15 yrs? And what impact may it have on your buying decision now if there is potential that your new internal combustion engine that you buy now may be considered obsolete when you decide to get rid of it?

https://en.wikipedia.org/wiki/Electric_ ... by_country
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alanbrenton wrote: I might as well go with a new BEV from a competitor.
Mhmm. 2023 still the target?
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The expected depreciation on a TM3 looks more linear (just like the S) and depreciation should slow down considerably after the third or fourth year because of the longer power train warranty. ICEV drops considerably in the first four or five years then depreciation slows down because of demand from buyers and car dealers but things could change for unreliable ICEVs because of the availability of more used BEVs that are perceived to be more reliable at least in some areas like the drive train.

Lots of luxury ICEVs should have worse depreciation going forward.

Even on TMC, many open admit depreciation will be significant. Only on RFD do some Tesla TM3 owners think their cars can defy the force of depreciation/gravity.

https://cleantechnica.com/2019/01/24/te ... of-fed-up/

One result is that the Tesla Model 3 is the best electric car in the country at holding its value. Another result, according to the numbers, is that the Model 3 was nearly tied for #1 overall when it comes to resale value estimates after 36 months.

After 36 months, the resale value of a used Tesla Model 3 was estimated to be 69.3% of its original price.

After 60 months, the resale value of a Model 3 was estimated to be 48.7% of its original price.


Also eventually we will get electric torque vectoring via multiple motors and further down the road, in-wheel motors and major improvements in battery technology could also accelerate perceived obsolescence. I say perceived because nothing is wrong with a 200-350 mile BEVs years from today. Only on paper do they sound outdated.

https://www.nissan-global.com/EN/TECHNO ... motor.html

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skeet50 wrote: You are leasing 2 cars and you make the comment that leasing a car has nothing to do with depreciation? When you lease a car, it is the depreciation of the car that you pay for. So the more that the car depreciates, the more you pay for a lease.
what are you talking about? When you lease a car, there's a pre-determined Residual Value, and a pre-determined Rate of Interest. These values do not change over your lease period. Car depreciates more or less DO NOT change your RV or rate, or monthly payment.

For example: if I lease a car at $50k for 50% Residual Value for 4 years. At the end of 4 years, I can either buy it off for $25k, and resell it if the car depreciates less, or return it if it depreciates more.
In fact, for the cars I have leased, the Residual Values have always come out less than Resale Value, so I could buy them off, resell and make some little profit.

Truth is, I don't really care if the car depreciate mores or less, I am returning the car at lease end. Unless the resale values are a lot higher, then I can re-think my plan of buying them off and resell.
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konsensei wrote: what are you talking about? When you lease a car, there's a pre-determined Residual Value, and a pre-determined Rate of Interest. These values do not change over your lease period. Car depreciates more or less DO NOT change your RV or rate, or monthly payment.

For example: if I lease a car at $50k for 50% Residual Value for 4 years. At the end of 4 years, I can either buy it off for $25k, and resell it if the car depreciates less, or return it if it depreciates more.
In fact, for the cars I have leased, the Residual Values have always come out less than Resale Value, so I could buy them off, resell and make some little profit.

Truth is, I don't really care if the car depreciate mores or less, I am returning the car at lease end. Unless the resale values are a lot higher, then I can re-think my plan of buying them off and resell.

My point is that if you had a choice between two cars that cost $40,000 and both have 4 year leases rates of 1.99%. Car A is estimated to depreciate 60% over the 4 years with a residual value of $16,000 whereas Car B is estimated to depreciate 50% over 4 years with a residual value of $20,000. Your lease payments on Car A will be higher than those on Car B, even though both cars cost the same and it is entirely due to the fact that Car A depreciates more than Car B.

Yes, once you are signed into a lease, you are protected should the car depreciate more than is expected on the lease. But if there are market forces at play that are negatively affecting the depreciation of your specific model, you will find it will cost much more should you decide to lease this same model again.

BTW: If the residual values of the cars you are leasing are lower than the resale value at the end of your lease, you are essentially overpaying on your lease each month.

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