What is the true cost of owning a Tesla?
I have just one simple question to ask you today. Would you pay $166 a month every month for 36 months for the following?
This is what you get for that $166 a month. First, you get to drive an all-electric Tesla Model X, which has a current new car retail value of a bit more than $128,000. Then for that price, I throw in free fuel. You don’t pay anything for gas and you don’t pay anything for electricity. Oh yeah, how about having free maintenance and repairs for that $166 each month? For the first 36 months of ownership, your expense for the car, and, the fuel, and for any kind of maintenance or repair is included for just $166 per month. At that point, you can sell the car and be done with it…all for $166/month. Sound too good to be true?
So, what’s your answer? Could you part with $166, on average, each and every month for 36 months…and then be able to walk away with no questions asked? If so, you may want to continue reading. If you said, “No, I don’t want to pay $166 a month to drive a car that costs more than $100,000 even if it doesn’t have any fuel expense whatsoever or any maintenance and repair expense. I want to continue driving my 1984 Dodge Neon for a price likely greater than $166/month”. What would I say to that response? Oh, my word!
Before I tell you how I did this, I need to caution you about one thing. I’m pretty sure I explained how all of this was going to happen when I bought my Tesla Model X three years ago. If you didn’t act then, then you may have missed out on this opportunity. I think the phrase is “You snooze, you lose”. Nevertheless, it’s never too late to avoid being too late in the future, is it?
About 36 months ago, I boldly walked into a Tesla dealership. I was not using “Randy’s new car buying strategy” which I still highly recommend. Why wasn’t I using Randy’s (speaking in the third person) idea?
Well, it’s pretty simple. Tesla does not negotiate prices on their new vehicle sales. They just don’t.
It is true that “Randy’s new car buying strategy” wouldn’t and didn’t work as well during Covid when the supply of new vehicles of all makes and models was limited. However, now Covid and Covid-related supply chain issues are disappearing quickly in the rearview mirror. I would suspect that on New Year’s Eve of 2023, you can come back to “Randy’s new car buying strategy” and have a good deal of success…but not with Tesla.
Everything I write in this post is going to be as accurate as I can possibly make it. In most cases, I’ll give you the backup data which might bore you to death. I will be overly conservative in my analysis. Why do that? I want to prove to the skeptics that I just didn’t make this stuff up.
I told you that I boldly strode into a Tesla dealership. This was not a dealership where the salespeople try to sell you extra dealer add-ons. This was not the type of dealership where before any deal can be made the entire financial discussion has to be sent up the chain from one manager to the next. It don’t work that way with Tesla.
When I tell you, I went into a Tesla “dealership” what I really did was walk into our local shopping mall. That’s right. Tesla has a storefront in the mall right next to Auntie Anne’s and Jamba Juice. They have a couple of cars on display. They also have non-commissioned salespeople. These folks will answer every question you’ve ever had about Tesla and owning an electric car. It’s a nice way to do business and probably can only be matched in its ease by implementing “Randy’s new car buying strategy”. But again, that doesn’t work with Tesla.
Today’s post is the first part of a two-part series regarding Tesla car ownership and how to finance one efficiently. Some people think electric cars are expensive. After you read what I’m going to share with you, you’ll have to decide whether $166 a month including the cost of the car, the cost of fuel, and the cost of maintenance and repair is really expensive.
There are a lot of myths about electric cars. I’ve heard almost all of them. The cars catch on fire much more so than gas-powered cars. There is not enough infrastructure to handle the oncoming barrage of EVs. You will run out of battery power and be stranded along the road and murdered by people stationed in the woods just for the purpose of murdering hapless EV owners. EVs are too expensive. EVs are unsafe. EVs pollute more than gas-powered cars. EVs are costly to maintain and repair. EV batteries won’t last long, will be expensive to replace, and will end up in landfills. It takes too long to charge an electric car. The power grid won’t be able to handle the oncoming barrage of EVs. EVs won’t work in cold weather climates. There’s not enough lithium in the world to supply the oncoming barrage of EVs. People who work in lithium mines don’t get their birthday off. Ready for some real true stuff?
Editor’s note. I have painstakingly researched all of the above myths about EV automobiles. These statements just aren’t true and I have the backup data to prove that. Well…I’m not sure if lithium mine workers get their birthday off or not.
I bought my car for $96,160. Then the friendly people from the state of California charged me 7.75% on the purchase price in sales tax. This added another $7,452 to the expense of the car. The total cost of my car came to $103,612. Have you ever bought a car for more than $100,000? Do you think you ever will?
Just to be clear Carol and I are not rich folks. You will remember that we paid $500 to fund our own wedding nearly 51 years ago. We borrowed $200 of the five hundred from the bank to fund our big shindig. Did I think I could afford to buy a $100,000 car? No. Did I think I could afford $166/month? Yes, if we ate at McDonald’s several times a week I thought we could.
We paid $40,000 for our first house. At the time did I ever think I would pay more than $100,000 for a house? Did I ever think I would buy a house for more than $500,000? Oh, my goodness no!
Since the time I bought my car (late December 2019), Tesla has had a number of price increases. They have also had one significant price decline that you may have read about in the past few weeks. I paid $96,000 (before sales tax) for my car in late December 2019. Three years later (now!) that same car with all of the identical options retails for $128,000 plus (before sales tax) even AFTER the most recent price decline.
Tesla owners have essentially two options when it comes to “fueling” their cars. Most will charge their car at home at a cost of 25-40% in electricity expense compared to the price of gasoline that will move their car the same number of miles.
Other Tesla owners charge their cars at local superchargers. Normally a supercharger is a little bit more expensive than charging a Tesla at home.
When I bought my car, they were offering a special option. My car came with free supercharging for the life of my car ownership. My nearest supercharger is an eight-minute drive away at a local shopping mall.
I have 38 solar panels sitting on my roof. Our monthly electrical expense for our home is zero (without solar our electricity expense would be $500/month). Nevertheless, I do not charge my car at home. I have driven my Tesla Model X 44,000 miles to date. Every one of those miles has been supported by a supercharger at zero expense to me. When I pull stuff like this off, my wife Carol often tells me that I am “just lucky”. Every time I do pull one of these rabbits from a hat I am quick to remind Carol that yes, I am “just lucky”. I also remind her that I was “just lucky” to have married her!
Are you ready to get into some of the numbers? The numbers will let me tell you in the most direct and honest manner that my cost to own a $100,000 plus taxes has been $166 a month for three years. Why don’t we talk about that now?
If I wanted to end my relationship (sell the car) with my Tesla Model X today, these are the expenses I would have had during my first 36 months of ownership.
I told you my car cost $103,612 including sales tax. I needed a down payment. I went to my plastic guitar-shaped Elvis Presley bank, which came to me filled with popcorn originally, and shook the thing upside down. Out fell $3,612. That money was my down payment.
Then I got a loan for $100,000 at an interest rate of 1.99% for six years. My monthly payment came to $1,480. I got that loan at a credit union that was reserved for teachers and farmers in Fresno. I am neither a teacher or a farmer but as Carol says “You’re just lucky”.
In 36 months of ownership, I have had four expenses.
First, my down payment was $3,612. My first 36 payments of $1,480 a month have amounted to $53,280. Currently, my loan balance is $51,480. My total maintenance and repair expenses have been $715. That $715 expense was for two Michelin tires. They say when you buy a Tesla all you pay for are tires and windshield wipers.
If you are handy with a calculator, and who isn’t, you can see that my total outflow of money to support my Tesla Model X has been $109,097. If I wanted to get rid of my car right now, I would have paid nearly $110,000 in just 36 months.
I know! Some people are just naturally skeptical. Those folks are breaking out their calculators right now and dividing $109,097 by 36 months. Take your time. I’ll wait.
When they do that they are going to come up with an answer that’s pretty close to $3,030 per month. Three thousand thirty dollars?? I thought he said $166/month! These skeptics are going to wonder why I could promise a totally unbelievable and not practical and certainly impossible cost of just $166 a month. They will think I am prone to exaggeration, or even worse.
But not everyone reading this is a skeptic. Many are willing to give me the benefit of the doubt because I haven’t let you down up to now, have I?
Yes, if I got rid of my car today, I would have spent nearly $110,000 on it. However, there is always a “however” in most aspects of life, isn’t there?
I went online to see what the current value of my 2020 Tesla Model X was. I checked two sources. I averaged the Kelley Blue Book and Edmunds’ used car values for my car. My 2020 Model X is currently worth $87,125. This is AFTER the recent Tesla price decrease as well. I bought the car for $96,000 before sales tax and it’s still worth $87,000 three years later? That’s pretty good. Tesla cars have some of the best resale values of any car brand in the world.
I mentioned that I didn’t have ANY fuel expenses whatsoever. This wasn’t because I couldn’t get gas like it was in 1973. I didn’t NEED gas! The car I owned before buying my Tesla Model X was a Lexus RX 350. By the way, I love the Lexus brand. That car gave me about 20 miles per gallon in fuel economy.
During the past three years, gasoline has averaged more than five dollars a gallon in California. We call this phenomenon the sunshine tax! As a matter of fact, today February 1, 2023 gas is selling for $4.69 a gallon just down the street from me.
I thought I would mention that California’s gas tax per gallon is 53 cents. The average state gas tax is 29 cents per gallon. That’s a difference of just 24 cents per gallon. Why are California gas prices a dollar more and sometimes nearly TWO DOLLARS more than states that I visit? I have no idea!
California’s electricity prices are some of the highest in the land as well. Only Hawaii has higher electricity prices than California. Only Pennsylvania has higher gasoline taxes than California. I absolutely love California. Why do I say that? Because I don’t pay ANYTHING for electricity or gasoline! What have I learned from this? Take control of your situation.
Wait! I fear I have digressed. Don’t even get me started on California’s ultra-low real estate taxes! O.K. You got me started! California has the 16th lowest real estate taxes and they are only one-third of what homeowners pay in New Jersey…and those folks have to live in New Jersey! Wait. I’m way off base at this point.
This is what I wanted to tell you. I wanted to figure out what my gasoline expense might have been had I still owned the Lexus RX 350 SUV for the past three years. How much would I have paid for gas in three years by driving that Lexus 44,000 miles and getting 20 miles per gallon at a gas price of five dollars a gallon? Just so you know that I’m being fair, the average price of gasoline in my state over the past three years has probably averaged closer to $5.50 a gallon if not more. I am nothing if not fair in my analysis.
I ran the numbers. I would have gone through 2,200 gallons of gas with the Lexus. If I averaged 12 gallons per fill-up I would have stopped for gas 183 times. If each gas stop took 10 minutes to drive to the station, get gas, walk into the convenience store and buy some beef jerky and get on my way I would have spent 1,830 minutes or 30.5 hours of my life just getting gas every year.
Most people charge their EVs at home. The charging speed at home is going to be about 25 mph. Folks charge their car at night…while they are sleeping. They don’t spend ANY time getting fuel.
I charge my car (that’s my car at my supercharger above) at a Tesla supercharger that charges at a rate of 250-450 miles per hour. I also powerwalk 60-80 minutes every day. I powerwalk 100% of the time when my car is charging. I figure it doesn’t take me any time at all to charge my car…even with a supercharger because I’m spending my time powerwalking. Just like the people who sleep (they have to do that every day), I have to powerwalk every day. While I’m doing that the car charges in the background just as if I were snoring away at 3 a.m.
The fuel cost for my Lexus would have been $11,000 over the past three years. Where would that money come from? My IRA.
When I take money out of my IRA to buy stuff I have to pay federal and California state income tax. My marginal tax rate from those two entities is 31.3%.
In order to have $11,000 in cash or credit to hand to the 7-Eleven cashier I would have had to take $16,012 from my IRA to net $11,000 to pay for the cost of fuel. I’ll put that $16,012 on the positive side of this ledger. Because I am driving a Tesla and not paying anything for fuel I have sixteen grand more in my IRA three years later.
I hope this proves a point. I am being extremely conservative when I calculate my savings. In reality, because I didn’t take out parts of $16,012 each and every week to buy gas that $16,000 over the past three years would have grown to a number quite a bit larger. I’m not even considering the investment gains that I would have had on that $16,000 in the past three years. I’m guessing those gains might have added another $5,000-$10,000 to my IRA totals.
Oh, this is for the skeptical reader. You didn’t pay five dollars a gallon for fuel for the past three years? Your car gets more than the 20 mpg my Lexus RX 350 got? No problem. You can put in your own numbers but it won’t make much difference in the final outcome.
So, if I cashed out my Tesla Model X today I could sell the car for $87,125. With no fuel expense, I would have saved $16,012 by not having to take that money out of my IRA to buy gas. The sum of these two items is $103,136.
Let’s try to make a final comparison. Sound good? The total cost of everything with my 2020 Model X was $109,097. However, the car has a current value of 87,125 and gas savings of $16,012 for a total of $103,136.
That means, if I bailed on my Tesla now (sold it) I would have spent $5,961 over 36 months. Now if you’ve got your calculator handy, you can simply divide $5,961 by 36 months to get an average monthly expense of $166. Wait! That’s the same number I mentioned in the title of this post. I love it when a plan comes together.
Oh, one more thing. I did get a rebate from the state of California for around $2,000 as I recall when I bought my Tesla. I don’t remember the exact amount. I’m not including that rebate in this analysis because I don’t really remember the exact amount and…as I mentioned I’m trying to be very conservative with the numbers I use. Fair enough?
There you have it. I hope all of the numbers I used didn’t throw you for a loop. Some people want to “see the numbers” and some not so much.
Could you replicate the deal that I got today? No, you couldn’t. I hope you don’t blame me for that. I shared with you pretty much the same plan three years ago.
The car I bought three years ago cost $96,000. Its replacement today will cost you $128,000. You’ll be hard-pressed to find a 1.99% six-year auto loan today. Tesla no longer offers the free supercharging option. I guess that could come back on a moment’s notice but it’s not available right now.
What can we learn from this? First, I think this analysis can dispel several myths about owning and operating electric vehicles, specifically Tesla automobiles.
Tesla cars are not that expensive when you consider what I have shared with you. I think it’s certainly fair to say that paying $166 a month each and every month for three years and getting an expensive car, fuel, as well as maintenance and repairs included in that number is beyond fantastic.
Even today you can buy a Tesla Model Y SUV with the recent Tesla price reduction and the government rebates for about $50,000. That is a smoking hot deal. The Model Y is a fantastic option. It has so much “more” than just about every automobile on the road and especially any car in the $50,000 price range.
I don’t want this to sound self-serving, but it might seem that way to some. If you want to get the really attractive “deals” I tell you about, those deals won’t last forever. If you jump in right away, you could be very happy with the outcome.
I told you that my Tesla cost of ownership post was actually Part 1 of a two-part series. Part 2 is going to talk about actually financing a purchase like this. I think you’ll find that very interesting as well.
Randy Lewis
Keeping the entire EV thing real
P.S. I have a really good sounding board of people who I sometimes ask to review my posts before they hit the worldwide airways. One of the best of those people basically asked, “Great, you got this super deal three years ago. Today, I can’t get the deal you got. What am I supposed to do with your information other than admire your result?”
First, to have a friend admire your result is not a bad thing! I responded to my friend’s message with this.
The point of my message is simple. Act on my recommendations when I present them, as I did when I bought my car three years ago, rather than waiting. Actually, used car prices are down dramatically compared to six months ago. The recent price cut by Tesla did not help the current value of my car. If Tesla hadn’t done that the resale of my Tesla Model X might be $10,000 higher. If that was the case I would not have paid $166/month for my car. I would have MADE money owning a $100,000 Tesla for three years!
I just got a flyer the other day saying I could get a 3.5% interest rate from the same credit union from where I got my 1.99% loan three years ago. There is not a huge difference between a car payment with a 1.99% interest rate and a 3.5% interest rate.
In reality, the free supercharging only eliminates the cost of my charging the car at home. I could charge from home whether I had free supercharging or not. Then the delta is free supercharging vs. charging from home rather than free supercharging vs. buying gasoline.
The REAL value of this deal is that Tesla cars hold their value really well. The biggest expense of buying a new car is depreciation. I didn’t even go into the best part of owning a Tesla which is not being able to get one for $166/month but all of the bells and whistles that come with the car.
My most current recommendation occurs in the last part of my note. Being able to get a Tesla Model Y (above) for about $50,000 is the steal my car was three years ago and that is available as we speak.
The two biggest expenses of owning a new automobile are depreciation and fuel. You’ve already seen that the Tesla brand has one of the lowest depreciation rates, if not the lowest, of any worldwide car brand. As the demand for electric cars increases the demand for gasoline cars will decrease. If the demand for a car decreases wouldn’t you think those kinds of cars would depreciate more?
The second biggest expense for car ownership is fuel. You can charge your car in your garage or carport, for roughly 30% of the cost of gasoline. You might be able to charge your EV at your local library for free!
No, you can’t get the deal I got. But you can get this deal on the Tesla Model Y today. Remember there is a $7,500 government rebate if you buy an EV for less than $55,000 (that’s the Tesla Model Y and several other brands/models). A few other rules apply to this situation.
Don’t like the government giving rebates on EVs? What can you do about that? You could get elected to the senate and change those policies but that would be time-consuming and expensive. I never complain about the rules of the games I play. I just play by the rules. I will figure out a way to exploit the current rules and drive on down the road.
Plan, do, check, ACT!