Tesla Lease vs. Buy: Pros and Cons of Ownership
Deciding whether to lease or buy a new vehicle is always a difficult question, but it can be especially tricky when dealing with an electric car like the Tesla.
That’s because there are several important factors to take into account, including the electric car tax credit, the depreciation rate of the vehicle, and whether or not you can buy the car at the end of your lease.
Leasing a Tesla Model 3 or Model Y can be an affordable way to drive a high-end car that would otherwise be out of your price range. But you may end up getting less value for your money than you would have if you bought it outright.
Here’s what you need to know about leasing or buying a Tesla, including where to find the best EV lease deals and used Tesla models.
Tesla Lease vs. Buy: Which Option Is Best?
First, let’s take a look at the pros and cons of leasing or buying a Tesla one by one — from pricing to performance.
According to Tesla’s own figures, the total cost of a new Tesla Model 3 is $39,990, plus $1,200 in delivery fees, for a total of $41,190 due at signing. Unless you’ve been saving up for a Tesla in advance, chances are you’ll take out a loan or a lease instead.
Tesla estimates that a 72-month loan term with a down payment of $4,500 would cost $549 per month with a 2.49% APR. Or, you could lease the car for a 36-month lease term, with $5,584 due at signing and an estimated monthly loan payment of $389.
If you simply want to keep your monthly payments low, then leasing a Model 3 is the more affordable option. But it’s worth keeping in mind that you’ll be paying a total of $19,500 over three years – almost half the value of the car.
You may also have to pay state or local sales tax when you sign the lease, which is due up front in some states and factored into your monthly payments in others. Plus, you may be expected to maintain more comprehensive insurance coverage than if you buy it outright.
Currently, Tesla doesn’t provide the option for lessees to buy the Model 3 or Model Y at the end of the lease — rumor has it Elon Musk is saving them for a robotaxi fleet — but other Tesla models may be eligible for this offer.
Lease vs. Buy: Tossup. Leasing a Tesla will result in lower monthly payments than a loan, but buying a Tesla may be more cost-effective in the long run.
According to the World Resources Institute, “EVs tend to depreciate sharply in value … given their short ranges and unproven longevity.” Some electric vehicles, such as the Nissan LEAF, can lose as much as 80 percent of their value in five years, making it a better deal to buy a used LEAF than a new one. EVs by other automakers, such as Ford and Toyota, depreciate at a similar rate.
Teslas, however, are an exception. Some Tesla models depreciate by only 10% over the first three years of ownership, and it takes more than 50,000 miles of driving before the battery capacity drops by 5%.
As a result, used Teslas sell for nearly as much as new ones, making depreciation less of a concern for Tesla owners than for owners of other luxury cars.
Lease vs. Buy: Buy. Teslas maintain their battery capacity — and their resale value — incredibly well, making it easier to recoup the cost if you choose to trade-in or sell.
Electric Car Tax Credit
The electric car tax credit — officially known as the Qualified Plug-In Electric Drive Motor Vehicle Credit — is a federal income tax credit that can help to offset the purchase price of a new EV. Eligible taxpayers can claim as much as $7,500 on their tax return.
Typically, buying a car allows you to claim the credit outright, while leasing a car means the credit will go to the manufacturer — and lower your monthly lease payments.
Unfortunately, Teslas aren’t currently eligible for the tax credit. That’s because the credit is phased out after a certain number of cars are produced by each manufacturer.
Tesla has already maxed out its quota, so you’ll have to wait for the EV tax credit to be re-introduced or extended before you can make use of it.
Lease vs. Buy: Neither. Ordinarily, the tax credit will be more beneficial if you buy, but Teslas currently aren’t eligible for it — regardless of whether you buy or lease.
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Another thing that’s important to consider before leasing an EV is how much you’ll be driving it. Leased vehicles have an annual mileage limit, and you can expect to pay hefty fees if you go over it or put too much wear and tear on the vehicle.
Tesla’s standard lease package includes up to 10,000 miles per year, with the option to increase that amount to 12,000 or 15,000 for a higher monthly payment.
If you’ll only be using it to commute to work every day, then that amount may be more than enough. But if you plan to take your Tesla on road trips and put a lot of miles on it, you may be better off buying the car outright.
With an 8-year/100,000-mile warranty on the battery pack, and a 4-year/50,000-mile warranty on everything else, you’ll be protected if anything goes wrong. Some Tesla owners report putting hundreds of thousands of miles on their Tesla with very little maintenance, making it a solid long-term investment.
Lease vs. Buy: It depends. If you plan to put a lot of miles on your Tesla, then buying the car outright will save you from worrying about annual mileage limits.
Range and Performance
Currently, the Tesla with the highest range is the Model S Long Range, which gets over 405 miles of driving on a full charge. But it’s also one of the most expensive Teslas, at $79,990 – that’s about twice the price of the Model 3 Standard Range, which gets 263 miles per charge. The Model S also accelerates faster — 0-60 mph in 3.1 seconds — compared to 5.3 seconds for the Model 3.
In other words, if you want access to the most advanced, most powerful Teslas, you can expect to spend more money upfront. Used Teslas simply won’t have the same range and battery life as the newest models.
Fortunately, leasing can be a great way to drive the newest, top-end models one after the other, by upgrading to a newer model at the end of your lease. You’ll also have access to the latest autopilot and self-driving features.
Lease vs. Buy: Lease. Leasing a Tesla can give you access to the latest models at an affordable price, and ensures that you’re never stuck with an obsolete vehicle.
Where to Lease or Buy a Tesla
Buying or leasing a Tesla may be different from the process that you’re used to because Tesla uses a direct sales model. and you won’t find a new Tesla at a local dealership.
Here are your two main options for buying or leasing a Tesla.
Direct From Manufacturer
The easiest option is to go directly to Tesla’s website and place an order for a new car. You’ll pay a $1,200 delivery fee and the car will be delivered directly to your home.
If you haven’t driven a Tesla before, you can visit your local showroom to take one for a test drive. This will also serve as your service center if you need any repairs.
You can also use Tesla’s website to apply for financing, compare Tesla’s leases, and look for Certified Pre-Owned Teslas.
Buy a Used Tesla
If you’re considering a used Tesla, then you can widen your search to third-party sellers. This will be your most affordable option for taking a Tesla home.
You won’t get the same financing options and warranty coverage that Tesla offers, but that could be outweighed by the ability to get a quality EV at an affordable price.
Be sure to do your research before buying a used Tesla by looking over its maintenance records and checking its capacity.
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Take Your Tesla Home
Teslas are in demand, so you may have to wait several weeks after placing an order for your car to arrive. Even buying a used Tesla can require some hunting.
In the meantime, take the opportunity to install a home charging station so you’re ready to plug your Tesla in the moment it arrives!