Why I plan on pre-ordering a Tesla Model 3

tesla3

Introduction

Wesley, my car guru reader, asked me last week if I was going to preorder a Tesla Model 3 on March 31.  I told him I wanted to actually see the car first before I pre-ordered it, but that’s not going to be possible.  It seems Tesla wants you to pre-order it before you can even see it.

 

How to preorder

The best way to preorder the car is by visiting a Tesla dealership and making a $1,000 deposit on March 31.  The deposit is refundable if you change your mind down the road.  Tesla is giving priority to current owners first.  The public ONLINE preorder won’t happen until later that night on the 31st.  The car is slated to ship in late 2017, but I have a feeling it won’t ship until 2018, especially if you aren’t a current owner or don’t do the store pre-order.

 

Cost of car

The car apparently is going to cost $35,000 before tax benefits.  Both Wesley and I are assuming it’ll probably cost you $45K to $50K fully loaded.

 

Lease or Buy

This is actually a tough decision.  Wesley says he wants to lease the car, but I think I want to buy the car.  A friend said that Tesla’s federal tax incentives may end in 2017 or 2018 (correct me if I’m wrong,) so if you lease the model 3 for 3 years and return it and decide to get a different one, the tax benefit may be gone.

Another reason why buying isn’t a bad option for a Tesla is because the car has a high residual value.  I remember looking at a used 1 year old model S, and the asking price was about the same price as new.  Plus, I’d have to pay sales tax on the used car vs the new one.  The premium you are paying is due to not having to wait for your Tesla S to be built.  If the model 3 is backlogged years, which is a good probability, I think you can resell the car after 3 years and have paid less in depreciation over those 3 years vs having leased it for 3 years.

 

What about the Audi?

Regular readers will know that I still have my Audi and the Infiniti SUV.  The wife will continue to drive the Infiniti, and I’ll probably switch to the Tesla.  While I still love driving my Audi every day, I barely drive the car.  I drive the car from home to work and that’s it.  On the weekends, we take the SUV around.  Plus, if the model 3 ships in early 2018, I’ll have hit 3 years on the Audi and my extended warranty will end.  I always expected to keep the Audi for only 3 years, so the timing will work out perfectly.  I think the model 3 as a daily commute just makes more sense than the Audi.

 

Conclusion

I don’t know how long the lines are going to be for the pre-order, but for sure, I’m going to preorder in store before the online preorder opens.

  • Wesley Murray

    I’m sad I didn’t see this post until now, and to think it appears you were thinking of me when you wrote it. I’m glad to see I had some help in swaying you to just do it. It wasn’t all THAT bad, and I think the car looks great. I’ll post on your more recent post about my line experience as well

  • Raj

    Can you sell your spot in line for the Tesla if you pre-order?

    • Miles per Day

      I’m not sure. I’m sure Google or Reddit has your answer.

    • stephenwong

      The reservation is non-transferrable.

  • simplyfantabulous

    Order the car now, figure out how you’ll pay for it later. But remember if you decide to lease, the actual purchase is made by the leasing company. If there’s still a generous federal tax credit on the purchase when delivery time finally arrives, make sure that credit is fully reflected in your capitalized cost.

    • Miles per Day

      I think Tesla will see some cancellations if the tax credit goes away by the time the car ships.

  • Ken

    “It seems Tesla wants you to order it before you can even see it.”

    I have heard this somewhere before. It did not end well for us.

    • Miles per Day

      Hey worst case, you cancel and get your deposit back. Or get the car and resell it to someone in Texas.

      • Ken

        Yup. Might even be able to make a tidy profit if it’s very popular and there’s a waitlist.

  • pointsrus

    “I’ll have hit 3 years on the Audi and my extended warranty will end. I always expected to keep the Audi for only 3 years”

    Nothing wrong with this line of thinking, but if you stick with this line of thinking, leasing is better for you.. Especially for non-ev cars.. With leasing you only pay tax (WA tax is very high) for the part of the car you use in 3 years..

    I would be interested in hearing about your total cost of ownership for your Audi once you are done with it (or what you project as of now) and the msrp of that car sold new.. To compare with TCO in leasing scenario..

    • Miles per Day

      GREAT question. Let’s do some quick math. If I had leased a new S5, it would have been a 57K car. With 7500 miles per year, I’d owe $7K at signing and $600 a month. That’s 21.6K of payments * 1.095 tax = 23.6 + 7K at signing = roughly $30K for the 3 years.

      My 2011 used S5 with 35K miles… in 2 years will be 7 years old. I can look at 2009 S5 prices now and they go for about let’s say 28K due to the low miles. That means I paid $38K after taxes – 28K = 10K plus the maintenance costs which so far have been brakes and tires of 2K. If nothing major happens in 2 years, let’s say I’d be out 13-14K.

      Of course this only works out cuz I bought a 5 year old used car where most of the depreciation has already kicked in. If I had bought a 1 year old used Audi S5, I think it’d be closer. Did I do my math right here?

      • pointsrus

        Are those lease numbers you got from a dealer – they look like starter numbers and quite high.. Let me give you a counter example of a deal signed on a 56k 2016 BMW 428i GranCoupe a month back. 36 months/10k miles per month, the total cost of the lease (with WA tax) was 36*540 + ~400 (tax/regn) = ~20k. Acquisition fee was rolled into the cap cost. Couple of disclaimers – this deal included a corporate fleet incentive of $2000. It also required a REFUNDABLE security deposit of around $3850.

        I think Audi leases are more expensive in general (due to higher money factor, etc). But even with that, I would say ~24k for 3 years is a good estimate for the total cost of the lease for a 57k S5.

        Does the 38k include tax and the extended warranty (probably around 2k?) ? I think you got a great deal if that is the case – to begin with. IMO, I would estimate 14-15k as the total cost of ownership for your car.

        So, to summarize, for a 55-60k german car, it would cost ~22k to lease new one for 3 years vs. ~15k to buy a 4 year old one and resell it.

        I have read quite a bit on BMW forums of people who swear by your approach – buying a clean off-lease car, own it for 3 years with extended warranty for 3 years and resell it. Kind of like used car lease, but requires some more experience buying (used at dealers) and selling (on CL) used cars.

        • Miles per Day

          Yeah I just went on the Audi site and pulled the numbers. I’m sure if I really was serious, I could talk them down some. But let’s assume it’ll range between 24K – 30K.

          Yeah, my used one for 38K included taxes and everything. It was listed at $31K + ~3K warranty + 9.5% tax = roughly 38K. You’re right, there will be more of a hassle when I go to sell, but I’m saving ~$10K by going this route instead of leasing new.

          I’ve also considered renting it out via Turo to recoup some of my TCO.