Recently I read quite a bit of discussion on “Should I buy or lease a Tesla?”. I do not want to weigh in on which side I take, as I know it is not just about numbers. People value things differently. So here I would just focus on the monetary cost side.
When it comes to comparison, we can take the following steps. In this post, I will delve into the leasing aspect. In the next post, I will discuss the ownership cost (i.e. the buying option). Perhaps I will need a third post to discuss how uncertainty makes such comparisons not so black-and-white.
OK, let’s talk about the total least cost.
For that, I decided to use my most recent lease as an example – Concrete examples make it easier to grasp. I leased a Model Y in March 2021. Here is the detailed breakdown of the lease agreement (If you like to see a screenshot of the original lease, here is a video):
So what is the total lease cost? Well, it is my total payment over the 3 year lease period, $14,268.89, in addition to the $4500 down payment, for a total of $18,768.89. (Note that I do not include sales tax here.). So divided by the sticker price of car, that is a whopping 45.5% of the value of the car.
Note that according to Tesla’s own calculation, the depreciation only accounts for 27% of the total price (Item E). So where are the differences? Well, there are two.
The first is the obvious one. I paid a $4500 down payment. That is $4500 I am going to see again.
The second is the mysteriously-named “Rent Charge” of $4,252.39. What is that? Note that it is quite significant, equal to almost another down payment.
This is where the shocker kicks in. First of all, rent charge is also called
“finance fee”. It is like interest payments on a loan and, in car leasing, it pays the leasing company for the use of their money.
So what is the interest rate Tesla is charging me for the rent charge? You can back it up using the standard formula, which is
It turns out Telsa is charging an APR of 4.46%! It is not as high as the APRs credit card companies charge, but it is not as lowe as the 2.5% Tesla is advertising for their car loans either.
In my next post, I will explore why buying a Tesla also is not black-and-white in terms of total costs.
You can view the spreadsheet on my calculation here. I also made a video: