Puts 4-square sales form on the desk. So tell me, what kind of payment did you have in mind? $500/month? That sounds doable. Do you have anything down? No? That's fine. I can still get you a good deal, though it will take a couple of extra payments to cover that. What's some extra payments here and there? You are still basically paying the down payment as a monthly payment. So it works out for you. Ok, great. What color were you looking for? Blue? Sure, we have that. Though the blue comes with the optional supercharger package. Yeah, Tesla only sells the blue model with that package. Uh-huh. It's basically an extra $13 a month? I mean, that's nothing for the convenience of the supercharger. You are already saving thousands of dollars in gas by buying an electric car. An extra $13 a month is no big deal. Ok, so let me run this by finance, and we will have an answer in five minutes. Let me show you the car a bit more while we get a response. Please follow me to the lot...
Especially considering the time it takes to charge the car. If you can do all charging while you're sleeping, then no biggie, but if you have to charge in the middle of your business trip to Los Angeles you can +$200 to your monthly tab, by Tesla's logic.
Good point - the time stuck waiting for the car to charge the car if driving normally is not accounted for yet is far more than 1 hr a month if one is driving the 15,000 miles a year which they assume in the same alleged savings scenario.
It also assumes you will drive 15,000 miles a year, then in a separate area notes you pay a 25 cent a mile penalty for all miles driven over 36k before trade in at 3 years or beyond.
It also assumes that gas costs $5 a gallon in the same area that electricity costs 11 cents a kWh. Which city is this again?
Fairly close to Palo Alto, CA. According to a sample bill the rate was around 12c [1]. Premium gas is currently $4.25-$4.50 it has been higher in the past.
Here in Quebec the gas cost about 1.35$/L (which is about 5.10$/gallon) and the electricity cost 5.41 cents/kWh (for the first 30 kWh and then it's 7.78 cents).
However I think the EV Incentive is only 8000$.
True. It also doesn't factor in the fact that one may have the drive to work only for a certain number of hours per day.
Let's say this number is 8 hours. One will work for 8 hours no matter what. Just because you saved 15 minutes, doesn't mean you will work extra for those 15 minutes.
I am sure there is a name for this kind of a fallacy in this purportedly logical argument.
While I agree that you are right and most people work a set numbers of hours I find that it is always important to have a value associated with your time and when you set out to do something just take a second and think about the opportunity cost of said activity.
Fifteen minutes a week equals an hour a month, which probably has an opportunity cost of ~$100 for the average potential Model S owner. That's 20% of what your monthly payment under this new financing, which is not trivial.
I use that number advisedly. In LA (TSLAs biggest market, really) it really is more like 15 minutes. And think carefully before you employ the word "idiotic"--it does not reflect well upon you.
How does that work? Google Maps suggests that LA has a gas station at least every other block, which jibes with my memory of the place. Are the lines really 10 minutes long?
If it makes electric cars more desirable and encourages research and competition, everyone will benefit as the technologies trickle down. The EV industry has needed a kick-start and the US auto industry should be energized by this rather than just racing to the bottom against foreign carmakers. More US jobs.
As a foreigner, I won't be able to afford an EV for along time but I think this makes it more likely I'll get it sooner, due to the technologies proliferating.
It's not "trickle-down economics". Trickle-down economics is when you use economic policies that benefit the rich hoping that the rich will spend that money in ways that benefit others. This is subsidizing the adoption of new technology, hoping that the technology itself develops to a mass-market state.
Only in the US would I be considered a liberal. I have some conservative views, some liberal, some centrist. Sometimes I change my mind, even. I hope to continue doing so.
On the specific issue, they have to start with a narrow market and high cost. Classic crossing-the-chasm stuff, or Porter's differentiation strategy focusing on a different market segment than the Prius. They've changed the perception of EV's, making them desirable where alternatives were ugly tradeoffs that screamed "bunnyhugger". You couldn't get me into a Prius, but I'd really like a model S.
I suspect Mr Musk would have done just fine without government support, but I'm sure it's helped a lot.
couple of thoughts:
- Could be to reduce reliance on fossil fuels
- Its more of a way to create jobs in America (ie car would worth less profit otherwise)
- a manufacturing base is important for certain things (ie can be used for military in times of war)
- lowers unemployment (looks good on stats)
Not that your point isnt valid as well, I imagine that they see it as a welfare solution on the bottom end.
I'm paying $580/month for a 48 month loan on an Infiniti G37S, plus about $300/month in fuel. That's almost $900/month. I can charge a Model S for between 1-3 cents/KwH (time of day metering between midnight and 5am). Oil changes? Gone. Brakes? Probably every 100K miles like a Prius/Camry Hybrid. So, goodbye fuel and goodbye most maintenance costs.
Yes, the Tesla is probably a good choice for someone who is in the $40k+ range already, since your gas costs can go to a better car. The odd thing is Tesla trying to sell this as a $500 a month car.
Maybe the employees of Tesla can drive a Tesla Model S for "business," but I doubt that that is the general treatment of buying an expensive car by the Internal Revenue Service.
AFTER EDIT: I should bring over here part of my comment in the other big Tesla Model S thread today. It's not clear that Tesla can genuinely manufacture its cars at a profit.
is what I had in mind when I indicated that Tesla is probably blowing smoke about business deductibility of their car. That depends on business use, which is a fact-based inquiry.
The trick is to get a $1 lease (where the terminal price to buy the car back is $1) and buy it with your personal dollar (incidentally, the local ferrari dealer showed how to set this up, and it is apparently a common practice)
Also, to clarify, "expensive car" for the IRS and most states is >$250K and none of the Tesla cars are that expensive.
Before I say anything, please understand that I'm not an accountant. However, my sister is, and she does my taxes. I'm a curious type, so I ask a lot of questions, and she doesn't mind. The trouble is that this stuff is very nuanced, so I often get the details wrong. I'm going to try and explain (in broad terms) why niggler's suggestion pushes the boundaries, based on my understanding.
First, there is no trick. There used to be a tax benefit to leasing in that you could depreciate 100% of the lease expense immediately, just like any other business expense. Unfortunately, the IRS has changed the way they treat automobile leases, and you now have to depreciate them on a schedule like you would any other asset.
Prior to the change in this rule, and assuming that you were able to write off a Ferrari as a business expense, structuring a lease with a $1 residual would mean that nearly the full value of the car would be paid as lease payments. This meant you could depreciate the payments immediately, receiving immediate tax benefit.
I'm not sure what niggler was talking about with the >$250k, but I suspect he's talking about the limits imposed on business deductions. There's a ceiling to the amount of business expenses you can deduct before you have to start using depreciation schedules. IIRC, that ceiling is around $250k, but I'm fuzzy on this one. All I know is that my little consultancy never hit a big enough number that I had to worry about it. I took everything as a straight business expense, including 50% of my lease payment for my car.
Here's where things get shady though. Writing off a Ferrari as a business expense is a high-risk proposition. The IRS has very specific rules about automobile deductions. You have to be able to substantiate the business use of the automobile. If you can't, or if the IRS strongly disagrees with you, they can stick you with the back tax.
If you've got the kind of money laying around that allows you to lease a Ferrari with a $1 residual, then you probably have the money to pay lawyers to fend off IRS auditors too. For your average person, it's not worth the risk, IMO. If you have a justifiable business use for your car, and you're comfortable keeping mileage logs that explain the business purpose, then go for it.
I AM NOT A CPA so please please please please please talk with your accountant or tax advisor. Rules are explained in publication 463 "Travel, Entertainment, Gift, and Car Expenses". There's probably a PDF on the IRS site.
From my experience, the people who are able to most easily deduct a car as a business expense are sales people. They will often put 20,000 miles a year on their company car as they travel around their territory and call on customers.
Which makes the 36,000 miles allowed under the Tesla 3 year lease problematic -- they'll have to pay 25¢ a mile for those extra 24,000 miles, or $6,000 at turn-in time. Even if they prepaid those extra miles at a cheaper rate, it'd still negate the advantages of the cheap(er) lease from Tesla.
This isn't a traditional lease, though. If you read the original article about the "new" financing product, you are purchasing the car. This makes you eligible for the tax credit(s).
After three years, you have the option of (a) doing nothing and paying nothing besides your normal payments. After all, you bought the car. (b) selling the car back to Tesla. You are not obligated to sell it, but if you want to, Tesla is obligated to buy it back. If you sell it to them you then pay the penalty.
So this hypothetical salesman need only not sell it to Tesla, or sell it to someone else after the tax credit period (which I believe is amortized over three years or something).
When considering the savings from using electricity instead of gasoline, depreciation benefits and other factors, the true net out of pocket cost to own a mid-range Model S drops to less than $500 per month.
Where did business insider get what seems like a direct quote? You certainly can get the cost to lower than $500/mo if your life has a specific niche the Tesla can fill, based on the calculator. The electric car is just like minivans, pickup trucks, and motorcycles. Each has benefits and downsides which fit well in certain lifestyles, and not with others.
I would certainly benefit 15 minutes a week using a home charger instead of a gas station, but the opportunity cost for me is certainly not $100/hr.
Off-topic, but the cost of owning a motorcycle is not much lower than a car (generally). They have much higher maintenance costs in general which offsets great gas mileage, even in the smallest motorcycles. I can't find the comparison spreadsheet, but here are some of the costs - http://faq.ninja250.org/wiki/Motorcycle_TCO
I ride a motorcycle, and it has been definitely far cheaper for me than when I drove a car. My motorcycle isn't even very fuel efficient, but most of the savings are region/use case dependent.
The biggest saving is that parking is generally free in the UK for motorcycles. That, for me, is a huge saving. Lower taxes and road tolls are also significant. My insurance is also lower than when I drove a car - I guess because there's less chance of me seriously damaging someone else's property (clean license + no claims bonus, but young driver). If you want to count your time, you can get places much faster on a motorcycle too, between lane splitting and driving on bus lanes (which are both legal).
But even excluding all that, the motorbike itself was less than half the price of my previous car, and has required a fraction of the maintenance. Besides tyres, part cost is minimal. Service labour costs have generally been a lot lower - most parts of a motorcycle are quite quick and easy to access. My last service cost £60, whereas my car services tended to cost around £150. It's also far easier to work on a motorcycle yourself and you don't need many expensive tools that you probably won't already have if you're that way inclined, besides a paddock stand.
For me, the biggest maintenance cost with motorcycle is far and away tyres and associated labour costs: they don't last as long, and punctures can't usually be repaired. But at least in the UK where you're not usually driving huge distances, the other running costs tend to outweigh the cost of tyres.
Depends on your definition of "a motorcycle", "a car" and "much lower" of course...
If you compare a brand new entry level 250 cc japanese motorbike to a brand new entry level korean hatchback,over say 5 years, the motorbike TCO will be less than half, with the most of the difference accounted for by lower depreciation and finance costs. Assuming - and this is very important - no medical bills from motorbike accidents.
Did I miss it or does this article not mention the gas savings? You can charge this car for free at Tesla's superchargers or cheap at home, with gas at over $4 a gallon thats a huge savings, theres people who easily spend $300 a month on gas, thats probably going to be the biggest part of the savings for most people, this article should have at least mentioned that.
If US average spending on gas is $368 per person per month, that's 100 gallons of gas per month, or 1200 gallons a year. Typical car these days gets 30 mpg, so that's 36,000 miles a year. Even if driving a gas guzzling SUV that gets only 19mpg, that's 22,800 miles a year.
Yet according to the US DOT Federal Highway Administration, the average annual miles driven is 12,334 per year.
So the $368 that CNN claims is a lie.
Except it was per two adult/two car household, and taken at a point in 2011 when gas prices were at $3.98 a gallon.
"The Energy Information Administration reported that the average household spent $2,912 on gasoline in 2012."
Note that the 2012 number is a secondary high record (2008 held the record), and uses the actual final numbers for the full year, rather than a CNN number that cherry picked a momentary peak and extrapolated to the whole year and then never published a follow through with the actual numbers. Typical CNN! Not reliable to cite.
Anyway that's around $1500 a year per adult/car, or a bit over $100 a month. $1500 buys 408 gallons of gas, which gets you 12,240 miles at 30 mpg. Now these numbers make sense because they match what we actually know about how far people drive.
You're right I should have mentioned that. But It gets complicated because a family would probably use this car for their longest trips/commutes, would use this one more then their secondary car for elective trips. Also this is grouping in single person households with coupled households and its including people who dont drive to work and the states containing the most people who would buy this car are also the states with higher than average gas prices as well. I haven't been able to find the statistic on how much an average Californian who drives to work spends but I think its on the order of hundreds of dollars in savings per month, which this article doesn't mention.
They didn't mention it because it's not one of the "ridiculous assumptions" the article is about. That $940 per month cost at the end reflects the gas savings of $284 per month.
