Source: iStockphoto (electric car)
Excitement, enthusiasm and cheers erupted from several of us last week when Elon Musk and Tesla announced they were going to offer a lease on the Model S. When we learned it was going to cost $500 per month, we thought, in-part, this might ignite the electric car revolution. However, after we listened to the announcement a second time, we heard an important word, effective. Tesla and Elon stated you could lease a Model S for an effective $500 per month. What does that even mean? We weren't sure ourselves so we sat down to take a closer look at the numbers.
After we dove into the numbers, we realized several of you would bucket Tesla's effective savings and benefits differently. Thus, we decided it would be best to break this answer into two buckets: hard cost savings and soft benefits.
- Hard costs savings are defined as what you would actually save i.e. tax incentives and energy costs
- Soft benefits are what you would save based on your own personal situation and how you value your personal time i.e. do you think of your time as money on a regular basis? These benefits will be different for each person, but the same for each individual if you're comparing like vehicles
We made the following assumptions to start:
| Tesla Model S 60 kWh Price Lease Terms Federal & State (GA) Incentives Miles Driven per Year MPG of Similar Vehicle* (2012 Mercedes-Benz S-Class Bluetec 4matic) Diesel Price (current National Avg)** Price of Electricity (kWh) Personal Time Value Tesla Guaranteed Resale Value*** | $70,000 2.95% APR, 10% down payment, and 63-month term loan, excluding sales tax and registration. $12,500 30,000 miles (82/day) 25 EPA MPG Combined $3.99 for Diesel $0.13 (per my last bill) $65/hour $40/month via Tesla |
Hard Cost Savings
There are three hard cost savings we are going to consider:
Living in Georgia, we will take advantage of $12,500 incentives from the federal and state government. This decreases the price of the vehicle and takes care of the 10% down payment to meet the lease terms. Combining all this together knocks off $150 per month our monthly lease payment.
Taking a look at the most obvious category, energy savings, we find we can save $294 per month if we drive 30,000 miles per year in a car which yields 25 MPGs on average at the current national price of diesel per gallon of $3.99 and the cost of electricity of $0.13 per kWh.
Total hard cost savings came to $484 per month.
- Tesla Guaranteed Resale Value
- Federal & State Incentives
- Energy Costs
Living in Georgia, we will take advantage of $12,500 incentives from the federal and state government. This decreases the price of the vehicle and takes care of the 10% down payment to meet the lease terms. Combining all this together knocks off $150 per month our monthly lease payment.
Taking a look at the most obvious category, energy savings, we find we can save $294 per month if we drive 30,000 miles per year in a car which yields 25 MPGs on average at the current national price of diesel per gallon of $3.99 and the cost of electricity of $0.13 per kWh.
Total hard cost savings came to $484 per month.
Soft Benefits
There are two soft benefits we are going to consider:
We also knew we would save personal time by not having to go to the gas station since we will be able to charge our Model S every night at home. Using our miles driven per year and MPG assumptions along with the tank size of our comparable vehicle, 23.8 gallons, we would calculated we would need to stop at the gas station 4 times per month. If we assume a 15 minute stop at the gas station, we could realize a $65 per month benefit.
Combined the total soft benefits came in at $282 per month.
Tesla also assumed you could take advantage of another soft benefit, using the car for business use. We did not include this in our analysis because you would receive the same benefit if you purchased another vehicle.
- Commuting Time
- Time at Gas Stations
We also knew we would save personal time by not having to go to the gas station since we will be able to charge our Model S every night at home. Using our miles driven per year and MPG assumptions along with the tank size of our comparable vehicle, 23.8 gallons, we would calculated we would need to stop at the gas station 4 times per month. If we assume a 15 minute stop at the gas station, we could realize a $65 per month benefit.
Combined the total soft benefits came in at $282 per month.
Tesla also assumed you could take advantage of another soft benefit, using the car for business use. We did not include this in our analysis because you would receive the same benefit if you purchased another vehicle.
Putting it All Together
Effective Monthly Payment (Hard Cost Savings Only)
| Car Payment Hard Cost Savings Effective Monthly Payment | $1,097/month $484/month $614/month |
Effective Monthly Payment (Hard Cost Savings + Soft Benefits)
| Car Payment Hard Cost Savings + Soft Benefits Effective Monthly Payment | $1,097/month $765/month $332/month |
As you can see, you can actually get below the $500/month effective monthly payment. Our take is that there is definitely some efficiency to be gained, but it all depends on how you want look at it. We encourage you to calculate your own cost of ownership at Tesla's site.
No matter what assumptions you make, at the end of the day, you are still going to be shelling out at least $1,097 per month for a Model S. Obviously, this is not a payment most people in the U.S. can afford. I guess we'll have to wait a little longer to ignite the U.S. electric car revolution.
No matter what assumptions you make, at the end of the day, you are still going to be shelling out at least $1,097 per month for a Model S. Obviously, this is not a payment most people in the U.S. can afford. I guess we'll have to wait a little longer to ignite the U.S. electric car revolution.
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