Finance bros/Tesla bros - interest rate/term on new vehicle question

Current Vehicle gets average 16mpg at average cost of $4/g for mid grade. I averaged 1337 miles/month over the last 2 years. Cost to fuel is approximately $336/mo. or $4,000/year. Current payment $578/mo. at 2.4%, insurance is $150/mo.

Model 3 long range priced currently at $44,880. (I qualify for $7,500 Fed credit, $5,000 state credit, $500 charge install credit, and $500 referral credit). Monthly would be approx $600 before tax, and insurance would be $200. Electricity cost for same mileage would be approximately $800/yr.

Netting out all the numbers, monthly cost would be roughly $194 or $2,300/year less with the Tesla. This part makes sense.

The issue: From what I gather the Model 3 depreciates very slowly for a vehicle. The numbers above are using Tesla's current 6.1% rate at 84 months. I shopped a number of banks and credit unions, and could not find a better rate (this is bananas - credit score is >800).

If I want to take advantage of the current price/incentives, without increasing (actually decreasing) monthly vehicle expense, does it make sense to enter the deal with Tesla's 84 month option, and plan on refinancing when rates drop? This sounds dumb to me - but I'm not sure why. (I do realize I could decrease the term and increase the monthly expense to break even with current expense, and that this would be prudent. I guess I am looking at this as a sort of middle ground, but having trouble with the 84 month thing.

Not a tesla or finance bro, just yer average clown who also worries about this stuff. I mean, I agree with your concern - 7 fuckin years is a long time to finance a vehicle - especially at 6+%. In addition to interest rate risk, you have new car tech risk - think about seven years ago, did you even know what a tesla was? There are new battery types coming out, new models, etc. A model 3 is now 2-3 year old tech.

Do you have alternative source of funds at a lower cost? My (again, not spreadsheeted out) gut says not to lock in for that long

ETA - the cash flow seems to work for you so if you are likely to be in a financed vehicle no matter what, that could be a different story. I drive a 14.5 year old minivan so am a cheap fuck

If the goal is to save money commuting…. Buy a lightly used Civic for $20k, put 80k on it over the next 5 years, then sell it for $16k.

I’m as EV as curious as anyone… but signing a 7 year loan on a Tesla just smells funny. I’m skeptical as to what happens to Tesla resale value as the majors catch up in the EV space and don’t have the same quality and service concerns…


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I'll up the ante even further then Nick. Buy an old Prius for $10k. Get 50mpg until the battery dies, then replace it yourself for $2000.

Borrowing money to buy a car (or any rapidly depreciating asset) is just dumb. Doing it to "save money" is even dumber.

Also, $1800/yr for insurance for one car... What are you, 17 years old with 5 wrecks on your record? I pay $1200/yr to insure 5 vehicles. Shop around and don't pay for comprehensive, because you're driving an old Prius.

I should write an e-book called "Dirtbagging 101". The main thrust would be to reduce your overhead. Money you don't spend is money you don't have to work for. That equals more time to ski/ride/travel/garden/etc.

^ this, both posts.

I'll throw in: buy an 87 suburban, tell your wife kids and job to take a flying leap, hit the road w some smokes, oxy, LSD, and a few 30 blocks.
Start living.

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Originally Posted by Squirreljam

- think about seven years ago, did you even know what a tesla was? There are new battery types coming out, new models, etc. A model 3 is now 2-3 year old tech.

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This is me all fucking day. The only thing buying a new car did for me was make me want every fucking new car to the point that I now want to sell and a buy a 2012 Subaru and watch the technology wave calm the fuck down.

There’s one way to win the math. Buy old with cash. Sit on it. Wait. Buy new when it’s glaringly obvious that this is what you should do.

If it’s not obvious, all you’re gonna do is wish you had done something else.

*edit— anyone want a rad 2017 Honda Step Wagon? AWD. Turbo. Shit’s dope, yo.

7 year car loan? On a Tesla?
No. No.

As much as I always want a new car I couldn't justify anything over 3 years anymore, 7 is ludicrous. ;) As fast as e-car tech is changing I can't imagine anything other than leasing for short terms right now.

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Originally Posted by gaijin

*edit— anyone want a rad 2017 Honda Step Wagon? AWD. Turbo. Shit’s dope, yo.

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Yeah

Agreed with most of above…. Buying a used Prius or corolla or civic is the money smart option. If you want to buy it because you like it recognize that for what it is and decide how much you want to pay for something that will make you smile more than the practical option will. I didn’t do the math, but reset your baseline and figure out what your driving smiles are worth. And if it’s smiles you’re chasing there’s STILL probably a more economical version (in terms of smiles/dollars) than the Tesla.

I enjoy driving and like shiny things, so I’m rationalizing my way up out of driving beaters my whole life. If you’re just going for practicality and economy via sheer utility your math doesn’t add up. But if you’re lying to yourself about your value proposition you’re unlikely to maximize it.

Look at some used cars to get an idea of how pricey stuff is. $10k Priuses have high miles and if you’re spending $20k on a Civic you may be better off throwing a couple grand on the pile and buying new. Cars are expensive AF right now and Japanese cars are no exception.

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Originally Posted by bagtagley

Look at some used cars to get an idea of how pricey stuff is. $10k Priuses have high miles and if you’re spending $20k on a Civic you may be better off throwing a couple grand on the pile and buying new. Cars are expensive AF right now and Japanese cars are no exception.

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This explains how I ended up in a new Tesla. I was trying to find a used car that met the requirements for the used clean vehicle credits but the options are pretty limited. Once Colorado added in the additional 5k for a new EV that pushed me over the edge.

We sold our Subaru for a little over the blue book value.

It didn't make sense to buy a used EV with 100k on it for 15k(ish) less than new, especially with how much the tech and range has improved in the last 5-10 years.

There were some plug in hybrids on my radar as well but the range on electric was not great and wouldn't have covered my daily commute. I value not having to stop at the gas station any more.

We didn't finance because the rates right now are terrible.

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The best strategy I've learned for owning vehicles is to figure out how to lose the least on them, unless you're buying rare shit they all lose you monies

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Originally Posted by gravitylover

As much as I always want a new car I couldn't justify anything over 3 years anymore, 7 is ludicrous. ;)

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Agreed! After I got out of the car loan trap probably 12 years ago, it's been REALLY hard to justify that again. Don't get me wrong. I've considered it a time or two when things were dire, but I'm super glad I refrained. Asinine Honda dealer markups nixed that silly idea for me since I outright refused to be upside down in a car before even driving off the lot. Oh hell naw! I know you and I both get some grief around here for our hilarious choices in cars, BUT we're also not totally chained down to a vehicle either. I've bought and sold cars on the fly as needs changed or I needed some cash to get by. Tough to do that when you're upside down on a 7 year note. Screwwwww that.

Seriously, though. Thanks to sticking to my guns on that (along with some wrenchin' sweat equity), you guys have all witnessed not only my downfall into jalopydom, but also my rapid ascension back out of it. When you can make "car payments" to yourself into an interest bearing account, you can save up crazy fast. I'll stick with my old beaters as long as it takes to something decent I want without a car loan. TR for my new whip coming this weekend if all goes well. ;)

Sorry for hijack, but I'm actually pretty impressed by the overwhelming amount of people in here coming out AGAINST the notion of financing. I think you guys are right since EVs are starting to see a decent hit on depreciation front that we hadn't really seen before. From Tesla Model 3 to the "Mustang" Mach-E. Either way though, best of luck to you on your car search, OP! Whatever you decide to do.

If you do go the Model 3 route, wait a another few weeks or so. Once the updated/refreshed Model 3 is formally announced (aka 'Project Highland'), you may see price drops as they clear inventory. Increased deprecation on the current Model 3 is also something to consider as well once the updated Model 3 is released.

That's some crazy Girl Math, like coming home from the mall and saying how much you saved.

Sometimes in life, you have to make payments. But the faster you can run away from interest on depreciating assets or consumables, the better. I'm assuming you make decent cheddar by the fact that you qualify for the tax credits? What are you spending it on?

So no, an 84 month car loan does not make any sense. What is 84 x monthly payments - $44,880? That's the money you are putting in a pile and lighting on fire. Why can't you commit to paying $15K a year for 3 years and paying it off?

I know this sounds like responsible old dude math because it is. Trust me when I say you get a bit older and you look around and see that the difference between peoples financial comfort is generally less about their paycheck and more about how much they systematically piss away.

Try not to be a slave to your money. Get value out of it Learn to say no. It is hard, but it has benefits.

Great advice but “Girl math”?
Lol. Lmao.

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Originally Posted by mcphee

Great advice but “Girl math”?
Lol. Lmao.

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Yup. It's one of the latest trending internet things I hear. Pretty funny actually.

https://www.youtube.com/watch?v=bV1Kv_U9Zzo

Ugh. you dumb dildos falling for comedic bits is hilarious to me

What're you talking about, mcphee? Who's falling for anything? It's SUPPOSED to be funny.

There’s enough dipshits around me that think that most women think like that. A lot of you fit that mold too.

^maybe that was uncalled for.

But if you don’t believe that viral girl math isn’t real why share an exasperated Ana Kasparian thinking it’s a real thing?

That term has existed since at least the late 80s for me. I tend to agree with most things in the video. Again, if it brings you satisfaction, go for it. But remember, if you spend it on one thing, you can't spend it on another.

So if you want a Tesla or a fucking CinaBon...git sum. But save me the spreadsheet analysis.

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Originally Posted by Foggy_Goggles

I’ve been a misogynist since the late 80s. I tend to agree with most things in the video. Again, if it brings you satisfaction, go for it. But remember, if you spend it on one thing, you can't spend it on another.

So if you want a Tesla or a fucking CinaBon...git sum. But save me the spreadsheet analysis.

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Cool

So you've 7 year car loan also? Did you pay cash or finance the tint and rims?

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Only things I’ve ever financed are an education and a home.

I mean “girl math” is pretty funny in a place where men regularly justify multi thousand dollar purchases to help them play outside.