Model 3 is cheap!

I don’t think the methodology used in this article can apply to every purchaser, but it’s indicative. People who are thinking about getting a new vehicle might want to use it as a basis for making their own calculations.

Don’t forget state incentives!


I think math is wrong, though.

Trivially on the “taxes and fees” line - you pay taxes on the nominal price of the car, not adjusted for the EV tax credit, so there’s no need for his adjustment. Plus, Edmunds uses a 15K miles per year assumption - and since very few Teslas are driven that much, you need to adjust the figures to account for that.

But I think he’s also double-counting the tax credit? Maybe? He pulls it out and adds it back in for various purposes. But if he’s saying that the trade-in value of the car will be $20K in five years, then the depreciation has to be more than the $10,066 he’s showing ($17,566 minus the $7,500 credit). It should be the full $17,566.

So what does the calculation come out to for your situation?


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For a first approximation, I’d just use the Edmunds TCO calculations, and adjust for the fact that the Model 3 is now eligible for at least a partial credit. So knock off $4K off the difference ($8K if you can get the full credit) that they show. Since Edmunds shows an approximately $18K difference in the cost to own, that would be a TCO gap of $10K-14K over the five years. Leading to the rather unremarkable conclusion that where one car costs about $18K more than another car, it will cost you more to own that car than the cheaper one - even with a sizable credit. You save a lot of money on gas and maintenance, but because the Model 3 is so much more expensive up front (even with credits) it’s not enough to make up for the difference in price and financing costs.

As of last week, the model 3 is eligible for the full $7,500 credit. For most people, this plus the recent price reductions makes the model 3 a veritable bargain! Hyundai is trying to compete with a factory sponsored $7,500 cap reduction on a lease of the ioniq 5, but it still isn’t quite comparable.

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I think the math is wrong too. It includes only the cost of financing, not the actual total car payment. But its part of the cost each month, isn’t it?
If you bought the cars outright, then the finance is $0. But you spend a heck of a lot more for the Tesla.
You need to add the cost of ownership to the cost of the car.

Just handwaving here.

So what’s your five year TCO for a Model 3? You, know, a number of dollars. Show your work. With error bars. All it takes is plugging in some numbers. And using the correct tax credit.

Likely less than anything else you would consider buying. Along with being a much better vehicle.


Why? I don’t have to have my own independent model to point out that the model in the article you posted has a mathematical error. And there’s no reason I can’t say that Edmunds does a pretty good job at estimating the various costs of ownership of various vehicles, and rely on that as a first order approximation of what those costs were.

After all, that was good enough for a blogger whose work you posted with approval here. Paul Fosse didn’t do his own independent analysis of insurance costs or maintenance expenses (with error bars!) for his assessment - he just took Edmunds’ figures for those things and tweaked them.

Nope. The small SUV I own has an Edmunds TCO (for a new version of the same model) that’s about $5.8K less than the Edmunds TCO for the Model 3. But that understates the gap for my specific situation - I put fewer than 5K miles on my car per year, which means that I would never recoup as much fuel and maintenance savings switching to an EV as Edmunds calculates with its 15K per year assumption. I’d never come anywhere close to saving money with a Model 3. Plus, I need an SUV - the cargo space and configuration in the Model 3 doesn’t work for me - so I’d have to move up to the Model Y to get the form factor I need.

Not necessarily. I bought my model 3 using cash. And it was about the same price as the comparable ICE car I would have bought (Genesis), maybe a few thousand more at most. My previous car was a Genesis and I loved it, but it got really crappy gas mileage, I tracked every single fill-up since the day I bought it and it averaged 16.6 mi/gal for my driving over all the years. So if you look at the actual savings on gasoline, it is as follows:
Genesis - 9700 miles/16.6 mi/gal = 584 gal x 3.30/gal = $1930.
Tesla M3 - 9700 x .271kWh/mi = 2628 kWh x $0.13/kWh = $341.
So I save about $1589 per year in fuel. Now this isn’t 100% accurate because a few times I year I pay more (or less) than 0.13/kWh when I use a supercharger. Some superchargers are $0.36/kWh and some are $0.11/kWh. BUT, it’s still not accurate because a couple of times a week I also charge for free at the supermarket or at the movie theater. And while traveling I sometimes charge free at the hotel (on our last long trip, I didn’t have to use a supercharger at all because out hotel had ample chargers). But it is still a good rough approximation. Now I also have no oil changes, and no brakes, or stuff like that to do. Basically I swap the wheels around every 5000 miles or so, and change the cabin air filter every year or two (I have to do that today), and bring it in once every 2 years for them to check the brake fluid and general inspection (about $100 I’ve been told), or the Tesla service guy comes to my driveway to do it. And the 12V battery every 3-5 years, but that’s with all cars. So figure the maintenance on Tesla is perhaps $150/yr less. Now the insurance it a bit more on the Tesla, maybe an extra $250 a year. Tires on Tesla are 50 bucks more, so 200 extra per pair, and probably 1/4 more often than the comparable ICE car. So an extra $33+50 a year on average.

So net net, operating costs, Tesla model 3 is about $1400 less a year to operate for me. And for someone who drives a lot more, it would be much less. As far as depreciation, well that all depends on when you bought the car. If you bought it at peak prices, you will see higher depreciation at some point, that applies to all cars, but especially Tesla that has seen dramatic drops in price recently. But decisions can only be made looking forward. Tesla model 3 right now with a full $7500 tax credit is really a crazy good bargain. The Model 3 long range like mine is just under $40k after the tax credit. That compares well to any other sports sedan out there. The model Y long range is $43k after tax credit which compass very well to just about any small SUV.

Oh, I also happen to like the Tesla a lot more. It is way more fun to drive, and way more comfortable to drive, and way more comfortable to even just sit in and enjoy a show or movie periodically if I choose to. It’s a good screen and a great sound system.

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Remember, the exercise is to determine the cost of owning the car for five years - not the lifetime of the car. Only a portion of the purchase price is “consumed” during those first five years. At the end of the five years, you’ll have a car that is still worth quite a lot. So even though the entire price of the car is reflected in your monthly payment over those five years (assuming 60 month financing), the actual cost to you is limited to the difference between the price paid and the residual value at the end of five years. IOW, the depreciation of the car.

As for finance charges, you have a cost of capital whether you borrow the money or pay cash. If you borrow $X (the purchase price), the cost of capital will be whatever the going rate is for new car loans - 7% right now, for convenience. But if you don’t borrow money, you then have to spend the $X on the car - so you still incur a cost of capital, since the $X you spent on the car is now not available for other things, like investing. Most of these types of calculators just assume you’re going to finance - but if you’re hanging out on TMF, your cost of capital should be at least the new car financing rate, so you can use that for self-financed calculations as a time-saver.

Sure. But by not posting your calculations we can’t tell whether you are making arithmetic errors too.

So how have you tweaked things for your situation?

So this never had any relevance to you regardless? You’re just here to criticize methodology?


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I’ve bought all my Teslas using profits from trading TSLA. If I compute my cost of capital as how much the value of the TSLA stock would be if I had just left my money in TSLA rather than spending it on the cars, well, it hurts to even think about.



It’s a discussion board. If the headline conclusion had been true, it would be a pretty remarkable (and counterintuitive) result - one with implications not just for people who are buying new cars right now, but for the industry in general. It’s worth talking about whether the author was correct or not, even if you’re not going to be buying a new car anytime soon. After all, I doubt that the article has any personal relevance to you either - based on your posting history you already own a Tesla (several Tesla’s?) and are in a financial position where you would never need to take into account whether a Model 3 is cheaper than a Mitsubishi Mirage over five years. Yet you posted the article in the first place.

I only mentioned my particular situation since you suggested I would never consider a vehicle with a TCO lower than a Tesla. When I last bought a car, I had two small children. I mean, I still have the children - they’re just not as small. Anyway, because I had little kids, I bought one of the cheaper SUV’s on the market. Because kids wreck the interior of cars, so I wasn’t going to spend the money on a luxury or premium vehicle. It just does what I need it to do - get to point B - with relative comfort but very few frills.

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