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Tesla Compact Car: $250 Per Month Lease
Tesla is going to announce their generation 3 platform in a week on Investor Day. This compact car will cost around $25,000 for a consumer to purchase. It will be half the cost, half the price of a Model Y vehicle. It's going to be a great vehicle for the average American because there is a case for leasing one with no money down. We have a video explaining how this vehicle could be leased for $250 a month and no money down.
A Model 3 lease today is about $349 per month. That includes $4,500 down for 36 months and 10,000 miles. We can assume 32% depreciation and about 6% interest using today's rates. EVs also depreciate slower than a gas car.
Lets' compare this to a similar car like the 330i Sedan from BMW. You can lease this for $559.24 for the same $4,500 down payment and 10,000 miles.
You can compare this with a 2023 Camry LE with a base trim. It can be leased for $358 per month. It's about the same lease price as the Model 3. How is the Model 3 a much better deal? It is due to the IRA EV tax credit in the U.S. of $7,500 for any EV purchased. Tesla can pass these savings on to consumers.
Tesla's $25,000 passenger car is going to throw the entire auto market for a loop in the low cost it will be to purchase and lease.
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Let's apply this half the cost, half the price of the compact car from Tesla's own earnings call. If you look at the Q4-2022 earnings report for Tesla, you can see total deliveries of 405,278. You can see that it cost $15.785 billion to build those cars. Taking those two numbers, you can see the cost per car ($15.785 billion / 405K) = $38,948 for all Model 3, Model Y, Model S, and Model X vehicles. The average cost is about $39,000 to build a vehicle.
The compact will be about half the cost of a Model 3 and Model Y. The $39,000 average price is a little high due to the Model X and Model S being included. We can be conservative and say half of that is $19,474. To round it up, we can say $20,000. Tesla should get about $5,000 profit for the compact car at a 20% margin. Something very unheard of for compact vehicles.
How much would a lease be for the compact car if Tesla can sell it for $25,000. Let's use the same 32% depreciation and 6% interest rate. If you put this in a lease calculator, you get an asset value of $26,000 (plus a $1,000 destination fee), and a residual value of $17,680 value after 3 years using 32% depreciation and a 6% interest rate. The lease becomes $341.51. That's nowhere near $250. That's right at about the level of the Model 3 lease.
But, we haven't applied the IRA tax credit, which will most likely stay in law. All signs point to it staying as a law. Tesla can pass these savings on to the consumer. The price goes to $18,500 and a residual value after 3 years becomes $12,580. The monthly payment now becomes $243 per month. And, you get this with $0 down, not $4,500.
Compared to a 2023 Toyota Corolla, the Corolla is a $405 per month lease with no money down. The Tesla is about $150 cheaper to lease. This is a big deal. Fuel costs are 50% less with an EV. Maintenance costs are less with no engines, belts, fans, transmission, oil changes, filters, coolant, and more.
You also get top tier performance with an EV and a battery that gives you a low center of gravity. You get the software and infotainment in a Tesla vehicle. In addition, you get the Tesla Supercharger network. You are basically renting a car for $250 per month.
57% of Americans cannot afford a $1,000 emergency expense, according to the Twitter account, unusual_whales. There is going to need to be an affordable option without a down payment for Americans to drive. This car satisfies that demand.
If Tesla releases a compact car at a $25,000 price point in the next 2 to 3 years, it is going to blow all other vehicles out of the water. The Model 2 will truly be the end of all other EVs and gas cars. I see it selling 6 million units per year or more, world-wide, eventually.
What do you think about the Tesla compact car - will it be rentable for $250 per month? Would this car sell?
For more information, see this video from Farzad Mesbahi:
In Related News: Tesla's 3-Part Ecosystem
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Jeremy Johnson is a Tesla investor and supporter. He first invested in Tesla in 2017 after years of following Elon Musk and admiring his work ethic and intelligence. Since then, he's become a Tesla bull, covering anything about Tesla he can find, while also dabbling in other electric vehicle companies. Jeremy covers Tesla developments at Torque News. You can follow him on Twitter or LinkedIn to stay in touch and follow his Tesla news coverage on Torque News.
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