When you think about electric vehicles, is Tesla one of the first names that come to mind? If so, you’re certainly not alone. Tesla was one of the first electric vehicle (EV) brands to gain notoriety. They currently sell the most popular EVs in the country. However, compared to many other EVs available today, Teslas have a premium price tag, making it essential to consider if they’re worth the cost before you purchase one for yourself. In this article, we’ll help you understand if Teslas hold their value over time to help you make an informed purchasing decision.
Key takeaways
Teslas and other EVs usually depreciate slower than regular gas-powered vehicles.
Tesla continues improving its existing products through updates, boosting their used-car value and resale prices.
The Inflation Reduction Act could help increase the resale value of pre-owned Teslas.
Are you a Tesla owner looking to lower your charging costs? The best way to do so is by going solar! Compare solar quotes through the EnergySage Marketplace to find a system that fits your needs at the right price.
Do Teslas hold their value?
Simply put, yes! Despite initial depreciation, Teslas are a good investment compared to many other cars, especially internal combustion engine (ICE) cars, also known as gas-powered cars. Teslas depreciate from the moment of purchase, just like any other vehicle. There are a few critical reasons for this, including slower depreciation, steady improvement, demand, and warranty protection.
What is depreciation?
You may have heard that as soon as you leave the car dealership with your new car, it loses value – this is true and is referencing “depreciation.” Depreciation is the decrease in the value of an asset following its initial purchase. This concept is most commonly associated with new cars; while used cars depreciate, they do so at a far lower rate. Teslas, for example, depreciate rapidly in the first three years and then slow in the depreciation rate.
Teslas depreciate slower than gas-powered vehicles
Compared to regular gas-powered vehicles, Teslas depreciate at a slower rate. One of the main reasons why Teslas retain their value even several years after initial purchase is their mileage range. Most Teslas will last over 500,000 miles, while the average person drives only 13,500 miles yearly. So, their depreciation is not typically evaluated based on mileage like traditional vehicles – instead, it’s evaluated through their remaining battery capacity. But unlike with ICE vehicles, there is a point at which the depreciation rate of a Tesla levels off and does not continue to depreciate as rapidly as other cars.
On the other hand, some gas-powered cars depreciate up to 60 percent in the first five years while others just remain as scrap value. Gas-powered cars contain over 2,000 moving parts, compared to just 20 in EVs. Therefore, the cost of repair and maintenance is far higher for gas-powered cars, which contributes to their faster depreciation.
Overall, when determining how quickly your car will depreciate, it’s essential to consider factors like warranty, anticipated maintenance, the model and any add-ons you purchase, the condition of the car, the EV’s range, and the mileage on the odometer (or the remaining battery life for EVs), which will all impact its eventual resale value.
Teslas continue to improve
Many EVs, including Teslas, continue to improve their existing vehicles that are currently on the roads as technology advances, increasing their long-term value. The cost of batteries continues to drop every year – lithium-ion batteries (the batteries that power EVs) cost $1,000 per kilowatt-hour (kWh) in 2010 but in 2017 cost just $200 per kWh. These lower costs make batteries easier to replace the battery in your EV, boosting its resale value and extending its life.
Another critical thing to note is that Tesla is working on their Full Self Driving (FSD) capability in the next few years, increasing their resale value. Teslas purchased after 2019 will be eligible for the software updates enabling FSD, slowing the rate of depreciation for these vehicles. You do have to add the FSD capability when you purchase a Tesla, though, or at any point through the Tesla app or website. Tesla did announce that as of September 5, 2022, FSD capabilities will cost $15,000.
There is also the option to have enhanced autopilot capabilities in your Tesla as an added feature for $6,000. Enhanced autopilot offers the ability to navigate on autopilot, auto lane changing, auto park, summon, and smart summon features. All of these features can be added retroactively to existing Teslas (aside from FSD, which is only available for cars from 2019 or later), which makes a Tesla that you purchased in 2021 able to have almost all of the same features as a Tesla purchased in 2023, boosting that used Tesla’s resale value.
Teslas are in demand
If you’ve ever tried to purchase a Tesla before, you know they’re in high demand. Most people hoping to buy a Tesla have to wait a few months before they can hit the road in their new EV. Even when the supply chain is slow, the demand for Teslas remains high. This can result in used Teslas being very close in price to new Teslas so that interested buyers can start driving their vehicles sooner. Tesla did make a substantial price drop of approximately 20 percent in January 2023, so prices are always subject to change.
Tesla’s warranties protect your investment
While EVs come with fewer moving parts to fix, there are some pricier components, such as the main battery and drive unit (your Tesla’s electric motor, inverter, and gearbox). While these have come down significantly in price over the last few years, as mentioned previously, they are still costly to replace. The good news is that Tesla’s warranty does an excellent job of covering you in this area, helping to protect your investment further and add value if you choose to sell your Tesla. Tesla offers a minimum eight-year or 100,000-mile warranty on your battery and drive unit, whichever comes first, with a minimum 70 percent retention of battery capacity over the warranty period. Some models, like the Model S and Model X, offer extended mileage limits going up to 150,000 miles.
Additionally, Teslas have a Basic Vehicle Limited Warranty that covers your vehicle for four years or 50,000 miles, whichever comes first, and a Supplemental Restraint System Limited Warranty that covers your vehicle for five years or 60,000 miles, whichever comes first.
How will the Inflation Reduction Act increase Tesla resale value?
The Inflation Reduction Act was signed into law in 2022, and a considerable part of its aim is to cut America’s carbon footprint by investing in the electric vehicle sector. The plan focuses on mid to lower-income households to include a large subset of the American vehicle owner that may not have considered purchasing an EV previously. The new law makes buyers eligible to receive up to $7,500 on qualifying new EVs and up to $4,000 on used EVs, but the buyer must make no more than $150,000 annually. Previously, such incentives were only available for new EVs, but now they are applicable for second-hand cars, enabling more people to afford and purchase EVs.
This incentive is only applicable to cars assembled in North America (which includes Tesla), eliminating several popular EV manufacturers and Tesla’s main competition. The used tax credit will likely drive more EV shoppers to choose a used vehicle, which could increase Tesla’s resale value. However, some of Tesla’s higher-end models will not be eligible for the tax credit since vehicles because of the guidelines surrounding vehicle cost — only cars less than $55,000 and vans, SUVs, and pickup trucks less than $80,000 earn the credit.
What Teslas are currently available?
Today, there are four commercially available Tesla models available for purchase: the Tesla Model S, the Tesla Model X, the Tesla Model 3, and the Tesla Model Y. These models share standard features, such as advanced automation and driving assistance, over the air updates, and advanced security features, as well as the ability to remotely monitor the car.
Here are some of the critical things you should know about each of the Tesla models:
The Tesla Model S is a luxury sports vehicle launched in 2012 and has the longest range of all the models at 405 miles. The base price is $94,990. The Model S is not eligible for the Federal EV tax credit.
The Tesla Model X, launched in 2015, is an electric SUV and is the fastest SUV in the automobile industry. It has a range of 348 miles and the base price is $109,990. The Model X is not eligible for the Federal EV tax credit.
The Tesla Model 3 is the most affordable and targeted to the mass market. It accommodates a wide range of shoppers at its competitive price and has a range of up to 358 miles. The base price is $43,990. The Model 3 is eligible for the Federal EV tax credit as long as your final price with upgrades or add-ons doesn’t exceed $55,000.
The Tesla Model Y is a mid-size SUV with a range of 330 miles and can fit up to seven passengers. The base price is $52,990. The Model Y is eligible for the Federal EV tax credit as long as your final price with upgrades or add-ons doesn’t exceed $80,000.
To learn more about the various Tesla models, explore our EV guide.
What does the future hold for EVs?
Electric vehicles are an essential part of the future of the automobile industry. With gas prices rising and new climate legislation signed into law, EVs are becoming an increasingly attractive and affordable alternative to traditional gas-powered vehicles. As charging infrastructure continues to expand, EVs are slated to become the vehicles of the future.
Power your Tesla with solar
If you’re looking to lower your Tesla charging costs, you’ll want to look into using solar to charge your EV. On the EnergySage Marketplace, you can compare up to seven quotes from our network of pre-screened installers, allowing you to find a system that fits your needs at the right price. If you’re planning to charge an EV at your home, be sure to make a note in your account so installers can size your system accordingly – that way, you’ll be able to power your car with renewable energy generated right at your home!
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