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Tesla

Does Tesla Model 3 Keep its Value? (Not What You Think)

Elon Musk revolutionized the automotive world with the Model S back in 2012. It was the first production-ready EV which did everything Elon promised it would. With the launch of the affordable Model 3 in 2017 though, Tesla made electric vehicles accessible to the general public. Despite the fact that it faced some production issues early on, it’s currently the best-selling EV on the market. Naturally, a lot of people are starting to worry about depreciation and how much the Model 3 will be able to hold its value come five years’ time.

The truth is that the Tesla Model 3 depreciates significantly less than the equivalent internal-combustion engine vehicle. After 36 months of ownership, the Model 3 retains 69% of its initial price. In fact, Tesla’s cars as a whole hold their value nearly twice as much as an ICE car and up to three times as much compared to other electric cars by other brands.

Want to see how we arrived at this conclusion? Read on to find out.

Supply is short, demand is high

Tesla sold over 90,000 Model 3s in the fourth quarter of 2019 alone, yet if you look at sites like AutoTrader or other similar marketplaces, you’ll find very little Model 3s for sale. At the time of writing this post, there are just 125 Model 3s for sale on AutoTrader.com.

It’s a simple matter of supply and demand, and the fact of the matter is that very few people are parting ways with their brand new Tesla. Consumer Reports surveyed over half a million car owners and the results were conclusive: the Tesla Model 3 is the most satisfying car to own.  

Because there are so few Model 3s for sale, prices of used cars are actually going up instead of down. This trend will, naturally, settle after a while, but the Model 3 is still hot in 2020 and will probably remain so for the next couple of years.

Tesla as a brand has a cult following with millions of loyal customers, and the Model 3 is their best product to date. People were willing to wait for months and even years to own one, tolerating delivery delays and early quality issues because they knew the end product was something amazing.

People don’t just like the Tesla Model 3 – they absolutely love it. Any car with such an enormous fan base is going to hold on to its resale value because it’ll always be in demand. Think how much the VW Transporter Bus or early Porsche 911s are worth today, simply because they’re treated as statements rather than just means of transportation.

If the Model S is anything to go by

If you want to know how much the Model 3 will depreciate, just take a look at its bigger brother, the Model S. It’s nearly eight years old and people still can’t get enough of it, even on the used market.

A study by Loup Ventures found that, on average, after 50,000 miles most luxury cars depreciate 35 to 40 percent. Here’s a list of some of them:

  • Lexus LS 460: 32%
  • Mercedes S-Class: 36%
  • Porsche Panamera: 37%
  • Audi A8: 40%

By contrast, the Model S had a depreciation rate of just 28%. The Model S holds around 7% more value compared to its competitors regardless of variables like model year or mileage.

When the Model S first came out, many ‘experts’ predicted used Model S prices would plummet as cars approached what is considered high mileage. The reason being that no one knew how the batteries would behave after a while, or how the car would hold up in general.

Of course, we now know that the complete opposite of that happened. The cars didn’t just hold up fine, but they completely exceeded everyone’s expectations. You can find Model S examples with 100,000 miles still on the original battery and with no signs of wear and tear.

More to the point, because of Tesla’s constant updates to both the infotainment system and the car’s features, the Model S ages significantly better than its competitors. Elon Musk’s over the air updates have proven to be quite valuable in helping the Model S (and indeed the Model 3) hold their value.

Looking at current Model 3 numbers

According to Kelley Blue Book’s findings, The Model 3 currently holds the best resale value of any electric car on the market. After 36 months it retains an estimated 69% of its initial value. After 60 months, that figure drops down to 48%, which is remarkable given that most cars struggle to even come close.

Here are some examples from other cars purely for comparison:

  • Lexus RC – after 36 months: 51%; after 60 months: 38%.
  • Audi A7 – after 36 months: 47%; after 60 months: 32%.

Those are two luxury cars from premium models, both failing miserably to even crack 40% after 60 months. It’s not just Audi and Lexus either. No manufacturer or model has better figures than the Model 3, and it’s even worse if we include stats from other EVs.

If we include maintenance costs, it just gets worse for the ‘good old’ internal-combustion engine (ICE cars). Let’s take the Model S as an example since it’s bigger and heavier, and should, therefore, be more expensive to maintain.

Maintenance costs for the Model S over five years equal to about $3,000 at most. Something like a Mercedes-Benz S-Class will set you back almost $20,000 in maintenance alone over the same five-year period.

Sure, installing a home charger might set you back up to $1,000, but that’s nothing compared to what you’re saving in both not paying for gas or regular maintenance bills like oil or filters.

If we factor all of this in, which we can’t since there’s no quantifiable way of measuring it realistically, you can see that those figures for the Tesla are skewed. Yes, the Model 3 is already one of the best cars to own in terms of depreciation (or lack thereof), but if you do the math, it’s even better than what those figures suggest.

Cars are nothing without infrastructure

Tesla has managed to do something no other manufacturer will be able to do, at least in the foreseeable future: build a nation-wide charging infrastructure. Most people charge their EVs at home, but if you want to fill up at a charging station, unless you own a Tesla, your options are limited.

CleanTechnica wrote an article back in 2016 highlighting just how much of a difference Tesla’s superchargers made. They drastically improved owner satisfaction and made the ownership experience that much more enjoyable.

If you have a non-Tesla EV, say something like a Nissan Leaf, you have to be a lot more wary of how you drive and where you drive. Nissan’s charging grid basically consists of stations at or near Nissan dealerships.

Although more and more manufacturers are starting to catch up, and we’re seeing a rise in charging stations at petrol stations, Tesla’s existing infrastructure still reigns supreme. In Western countries like the USA, Canada or the UK, you’re better off with a Tesla than anything else if you struggle with range anxiety.

Teslas automatically direct you to the nearest charger within range before you battery dies, drastically reducing the need for roadside recovery or getting a tow home.

It’s all about the technology

We’ve mentioned it briefly already, but it’s worth noting again. People don’t buy Teslas just because they’re fast or cost very little to run (read my Cost to Own Tesla guide). They buy them because they’re probably the most technologically advanced pieces of machinery on the road.

Think of how far Tesla moved the game with the Model S and you’ll see what we mean. Soon after the Model S came out, people started copying (or at least attempting to) the big central screen and the various different safety features.

Autonomous driving wasn’t even a thing before Tesla came around. Different companies were developing autonomous driving, but it wasn’t until Tesla used a production-ready version of the software that everyone started implementing the idea.

Most modern cars today have various forms of digital instrument clusters or large digital infotainment screens, but none are as good as what Tesla offers. Think about that for a moment. The Model S came out eight years ago, and it still has the best-in-class infotainment system.

People like the safety features, but they especially love all the useless yet entertaining features Elon Musk has implemented in his cars. Think of the whoopee cushion noise or the ‘I want my mommy’ when you put the car in ludicrous mode.

On their own, they’re small insignificant details, but they add up to make something pretty special. It shows that Tesla has a humorous side, and it perfectly showcases that EVs are not these soulless appliances everyone thought they’d be back when the movement started.

Tesla’s ability to update existing cars and their software, and constantly push the boundaries of what’s possible, is why the Model 3 holds its value so well.

Let’s Recap

Not only is the Model 3 one of the best EVs ever made, but we’d argue it’s the best car ever made, full stop. It’s practical, fun, extremely quick if you want it to be, and wildly popular.

For those reasons and all of the others listed above, the Tesla Model 3 is one of the most valuable cars of our generation.