Purchasing a Tesla is a major financial decision that requires weighing the pros and cons of leasing versus taking out a loan. While leasing often provides lower monthly payments, buying through an auto loan allows you to eventually own the car outright. Here are the key factors to analyze when deciding between a Tesla lease or loan.
Upfront Costs
Leasing a Tesla typically requires lower upfront costs, usually limited to the first month’s payment plus a refundable security deposit. Buying requires either a higher down payment, often 10-20% of the purchase price, or financing 100% of the cost. With a $50,000 Model 3 for example, leasing may only require $1,000 to start while buying could need $5,000 or more down.
Monthly Payments
Monthly payments are usually lower with a lease. This is because you are only paying for the vehicle’s depreciation during the lease term, not the entire cost. An equivalent loan term often has higher monthly payments because you are financing a larger portion of the total cost.
Ownership Equity
With a loan, each payment builds equity and ownership in the vehicle. At the end of the term, you own the Tesla free and clear. Lease payments do not build any equity – you must return the car unless you exercise a purchase option.
Cost of Driving
Leases limit the annual mileage, typically 10,000-15,000 miles per year. Exceeding this costs a fee per extra mile at lease end. A loan has no mileage restrictions so your total cost of driving is fixed.
Latest Model Access
Leasing allows swapping into a new Tesla every 3 years to access the latest technology and features. Buying a Tesla means you won’t be able to upgrade as frequently without taking on another loan.
Customization and Modifications
Since you must return a leased Tesla in good condition, you cannot customize or modify the vehicle as freely as with a purchased vehicle. This includes wraps, tinting, suspension, wheels, and more.
Maintenance Responsibilities
With a lease, regular maintenance is usually covered but major repairs may not be. A purchased Tesla makes you responsible for both routine and unexpected repairs after the warranty.
Insurance Requirements
Leasing requires more comprehensive and collision coverage with lower deductibles. Buying allows flexibility on insurance minimums and deductible amounts to help control costs.
Cancellation Fee
You can sell a purchased Tesla at any time if needed. A lease has an early termination fee if you want to end the contract early, often several thousand dollars.
Tax Benefits
There are tax advantages to both options. Leasing provides tax deductions for business use. Buying allows tax credits for charging equipment and potential deductions for loan interest.
Credit Score Impact
Leasing results in a “hard pull” credit check but doesn’t add debt. Buying adds an installment loan to your report. For some, having an open auto loan can help build credit through on-time payments.
The Bottom Line
Analyze your budget, ownership goals, driving needs, and tax situation. Leasing offers lower payments while buying builds long-term equity. Weigh the overall costs and benefits before deciding between a Tesla lease or loan. Being informed helps ensure you choose the optimal financing method for your needs.
References
https://www.nerdwallet.com/article/loans/auto-loans/should-you-lease-or-buy-a-tesla
https://www.bankrate.com/loans/auto-loans/tesla-car-loan/
https://www.lendingtree.com/auto/financing/tesla/
https://www.edmunds.com/tesla/model-3/2017/cost-to-own/
https://www.kbb.com/car-news/tesla-lease-buy/
https://www.autolist.com/guides/can-you-modify-a-leased-car
https://www.carmax.com/articles/lease-vs-finance-which-is-right-for-you