Breaking Down Tesla's New $399/Month Model 3 (In-Depth Analysis)
Tesla increases residuals by 4% on Model 3, saving lessees over $1,500.
To discourage Standard Range (SR) lease, Tesla increases its APR from 6.5% to 8.33%.
Lease APR drops to 5.79% on all other Model 3 variants.
Base Standard Range model more expensive to lease than Standard Range Plus (SR+).
Tesla today released new lease terms for Model 3. According to their website, a Model 3 Standard Range Plus (SR+) can be leased for $399 per month with a $4,500 down payment (not due-at-signing or drive-off), assuming 36 months and 10,000 miles per year.
Tesla’s previous advertised lease for Model 3 SR+ was $504/month with $3,000 down. As Tesla blog “electrek” observes, the new offer represents a drop in the monthly payment and an increase in the down payment. Our readers expect a more astute analysis than that, so we asked our Tesla contact for details. Here's what you need to know.
You Don't Have to Put $4,500 Down
As with any lease, the terms are configurable. The bigger the down payment, the lower the monthly payment. Tesla selected $4,500 down to arrive at the appealing $399 per month figure. But if you wish to pay less upfront, you can do that as well.
Advertised "lease specials" like these create the impression that leases are strictly-set menu items—as if you're choosing phone plans from T-Mobile or something. In truth, what really matters is the MSRP, the discount (or "adjustment", in Tesla speak), the residual value, the acquisition fee, and the money factor. These variables determine the terms of your lease.
The Actual Numbers, Before and After
If you leased a Model 3 from Tesla between April 11, 2019 and May 2, 2019, these were the terms:
Residual: 54% + $3,750 credit (36 months, 10,000 miles/year)
Subtract 1% for 12,000 miles/year
Subtract 3% for 15,000 miles/year
Money Factor: .002708 (6.5% APR)
Acquisition Fee: $695
Here are Tesla's current numbers for Model 3 SR+ (May 3, 2019 and later):
Residual: 58% + $3,750 credit (36 months, 10,000 miles/year)
Subtract 1% for 12,000 miles/year
Subtract 3% for 15,000 miles/year
Money Factor: .0024125 (5.79% APR)
Acquisition Fee: $695
The residual value, which is a percentage of the MSRP, jumped by four percent. On a Model 3 SR+ with zero options ($40,700 including destination charge), this means today you'll be paying $1,628 less in depreciation charge compared to yesterday under the old program. The new program's lower money factor (MF) further saves about $20 per month.
Interestingly, Tesla raised the MF on the $36,200 off-menu Standard Range (SR) car to a whopping .003471 (8.33% APR), making it a more expensive lease than the SR+ car. Tesla is very clearly trying to discourage consumers from choosing the base car, not just by removing it from their website, but also by making the lease terms ridiculous.
Are The New Terms Any Good?
While the new program is certainly better, the money factor of .0024125 is still extremely high. On the SR+ car, this amounts to $164 per month in interest alone, totaling $5,904 over the course of three years. Most other brands have considerably better rates; for instance, the money factor with BMW FS this month is .00165 (3.96% APR).
There are many good reasons for leasing (hence the existence of the Leasehackr community), but for the Tesla Model 3 SR+, we think traditional financing is a better option for most people. Credit unions are offering considerably better rates. We expect Tesla to continuously adjust the MF in response to demand for the vehicle, so terms may improve. There may also be end-of-quarter price adjustments on inventory cars.
For the Leasehackr nerds out there, click here for Model 3 SR+ on the Leasehackr Calculator. Use it to adjust your down payment and annual mileage—and more importantly, to account for taxes and fees. Here in Los Angeles, it amounts to $437 per month and $6,660 drive-off, which is far more than you’ll pay for a comparable premium sedan.
That said, local incentives are available, including California’s $2,500 CVRP rebate. Note lessees cannot separately claim the $3,750 federal tax credit for EVs; it’s already incorporated into the lease.