- Source: Tesla

Valuation of second hand, demonstrator or full used vehicles relies on one thing and one thing only, supply and demand. That's why despite the fact that your fully specified white Audi Q5 looks fantastic makes you and anyone riding in it feel like a bonafied millionaire doesn't mean a dime when it comes to selling the car. It's still going to be worth only 50% of the full value of the vehicle after one year.

I kinda lie though when I say supply and demand is the only thing that dictates the market because technically environmental factors then affect supply and demand. Like, for example, mechanical reliability and availability of the new vehicle. Overall though the system tends to work, it does mean a select few customer come out losers as a result but it also keeps brands who do engage in slightly underhanded conduct regarding reliability or dishonesty (insert unnamed German brand here) honest.

So the belief would be in that case that because EV have longer service intervals than your ICE vehicle, are more reliable and more scarcely available that they would hold more value upon sale right? You'd be wrong.

This morning while scrolling and jumping through hoops in the internet though I found something out very interesting which largely goes unreported in the automotive world. It's the idea of the valuation of electric vehicles. Now because the EV market is so new the idea of EV valuation is also an extremely new thing. In Australia there are only just over 100 used or second hand EVs for sale (using Carsales as a guide). So the belief would be in that case that because EV have longer service intervals than your ICE vehicle, are more reliable and more scarcely available that they would hold more value upon sale right?

You'd be wrong. In fact the examples of the Tesla Model X that I'd seen, all of which had done under 40,000km (which means they'd maybe hit one service interval so far) had lost well over 60% of value in the first year and a half after sale. That is astonishing. To put that into perspective these cars retailed at well over $220,000AUD and in some cases are selling under $100,000AUD. But here's the thing the EV market is playing in a space dominated by both ICE vehicle buyers and over saturation of such.

The vehicles themselves though don't play by the same rules. In today's standards a Tesla actually has a longer lifetime than your typical ICE vehicle. And in fact this reflects over the longer term second hand vehicle valuations. I found that with, for example, the Tesla Model S in the first year it lost almost 40-50% of it's total value, but in the 2nd, 3rd and 4th years the vehicle hardly lost $15,000AUD in value. So why is this?

Well it's actually very simple and a bit ironic at the same time. The Tesla used vehicle market is booming, but it isn't booming in the same demographic that Tesla targets their new vehicle market with. It's booming in a sub-par market, more middle class. And that brings me to my point.

Electric vehicles don't play by the same rules your normal ICE vehicle plays by. They have less mechanical parts which theoretically makes them more reliable. Their energy source also has a longer theoretical life than their counter parts. You don't need to pay for physical fuel with an electric vehicle and you only need to service it once every 3 or so years. So what is the actual point of buying one of these vehicles new?

I'm normally a massive fan of buying new vehicles, with massive leaps forward in technology and the obvious fuel economy and performance benefits (not to mention issues with reliability and warranty on second hand vehicles) you're always going to be far better off buying a new vehicle on a well strategised finance plan and changing it over every 5 years than getting something used and spending the same amount of money on driving it into the ground.

You should be buying a Tesla used (just a year or two old) and changing it over for another used Tesla or EV every 4 years.

After researching Tesla valuations though I've come to the conclusion that the Tesla is different. You should be buying a Tesla used (just a year or two old) and changing it over for another used Tesla or EV every 4 years. You'll lose a hell of a lot less value that way and ironically most Teslas are future proof. They almost all have the ability to be fully autonomous and they all receive over the air software updates (much alike to an iPad).

Your initial outlay for a used Tesla is also much less than a new one, making them far more achievable for the day to day car purchase. A Model S used can go for about $70,000 to $100,000AUD (compared to the new price of $150,000 to $230,000AUD) and the Model X used can go for about $95,000 to $140,000AUD (compared to the new price of $170,000 to $250,000AUD). Comparatively that means at a used level the Model S is worth about the same as a new BMW 3 series and the Model X is worth the same as a new Audi Q7 or Volvo XC90.

I can't imagine the trend is going to change with the Model 3 which retails on road in about the mid-$70,000AUD. You can expect that car to come down to the $40,000 to $50,000AUD after the first year (and even more on the performance model).

So basically you're buying a luxury vehicle for far less, which is going to cost you far less to run, and you're going to sell for more in the long run. I think that's the first time you'd refer to a triple win in the same sentence as the word valuation. Obviously no-one can guarantee it's going to stay this way. In fact as electric vehicles are more widely accepted and sold I can guarantee the used vehicle valuation trend we see here today will change.

For the near future though, let's all of us come together and appreciate that I, here, today discovered that buying, owning and selling a Tesla doesn't actually need to be all that expensive. It can be quite affordable, and the reality of the situation is when you're losing less money in the long run? Buying an electric vehicle may just even make you smile.

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