The Truth about Leasing vs. Buying a Tesla in 2023 - What You Need to Know!

So you are ready to place an order for your new Tesla Model Y or Tesla Model 3 and due to the EV Tax Credits, you are not sure if you should lease or buy. I'm here to help you with the decision and provide you some compelling details on the numbers behind both options.

First and foremost, you need to determine if you qualify for the EV Tax Credits that are a part of the Inflation Reduction Act of 2022. These new tax credits allow all Tesla Model Y's and Model 3's to qualify for the full $7,500, assuming your income is qualified. These credits will potentially be changing once the Secretary provides input on the Battery Critical Minerals and Components requirements some time in March 2023.

Until then, all Model 3's and Model Y's get the full $7,500. If you do qualify, you want to consider the implications of leasing vs buying. If you lease, you don't get the credit. The bank that is funding your lease gets the tax credit and they have the option to apply some, all or none of that credit to your lease. In the case of Tesla, they are applying most or all of the credit to the lease payment, which is why the Model 3 SR+ is leasing for a low cost of $349/mo.

On the other hand, if you buy, you will get that $7,500 back at time of filing your 2023 taxes, which can then help to offset the full cost of the car. That said, you won't be seeing that $7,500 until 2024. Starting in 2024, this will be a rebate at time of sale, meaning you would get that credit the day you take delivery off the price of the car.

Next, we look at the total cost of the lease and the purchase over the next 3 years. Using Tesla's default financing options, you would be looking at $349/mo for the lease with $4,500 down and $652/mo for the loan with $4,500 down. Both require the same down payment, and the lease seams so much cheaper. The lease is actually cheaper, but only when you consider the cost of the payments and the down payment together.

At the end of the lease, you have nothing to show for it. You have paid roughly $17k to rent a Tesla Model 3 and have $0 or assets at the end of that 3 years. On the other hand, if you buy the same Model 3, you would spend a little over $20k after the rebate is factored in over that same 3 years. You would still own the Tesla, and have an outstanding balance just over $21k.

But what is a 3 year old Tesla Model 3 worth? Well, when we look at the market today, we can see that a clean used Model 3 SR+ is currently selling between $31-35k. So that means after spending $3k more over 3 years, you would have about $10k in equity in the car.

This makes the purchase a way better deal in the end. Tesla Model 3's continue to be extremely popular and they have a strong market. That all said, the market fluctuations for Tesla's can be extreme, in both directions. Because of this, there is risk involved in this math and the market today does not necessarily reflect what the market will be in 3 years.

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[Simplereyes]

I want a new one every 3 years. I did this with BMW's now with Tesla's. Im good with the Lease. I also never have to worry about anything as I am always under warranty. Moreover, Tesla is getting better and better and just keeps getting better - I would want to experience, enjoy the latest build with a new battery.

I've owned lots of great cars. As it gets old I end paying for everything trying to keep the car as good as I had it when it was new is in denial that its already dated. Prefer worry free and just drive. Yes I'll always have a car payment - all good and factored it as cost of living. Years down the road the end result is the same - pay up! Great video!

[paulhaws]

the most rational analysis of buying v. leasing an auto that i have seen. Too many people are blindly driven by either payment amt. and, therefore, less. Or, on the other hand, the advice that you should always own bc you’re gaining equity has them blindly purchasing. In reality, what’s most important is what will financially benefit the individual customer. Good job clearly outlining the pros and cons of both! And highlighting market volatility. Bravo!

[nbtgtso]

Thanks for this great breakdown. I was thinking about leasing in my business. This gave me more perspective.

[philemon]

Thank you as always. Very knowledgeable and things I really did not know. Whoop there it is. Thanks again.

[budgetaudiophilelife-long]

THANKS BEARDED…FOR SHARING THIS USEFUL INFO ℹ️👍💚💚💚

[donharris]

“Nothing to show for it” is not always the best way to look at leasing or renting. The question is whether the asset will appreciate or depreciate. Rent vs. buying a home that appreciates makes no sense because you own none of the increased value at the end of renting. Leasing a car is different because it is losing value the second you purchase it. With a lease you only own the lost value on the portion that you use, the rest of the devalued car is the dealership’s burden. They have to deal with trying to resale it. In a lease, there is very little maintenance needed within 3 years. If you own, and the battery dies in year 4, 5, or 6 then that $20, 000 hits your wallet, not so with a lease. Also if you do buy, you’d better plan on keeping that car for 6 to 7 years to make it financially comparable to leasing, but that means your car’s hardware is 7 years old. Good luck with that. Take a look at the difference in tech between a 2017 and a 2023, then imagine the tech in a 2030 vehicle, while you’re driving your 2023.

[DominicZaidan]

Great video. Personally never thought smart to lease, this confirms. Thanks.

[jamesbuchanan]

Great video. It seems to me that your forté is doing videos like this: what are the best Tesla buying, owning, and selling strategies, especially breaking news or explainers on price changes and/or Tesla-relevant legislation changes or potential changes, and real-world use of accessories and products, rather than reporting on general Tesla and other EV news as other YouTube channels (e.g. Ryan Shaw, Rob Mauer's Tesla Daily (stock ownership oriented), or Tesla Time News weekly) do regularly. The reason I say this is that you do the ownership aspect so, so well, and usually quicker with breaking news than anyone else, and often this valuable content is unique to you.

[charliepham-gdgo]

Excellent presentation for pro and con of lease vs buy.

[untouchablex]

"If it flies, floats, or f. Rent it. Do not buy depreciating assets."

[erickessler]

BTG,
Great concluding statement about leasing might be a benefit IF you didn't qualify for tax break if you were to buy. Perhaps you're a few yrs from an income reduction like a mom staying Home to care for child, or retirement when you might qualify with less income.
We are retired, and having our Model Y really allowed us to travel much more, due to low cost of travel.

Cheers, Eric

[qitstrn]

I’ve never leased a car but was considering it when I just got my Model Y. With the 0.99 rate it didn’t make sense for me to lease it. I do plan on keeping it more than 3 years.

[Chrisbs]

Yes, the big question is how much a 3 year old standard range is worth 3 years from now.. think about how many Model 3s were on the road 3 years ago vs today.. vs the number sold in the next 3 years. if that car is worth about $20K, which is very very realistic (to me) .. you are under water, your model 3 standard range will be worth less than you owe. Save that monthly payment, and invest it. or just put it in a CD, you'll be assured to have money at the end of the lease (for your next lease)

[DogeTeamCaptain]

Got any tips for what to do when Tesla lease is ending? Should I buy out the car or turn it in for new lease

[disneymike]

Great video! Can you use this same comparison for a Model Y since Tesla is not buying down the apr on the lease?

[weho_brian]

is the income limit based on your 2022 taxes, or when you buy the car which would be 2023. Because my income is above/below 150 for those years

[sherwinm]

Vehicles are a depreciating asset. I get how people will try to minimize the loss at the end. I live in California and most of us commute and can’t do leasing. So I don’t even bother doing the calculations. If I had to finance, I try to get the lowest APR and pay down the loan ASAP. I usually have equity once it’s time to trade in. Usually 100K miles or 4-5 years and recycle the process. But since switching to EV, I see myself keeping the cars longer because of lower frequency of maintenance. Also, I just enjoy my cars and use it to the fullest rather worry about how much I get out of it in the end.

[mikeab]

Thanks for the news and info brother. I am waiting till next year to get a Tesla 😅 have to focus on my wedding this year. It’s hard with all these tempting prices.

[davidharris]

Needing some owner of '21 Model Y. Looking to add a Model S (still deciding which trim) to the line-up. I understand if purchasing no $7500 tax credit is available but when I go to the leasing option on the Tesla website....it shows that it applies. Can someone confirm? I'm considering leasing and tying the vehicle to my LLC for a write-off. Any advice would be greatly apprecited. TIA

[LJLion]

Leasing is better imo for people on a budget. No strings attached. New car every 3 years.Take the rest of $600 and start making reoccurring buys into Tesla shares For the term of the lease. Now you have an investment you can use for your next car in 3 years. Win win.