Tesla Model 3: $535/mo (84mo) -OR- $878/mo (48mo), $0 Down after Fed Tax+CVRP+SCE – Must Order by 11/30 (Financing)

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#21

I’m woefully ignorant on electric cars (because I don’t take golf clubs with me everywhere I go) but this could be a real deal breaker! Lots of couples in California making this much cheddar, pretty well negating a huge benefit.

I learned something today.


#22

On the other hand, if one qualifies for the low income CVRP, it’s $3,500!


#23

One can argue that a Tesla is great currently but I don’t think it would be wise to get stuck with any electric car for 7+ years. There are many electronic cars in the pipeline that I am sure will be better value.


#24

Remove the word “electric” and it’s even more accurate.


#25

The Model 3 begs to be leaseable so there’s downside protection for the driver.

Kharma


#26

Why do so many people think that the terms of a loan dictate how long they are stuck with a car?


#27

Because you sign documents stating as much?


#28

So you can’t pay it off early, like when you sell the car?


#29

Maybe. If the market goes your way. No promises, though.

The economy poops, it’s yours till the note is complete.


#30

The risk is on the lender. When you pay cash, the risk is on you. The longer the terms the better for the borrower which is why longer term loans cost more. The terms of the loan in no way dictate how long you’re “stuck” with the car. The drop in market value is a completely different topic.


#31

You mean the lender’s risk is if the borrower defaults?

Longer term loans cost more because the cost of money is higher for the lenders. Why are longer term loans better for the borrower, other than having lower payments?

You’re more likely to be upside down in a longer term loan, which makes being stuck with the car more likely.


#32

Yes, default is always a lenders risk.

If you owe somebody $40k would you rather have a week to come up with the money or 84 months? The fact that it costs more for longer term financing tells you that it’s a benefit to the borrower.

Being upside down on a longer term loan is strictly a function of poor fiscal management on the part of the borrower.

The fact that you can prepay a loan whenever you want makes it even more attractive.


#33

More attractive than what?


#34

Than a loan with a prepayment penalty.


#35

Did someone mention pre-payment penalties earlier, or did I lose my mind?


#36

That’s an oxymoron. Try this- calculate a 30-yr fixed mortgage at 5% and a 40-yr mortgage at 5.5% and let me know what you think.

How is a borrower to manage that better?

How is pre-paying an 2.64% 84 month loan (let’s say) at 48 months better than paying a 48 month loan at 1.39%? One would have paid almost double the interest on a high balance.

Dude. Loans at 1.39% or 2.64% don’t have prepayment penalties. Crummy loans at 15-25% or so do by not having simple APR payoffs, skewing a disproportionate amount of the payments already made to interest instead of principal.


#37

No you still have your mind. I mentioned it because as I said earlier people tend to think they are stuck with a loan for the entire term. The same is true for mortgages. Most 30 year mortgages do not last 30 years.


#38

I’m enjoying this discussion and would not want to be misconstrued.

Good food for thought

However, comparing car stuff with real estate stuff gets dicey real quick. Cars are depreciating assets that should ideally be seen as appliances.

Mortgages and real estate affords one more attachment as it tends to be a genuine investment, in stark contrast to vehicles.

Great talk. Keep it going.


#39

Does a bank pay you a higher interest rate for a 6 month CD or for a 5 year CD?

How about paying the 84 month for the full term while investing the difference in payments between it and the 48 month in an investment that earns 4%? Then you gain the margin and gain the longer term.


#40

OMG. What’s your marginal tax rate? If you’re making decent money, the taxable 4% will net you about 3% or less. Maybe even less than 2.64%. There’s no margin there.

Let’s use your example of a $41,000 loan for 84 months at 2.64%. After 4 years, the balance is going to be $18,500. What’s that $47,000 Tesla going to be worth? The 84 month loan is sort of like a 4 year lease, except the borrower is on the hook for the car.

Agree. My point was about the financing- not the collateral. For $100K:
$536.82 30 years at 5%
$515.77 40 years at 5.5%

Extra interest on 40 year loan $54,314 for a nominal payment difference. To me, 6 year loans are pushing it. 7 year car loans are like mortgages.