, 15 tweets, 4 min read

"Moody's upgrades Tesla Auto Lease Trust 2018-A Notes". Is this a financial post? No. I want to instead point out the reason *why* Tesla got this upgrade:

"The upgrades were prompted by strong residual value performance of the underlying lease contracts"
Put in plain terms: @Tesla cars (Model S/X in this case) simply aren't depreciating much, so leaseholders end up holding a more valuable asset when the lease expires.

Teslas have famously low depreciation. ISeeCars calculated Model S depreciation at a third that of..
... other EVs and half that of equivalent gas vehicles:


The same low numbers can be seen here:

Autolist's forecast for the Model 3 is here:
Compared to other EVs, we see the same pattern, only more (image data: Autolist). Look up vehicles in Kelley Blue Book; you'll see the same thing.

Now Moody's is pointing out the same thing yet again: Teslas depreciate (comparatively) slowly.
When it comes to buying new cars, some people get sticker shock with EVs. Why buy a $39k Tesla when I could buy a $24k Accord? That's $16k difference; that's a lot of ground to make up.

But that's not how total cost of ownership (TCO) works. At all.
Let's forget for a second about how much *vastly* better of a car the Tesla is, and focus only on the economics.

Purchase price differences *are not a cost*. If you buy a car for $X dollars, then turn around and sell it for $X, you've lost nothing. It's depreciation that costs.
After 5 years, a given Model 3 may have a depreciation of ~50%, while said Accord may depreciate ~60% (exact details depend on condition, mileage, etc). This is the actual amount you lost: $19,5k for the Model and $14,4k for the Accord, for an actual difference of $5,1k.
Suddenly, it becomes obvious how five years of gas and maintenance savings make the Tesla actually *cheaper* than Honda's simple people mover.

But you really don't need to go through all that to see the difference. Looping back to leases: just check monthly payments.
Said Model 3 SR+ has a (US) 3-year lease of $399 per month. The nicer, faster, longer-range LR has a lease of $499/mo. The 3-year lease on the Accord? $409/mo.
Now factor in monthly gas savings.

There is of course some nuance, such as tax credits (makes EVs even more affordable), interest (adverse to more expensive vehicles), etc. But the overall picture is clear: depreciation, not purchase price, dominates cost of ownership.
And today, we have Moodys acknowledging what numerous other entities have been saying for ages: while Teslas depreciate (like all cars do), they do so slower than most cars - and much slower than other EVs. Which makes them very affordable to own.

But why low depreciation?
There are many reasons, but to name a few:

* Teslas are aspirational cars. Try tuning in a realtime Twitter stream for the word "Tesla". Apart from the TSLA / TSLAQ chatter it's a flood of people writing things like, "OMG, the Uber that just picked me up is a TESLA! SO COOL!!!"
* Teslas constantly improve. Ask any owner; the continuous stream of new features makes it like getting a new car at regular intervals.

* While not every Tesla battery model has performed the same, most have shown superb longevity compared to other EVs - hundreds of k miles.
Let's even forget for now the whole "Robotaxi" thing.

The simple fact is that this evening's Moody's upgrade is - indirectly - an acknowledgement of a simple fact:

***Sticker shock or not, Teslas are cheap to own***.
Edit: $407/mo.
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