Tesla Model 3 is the worst car to buy used.
John Goreham's picture

Study Names Tesla Model 3 Best Car To Buy New Rather Than Used - Here's Why

A new study confirms what Tesla shoppers already know; used Tesla Model 3 cars make no sense at this point in time. And this is a compliment to Tesla. It has one of the highest retained values in America.
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A new study conducted by iSeeCars.com has found that the Tesla Model 3 has one of the highest retained values of any vehicle in America. The Tesla Model 3 continues to win over fans and buyers. Without a doubt, the Model 3 leads its segment in sales and dominates its segment in certain local markets like California. One thing the Tesla Model 3 is not is a good used car buy. And that is a compliment to Tesla in a few important ways.

iSeeCars researchers analyzed the transaction prices from over 6 million new and used cars sold from August 2019 to January 2020. So this study's data is as fresh as a daisy. Researchers pulled out of the data the top ten cars that have the lowest price difference from their one-year-old used versions of the same vehicle.

iSeeCars.com Tesla used vs. new chart of prices

“While choosing a used car over a new car is typically associated with the greatest cost savings, sometimes the price difference isn’t that significant,” said iSeeCars CEO Phong Ly. “There are factors that can affect price differences beyond the overall popularity of the vehicle such as redesigns, which were common among the vehicles that made both ends of the list.”

Tesla Model 3 Resale Value
With regards to Tesla's Model 3, which Torque News estimates has an average new-vehicle transaction price of around $50K, the difference between a new Model 3 fresh off Tesla's "showroom lot," vs. a used Model 3, is just $2,529. iSeeCars says that the average difference between the new Model 3 and a used Model 3 sell is a tiny 5.5%. iSeeCars says that the average is about a 25% difference.iSeeCars concludes that buying a new Tesla Modle 3 makes more sense than a used one. “Instead of buying a car that’s already been driven for one year, consumers can buy the new version of select vehicles with a purchase price of just a few thousand dollars more to avoid the uncertainties that come with purchasing a used vehicle,” said iSeeCars CEO Phong Ly. “When spread out over the length of the average car loan at 5.5 years, the slightly higher monthly payment can be offset by the car warranty and dealer incentives such as rebates.”

Related Story: 4 Reasons Used Tesla Model 3 Cars Are So Expensive - And When It Will Change

Why Does The Model 3 Have Such High Resale Value?
One reason the Tesla Model 3 has such a high resale value is its newness. Tesla Model 3 cars have only been produced in a meaningful volume for about 20 months. The majority of Tesla Model 3 cars built are still basically new. So comparing the Model 3 to cars that have been in production in whatever volume the public demands them to be is really not a fair comparison. There just are not many Tesla Model 3 cars for sale used. Even by the standards of its class or segment. Because it is essentially still a "new" model. Yes, it launched in 2017, but Tesla only built a handful for the first year and all of them went to one state.

Model 3 Advantage - Updates
Another reason the Model 3 is unusual is it is a trailblazer with regard to technology updates. Tesla is very forward-thinking with regard to technology. The company planned ahead to make the car "updatable." Over the air updates to software and service center applied firmware updates enable Tesla to bring its used fleet very close to the new vehicles it is producing. This is an incentive for existing owners to hold onto their Model 3 and a disincentive to them turning it over in the used market. That means the value is higher. Kudos to Tesla for this industry-changing forethought.

Discounts On New Tesla Model 3 Cars
Mr. Ly makes a good point about discounts and incentives as well. Although Elon Musk promised never to discount its new vehicles, that changed. We know Tesla changed its discount policy because this author was offered a significant discount on a new, never-driven Model 3 car almost a year ago in March of 2019 by the Dedham Mass. Tesla dealership (yes it is a Tesla-owned dealership in our state with full dealer priveledges). We also know because Tesla shoppers have created Facebook clubs posting Tesla discounts and incentives.

Model 3 Earns The Love Of Owners
There is another simple reason that the Model 3 is holding its value so firmly. Sure it is in short supply. Yes it is uniquely able to be updated. But it is also a great car that owners love. Very few buyers are surprised by the car in anything but a positive way. They waited a long time to have an EV of this type and they love what they got.

Model 3 - No Better Alternative
Tesla Model 3 owners also had another "problem" of sorts. There is nothing in the market to really tempt them to move up or on from a Model 3. Sure, there is the Model S and Model X, but those vehicles are dramatically more expensive. Jaguar and Audi have some EVs in theory, but in actual practice, do they really have them? Or are they building a handful to pretend they are in the EV space? You be the judge.

The Tesla Model Y may in fact help loosen up the used Model 3 market a bit. We participate in many Tesla forums and clubs, and it is common to hear a Model 3 owner say they are considering trading their Model 3 sedan for a Model Y crossover. However, the Model Y will not be available in any meaningful numbers until late this year at the very soonest.

The Tesla Model 3 is a unique vehicle in many ways. One of the many ways it sets itself from the rest of the automotive world is by being a much better new car buy than used.

John Goreham is a life-long car nut and recovering engineer. John's focus areas are technology, safety, and green vehicles. In the 1990s, he was part of a team that built a solar-electric vehicle from scratch. His was the role of battery thermal control designer. For two decades he applied his engineering and sales talents in the high tech world and published numerous articles in technical journals such as Chemical Processing Magazine. John's work has appeared in print in dozens of American newspapers and he provides reviews to many vehicle shopping sites. You can follow John on Twitter, and view his profile at Linkedin.


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Comments

you should update the availability date for the Model Y -- I believe they have moved it to March 2020 in limited numbers.
Thanks, Cotty. That would be great news. But I think my comment is still accurate, even if the Model Y is available in limited numbers in March. "However, the Model Y will not be available in any meaningful numbers until late this year at the very soonest." Limited numbers of Model Ys at any time in 2020 won't help the Model 3 used vehicle market prices move lower.
Isn't there a huge additional reason that isn't on the list? The federal tax credit. If you bought the Model 3 early you got a discount of $7,500 plus possibly some state tax credits. This substantially lowered the effective cost of the new car. As the credits have disappeared the effective cost of the new Model 3 has increased substantially. So, as long as overall demand for the Model 3 stays high then used Model 3s will maintain much more of their value as the (net) cost of a new Model 3 has risen substantially.
I didn't think of that. Great point!