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Electric Cars Are Suddenly Becoming Affordable
(www.nytimes.com)
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this post was submitted on 03 Jun 2024
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Of course its depreciation. Its the very definition of depreciation. An asset was worth more at a point in the past than it is today. The reason for the value loss is irrelevant.
The definition of depreciation is:
The MSRP going down isn't depreciation as you're referring to a brand new item that you haven't even purchased and hasn't been used.
Prices shot way up during COVID and now they're coming back to reality in response to higher interest rates and slowing sales across the entire automotive market, not just with EVs. Housing prices have come down too but again that doesn't mean depreciation, it's just a response to interest rates being 2-3x higher than they were just a couple of years ago and sale prices adjusting accordingly (you're still paying more overall with interest).
The context here is that "people are concerned about depreciation," but why would people be concerned that they're able to buy these cars new at a slightly cheaper price to begin with? Most people prefer to pay as little as possible for things, which is the whole point of companies having a sale on their products.
Look at the first half of that sentence. Thats the same idea I posted with my definition:
" Its the very definition of depreciation. An asset was worth more at a point in the past than it is today."
You're getting hung up on the "wear and tear" thing because that's a regular way that cars lose value over time, but its not the only way. A Picasso painting continues to slowly deteriorate over time but its value continues to go up because there is a market for people wanting his paintings. This would be an "appreciated asset" even though it still gets wear and tear.
Because many people buy cars with the expectation of only owning them for a couple of years and then selling them for something newer. If the value of their EV dropped by 50% in two years of ownership instead of dropping perhaps 20% of specific ICE cars, the they would be concerned about the depreciation. Even people that don't sell so quickly want an asset that retains its value in case it gets totaled (and they need to buy a new replacement) or in case they need to sell it for emergency liquidity.
Okay assuming we do go with your definition, the 2019 Model 3 LR was $36,000, meaning they've appreciated by $11,000 over the last 5 years. Once again this disproves your point.
The 2022 numbers you picked were the absolute peak of COVID era pricing, but they're still selling for more than they used to, meaning they aren't depreciating at all.
I'm not sure where you're getting $36k for the price of a 2019 Model 3 LR (in 2019). This link seems to show it at $43k, but the real price is irrelevant to your point, so I'll agree with your $36k for this discussion.
If you can find someone that will give you $47k for your 2019 Model 3 LR, then yes. The market value of an asset isn't determined by guidebooks, but by what someone will give you for it if you're selling it, or what you have to pay for it to buy it for yourself.
I have a 2022 Model 3 LR. I have zero faith that today anyone would give me what I paid for it even if it had zero miles on it. Why would they when they could buy the 2024 for less money? What I paid for my car is irrelevant to what it will sell for today.
If you're looking at whether your asset appreciated or depreciated, there are only two numbers that matter:
If someone will pay you more than you paid, that asset appreciated. If the best you can do is someone paying less than you paid for it, that asset depreciated. That's the literal definition of appreciation and depreciation.
Dude, you're all over the place. You're now comparing used car prices to new car prices when previously you were comparing new car prices from prior years to new car prices from today.
If I go out and buy a 2024 Model 3 LR for $47k, how much depreciation have I incurred? Previously you said it's at least a few thousand dollars because they cost more in 2022, but now you're saying it only matters what today's purchase price is compared to what I could sell it for used. You can't have it both ways.
I am all over the place because I'm trying to show you what matters is where you come from what you paid for it versus how much you can sell that item right now to determine if its appreciating or depreciating.
Slightly more than $7500, as that is the amount of the tax credit. Any buyer that is in the market for a 2024 Model 3 LR has the choice to buy it directly from Tesla for the $47k with all of the trust and benefits (possibly preferential pricing on financing). So you'll likely have to discount yours by a couple thousand for someone to take the risk you didn't do something to the car in the short time you've owned it.
So my estimated final answer to your scenario is: Your 2024 Model 3 LR is now worth 37,500.
I'm not seeing where I said that. Can you link/quote my words where you're seeing that?
Okay I see, you're getting stuck on a minor point for this part.
In economics there's a concept call substitution. Lets say you have THE ONLY Model 3 LR ever made. Lets also assume the tax credit never existed because that just makes this even more complicated (and doesn't change the outcome). If someone wants a Model 3 LR they have no choice but to buy it from you. If they only wanted a Model 3 LR, and no other car would suit them, then there would be zero substitution options open to them. They'd have to pay you what you're asking regardless of how high or low that price was.
However with Tesla Model 3 LR there are lots of options for substitution. If they simply wanted a Tesla, and you had the only Tesla Model 3 LR ever made, they would laugh at you if you asked for the $52k you paid in 2022. They would happily buy a 2024 Model Y for less money directly from Tesla. So worse for you in this scenario, you don't have the only Tesla Model 3 LR ever made, so if your theoretical buyer wanted a Tesla Model 3 LR, they could put your 2022 (assuming yours had zero miles) where you're wanting to get your full $52k back next to a 2024 which only costs $47k from Tesla.
The buyer will probably choose the 2024 for $5k less than your 2022. They see no value in paying an extra $5k for your 2022 because they are substituting a 2024 instead. So how much would you have to discount your 2022 before the buyer will buy yours over the 2024? $5k? No. That puts your 2022 and Tesla's 2024 at the exact same price. So you'll have to go even lower because the buyer can get, as an example, the Highline refresh on the 2024 which the 2022 hasn't. So you'd probably need to knock another couple thousand off at least to make your 2022 be priced at $45k to be below the 2024 at $47k.
Since you paid $52k for the Model 3 in 2022, and you've now sold it for $45k, you had depreciation of of $7k. Again this scenario excludes all tax credit because it just complicates the explanation and doesn't change the outcome that the 2022 has deprecated.
What? I'm talking about buying it from Tesla. You pay them $47k and then at the end of the year receive a $7500 credit making your purchase price $39,500. I'm not referring to buying a used car at a new car's price.
Right here in your initial comment:
What does this have to do with depreciation on EVs versus depreciation on any other vehicle? 1 of 1 cars are so rare that they're completely irrelevant when talking about the other 250 million cars on the road in the US. Again, you're comparing the MSRP of the 2022 model year versus the MSRP of the 2024 model year to claim depreciation while also ignoring my point above about the 2019 model year being much cheaper than both. While it is true that someone who paid more for the same car isn't going to get as much out of it on the used market, this is in no way unique to Tesla, EVs, or any car on the market.
The whole basis of this argument was someone claiming that EVs suffer from 'extra' depreciation and I was simply asking for some real numbers to back that claim up. All of your number mirror that of any other car on the road because a car with wear and tear on it isn't as valuable as one without (the very definition I quoted above).
You have to refer to the possible selling price of your, now used 2024, used car. Thats how you determine how much depreciation has occurred.
I explained all of that in the post. Where is your question?
Not extra, but 'disproportionately large' depreciation across the board for BEVs. Sure there are many ICE cars depreciate just as quickly or even worse, but not all ICE cars. Thats the point that poster was making.
And you got them.
You're still hung up on the less than prevalent "wear and tear" after we've been over that. You're missing the forest for the trees.
I give up. Take a basic Accounting 101 course and post back here with the results of your argument with your professor about how appreciation and depreciation are calculated.
Good luck!