Model Y: Leasing vs Financing

Jul 21, 2020   

Tesla has recently introduced leasing to Model Y. We break down whether it makes more sense to lease or finance, and what type of consumer is best-suited by each option.

Starting with the principal economics, leasing over three years makes Model Y’s Long Range Dual Motor base configuration cheaper by around $200/month compared to financing over a term of six years. Both financing options are based around a $4,500 down payment. For consumers looking for the lowest payment possible, leasing may be the preferred option.

It is worth noting that with $0 down (which is advisable on a lease as upfront costs generally can’t be recouped if the vehicle were to be totaled), the lease payment is $633/month compared to $766/month for financing the same Model Y base configuration with a $0 down payment. The overall difference in the payment isn’t as drastic as initially implied by Tesla’s terms.

The same also applies to the Performance configuration, which costs $813/month to lease vs $916/month to finance over 72 months with $0 down. (Or $679/month to lease vs $848/month to finance with the recommended $4,500 down payment.)

Of course, one of the benefits of a lease is a shorter financing term. Some consumers view this as a benefit as it allows for the freedom to easily switch to a newer model every three years. This may not be as beneficial for a Tesla as it is for other brands since Tesla constantly releases software updates that improve its vehicles, including efficiency improvements for better range and even at times power output increases for quicker acceleration.

The fact remains that even when a vehicle is financed it can be sold at any time, assuming that the loan is ultimately paid off. (A lease can also technically be transferred to a new owner, if needed.) We can assist with the process and help net top dollar for your Tesla, whether it’s a Model Y or any other model from Tesla’s lineup.

Financing may be the more economically-minded option, as Tesla’s vehicles tend to hold strong resale values. (As evidenced by the many used Tesla’s for sale on our site.) Over a period of six years, it is possible that Model Y will only lose around half of its original value — essentially making a lease almost twice as expensive as a lessee would spend roughly $23,000 over a three-year period on a configuration with a $46,990 MSRP.

For owners that choose to configure a Model Y with Full Self-Driving Capability, it may make more sense to finance as many of the features aren’t yet available and may not be fully implemented until the end of the lease term. Although, on a lease the payment increases by $120/month so for somebody that’s satisfied with the features that are available (such as Navigate on Autopilot) it may still make sense to add Full-Self Driving Capability to assist with their commute.

Leasing is typically a better option for business owners that plan to use Model Y exclusively for business use, assuming mileage stays within the terms of the contact. Monthly payments can generally be written off in full, or split between personal and business use.

Tesla doesn’t give lessees the option to purchase Model Y at the end of the lease term, as the company plans to utilize the vehicles as robotaxis. This is worth consideration for a consumer that may want to keep their Model Y after three years.

Since Tesla doesn’t offer incentives or negotiation on its lease terms like other franchise brands, for the average consumer we find financing to be a better deal.