Kelley Blue Book, the most popular source for dealers and consumers alike to calculate a fair purchase price for a vehicle, has been largely optimistic with its Tesla valuations.
Kelley Blue Book had projected the Model 3 to retain 69.3% of its value over three years, and 48.7% over five — which is best-in-class and earned the car a 2019 Best Resale Value Award. However, Model 3 has been depreciating at a quicker rate than expected.
The main source of depreciation? Tesla’s own price cuts.
Tesla’s sales model is unprecedented since the company makes price changes transparently. Other manufacturers will maintain the MSRP of their vehicles while at the same time offering incentives that can total as much as 10-20% of the retail price.
Then there’s also the fact that electric vehicles are inherently different than vehicles with an internal combustion engine. Kelley Blue Book’s formulas aren’t fine-tuned for the intricacies of an electric vehicle.
Their formulas aren’t built to take into account all of the unique factors that make up the Tesla market. Tesla as a company is significantly more dynamic than legacy automakers, with constant changes to not just its vehicles but also its business model.
Tesla makes minor improvements to its vehicles on a weekly basis, with more significant improvements rolled out as they’re ready. As a result, Tesla doesn’t rely on model years to identify its vehicles or to release new features. In fact, Tesla’s receive over-the-air updates that make them better over time. There is no other vehicle on the market that’s improved as frequently.
Most importantly though, Kelly Blue Book didn’t foresee or account for Tesla’s price drops. There have been times where Kelley Blue Book’s valuations for a used Tesla have been higher than the cost of a new Tesla. We have seen firsthand how this can end up inflating dealer’s trade-in values, which is good news for Tesla owners but can ultimately lead to a loss for dealers who become too reliant on Kelley Blue Book’s pricing.
While we respect Kelley Blue Book and they have their place in the automotive industry, at times their valuations for a Tesla don’t accurately match up with market value.
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