Two weeks ago from today, I drove off with a new car. After a long two year wait, my Tesla Model 3 finally arrived!
A quick, completely biased review
I love the car. It rides like nothing else and it’s an absolute joy to drive. I remember the very first time I stepped on the Tesla accelerator (can’t call it a gas pedal), my wife’s sunglasses literally flew off her face. The instantaneous thrust makes you feel like you’re driving on jet fuel. It really feels that fast.
The car is also a pleasure to the senses. It has a very sleek and sporty exterior that attracts the eyes of curious onlookers passing by. The interior is very minimalist by design, which I really like (I am kind of a minimalist). The seats are extremely comfortable and made of all-vegan materials. It just feels nice and luxurious. With the premium package, the car has a tinted glass roof that is simply gorgeous. And it’s well-equipped with a great sound system.
One of its defining characteristics is that it has no cluttered instrument cluster. Everything is displayed and controlled on a centrally-mounted touch screen with no physical buttons. While this feature may not appeal to some people, I really like it because it is simple and intuitive. Even my dad (not super tech-savvy) learned how to operate it within five minutes!
Pay in cash or finance?
The car wasn’t cheap. The base price is $35,000. But I selected the premium upgrade (extra $5,000), long range battery option (extra $9,000), deep metallic blue color option (extra $1,000), and enhanced auto-pilot (extra $5,000). With taxes, fees, and registration the car came out to be $60,000!
While I had the cash on hand to pay for the car in full, I chose to finance it. In my opinion, the financing option was attractive. After making a 20% down payment, I could take a six year car loan at 3% APR.
With more cash available to me, I would be able to put that money into investments that could potentially generate a return better than 3%. Plus I knew that I could pay off the remaining balance sooner than three years if I really wanted to.
To soften the blow, I will receive some federal and state tax credits that will almost cancel out the down payment.
For the next six years, my car payments will be $770 a month. How exactly is this saving me money???
The cost of being old
The car that I used to drive isn’t exactly a money saver. She’s a 2001 Mercedes Benz C240 with 180,000 miles under her belt. This 17-year old German beauty is expensive and high maintenance AF.
Every 6 months, the instrument cluster alerts me that I am due for a service. In reality, this service is little more than an oil change. The Mercedes-certified mechanics also check fluid levels and run various diagnostic tests according to a standardized checklist. And because it is a Mercedes, it costs $240 to perform these services. That’s $480 a year, or $40 a month just for an oil change!
Because it’s an old car with a lot mileage, things are starting to break down. Three years ago, I needed to replace the fuel filter and fuel pump, which was $1,700 (ouch!). Two years ago, I needed to replace the spark plugs, air filter, and brake pads (say bye to another $1,200). Last year, the mechanic informed me that my suspension should be replaced at some point. I don’t even want to know how much that would cost. The cost of maintenance for the car seems to increase every year. I would conservatively estimate that the cost is $1,200 a year or $100 a month.
Gas is expensive in California. And my old car requires premium fuel only, which costs at least $4.00 a gallon. The car is not very fuel efficient and it usually averages about 20 miles per gallon. Because work is about 20 miles each way, I’m paying $8 every day when I commute to and from work. Analyzing our expense reports over the past months, I had consistently paid at least $200 a month on gasoline.
Minimalist car, minimal maintenance costs
Because the Tesla is all-electric, it does not need engine oil. Right there, I am saving that $40 a month I would have paid for a comprehensive oil change service.
In addition, the maintenance costs are minimal. I was told that the only maintenance a Tesla needs is checking the wheel alignment, making sure the brake fluid and windshield wipers are adequate, software is up to date, and checking the wear on the brake pads. Depending on how you drive, the brake pad wear could be very minimal due to regenerative braking. When the accelerator pedal is not pressed, the car naturally brakes without pressing on the brake pedal, thus reducing wear on the brake pads. Because maintenance is minimal, I will say it is $0 and I am saving $100 a month of maintenance cost.
And because it’s an electric car, I obviously won’t pay for gasoline. This will save me at least $200 a month. I am not factoring in the cost of electricity because we have solar panels which over produce energy even when taking into consideration the amount of electricity it takes to charge the car. So for me, this clean fuel is completely free.
The hidden savings many people forget about
Okay. So based on my calculations, I am saving $40 + $100 + $200 = $340 a month by driving the Tesla instead of my old Mercedes-Benz. But that’s not even half of my monthly car payments of $770. I’m still paying a net of $430, right?
Many people forget about the cost savings of saved time.
No doubt, everybody has heard of the phrase “time is money”. Time really is money. In our jobs, we trade in time worked for earned money. Time can even make more money when invested early and wisely (think: “rule of 72” and compound interest). Using the reflexive property, not only does time equal money, money also equals time. When we have enough money (financial independence), we can buy our time (and the freedom to retire early).
How much time am I saving?
When I need gas to fuel up my old car, it takes me at least five minutes to find a nearby gas station and ten minutes to pump the gas. (In reality, it probably takes a little more time that that.) I used to fuel up my old car about four times a month. Over the course of an entire month, it is reasonable to conclude that I generally used to spend 15 x 4 = 60 minutes a month dedicated to the task of getting gas. With my Tesla, all I have to do is plug it in inside the comfort of my own home. It takes about a minute, and the time is really negligible. I am saving 1 hour a month by driving an electric car.
The time spent going to and from the auto shop and waiting for maintenance services should also be considered. Let’s say I go to the mechanic three times a year. The auto shop is 30 min away from my usual route, so transportation time is an hour round trip. Each time I take my old car in, it takes about 3 hours to complete the service. I can reasonably conclude that I spend about 12 hours a year at, and traveling to and from, the auto shop each year. That’s 2 hours of time spent a month.
And because the Tesla is a zero emissions vehicle, I can drive in the high occupancy vehicle carpool lane. This easily shaves about 3 minutes of commuting time each way. So I save 6 minutes per round trip each day I commute to work. Assuming I work about 20 days (it’s usually more) a month, then I am 2 hours a month simply by driving in the HOV carpool lane.
What is your time worth to you?
The idea of quantifying the value your time has been explored by many people. Passive Income MD explores this concept and discusses this here.
You can estimate how much your time is worth by using this calculator by Clearer Thinking.
After answering their survey of “thought experiment” questions, here are my results and some of their recommendations:
- My time is worth ~ $150 per hour
- My money/time value suggests that it may be worth it for me to delegate some tasks to paid help from time to time, so that I have more free time at my disposal.
- If I’m considering waiting in line for 20 minutes to get something free, I should ask myself whether I’d be willing to pay $50 for that thing. If not, I probably shouldn’t wait.
- When debating whether to purchase an item worth $20, then I should spend much less than 8 minutes making up my mind. If I spend longer, the value of the time I’ve devoted to deciding whether to buy the item will exceed the value of the item itself!
These results are interesting. I don’t necessarily agree with some of their recommendations. Whenever I can, I generally try to DIY tasks rather than hiring paid help (as long as it’s something I can enjoyably do). I don’t mind waiting a while for something free if it is something I actually value. And in general, I take a considerable amount of time to debate whether to purchase an item because I want to make intentional and thoughtful decisions. I consider myself a conscious consumer.
However, I do agree with the valuation of my time. $150 per hour sounds about right to me.
“Braking” down the numbers
Given that each hour of my time is worth $150, lets see how much money I am saving by driving my Tesla.
- I save 1 hour a month by not pumping gas. That’s $150.
- By not spending 2 hours a month on auto maintenance, I am saving $300
- Driving in the HOV car pool lane saves me another 2 hours a month, which comes out to $300.
Adding everything up, that’s a total of $750 a month of saved time, just by driving my Tesla each month.
And if you add in the $340 of cost savings, that’s $750 + $340 = $1,090 saved each month!
Of course, you have to subtract the $770 monthly car payments. So the real net savings is $1,090 – $770 = $320.
I am saving $320 worth of time and money by driving my Tesla.
Final thoughts
Did I write this post specifically to showcase pictures of my new car? Yes.
Am I rationalizing the purchase of this shiny new toy by using fuzzy math to calculate potential cost savings on the value of my saved time? Maybe.
But never underestimate the value of your time.
Remember, time is money.
Your time is more valuable than you think.
I love satire! Way to go Doc!
Hi Steveark, I’m glad you appreciated the satire! Thanks for stopping by 🙂
I can’t help it, I used to make gasoline and diesel so I see Tesla’s the way vegan’s see RibEye steaks, the horror!
LOL! Well, now that you are semi early retired, you don’t have to make gasoline and diesel or fear the surprise EPA inspections anymore. Continue enjoying your retirement. It sounds wonderful. 🙂
Congrats. They’re great cars! Hope you enjoy.
Thanks Doc G. So far, I’m enjoying it a lot!
I too have been stung by a temperamental old German car. It was an M5 and required $300 oil changes and if ANYTHING went wrong I was looking at a minimum of $3k in repairs. Sweet new ride, Doc! I had a reservation but canceled it and bought a 2002 Toyota Sienna with not much more than the reservation refund. I’ll likely pick up a Tesla once I’m retired for good (if I’m not living overseas).
Wow. An M5! Now that’s what I call the ultimate driving machine. Yeah, German cars are really high maintenance especially after seven years of ownership. Must be why they say BMW stands for “Bring Money With” you.
Good call on buying the Sienna. Much more functional for a growing family. We will likely get a minivan at some point. It’s good to know I can buy one for little more than $1,000. What a great deal!
If you’re happy, that’s all that matters. It makes it less fun for me to snark that I don’t have a car.
LOL! Darn, I am always looking forward to your snarky remarks!
I just purchased a 2018 Nissan Leaf. Nicely appointed, under $35k. My wife’s company offers a $2500 bonus for employees who buy an EV. 0% 6 year financing. My wife will juice it up for free at work once per week. That makes me DrMcVeryFrugal. 😉
Hi VagabondMD! That’s a tremendous deal on the Nissan Leaf. 0% 6 year financing, free electricity at work, AND a car that is almost half as expensive as mine. You are indeed DrMcVeryFrugal. 😀
It’s perty.
Sporty cars aren’t really my thing, but I certainly see the appeal. And the numbers add up. Will you let the baby in the car when they are a toddler? That’s the biggest question.
I’m with you on the value of my time thing… I don’t completely buy it. But hey, however you can rationalize it sounds good.
If I lived somewhere with enough sun to make solar panels worthwhile I might even consider a lower end model myself when my lexus bites the dust. Since I haven’t seriously researched the cost of anything electric, I am curious generally what the average electricity costs per month are.
Good for you about the solar panels, because I would guess So-Cal has some pretty serious peak time fees for energy use.
Have fun!
I’m pretty sure that in the near future, electric cars will be more mainstream and much more affordable for everybody. I would definitely drive the Lexus to the ground, which could be a long time because Lexus (and Toyota) and well known to be very reliable cars that last forever.
Our house was built with solar panels when we bought it, so I have never had to pay electricity since moving in. That said, I should find out how much electricity is out here. I’m sure it’s expensive. Everything is expensive here in California… energy, gas, water, etc.
A couple things.
#1 – can you sell excess solar back to the grid? If so, that’s what it costs you to put power into your car battery.
#2 – the time you save with this car, are you earning $150/hour or are you using it for leisure earning $0/hour?
#3 – the financial analysis does not consider the opportunity cost of the down payment.
All valid points.
#1 – Yes, I can sell excess solar back to the grid. But I would be selling it back on pennies to the dollar. It might come out to $10 a month. I would have to take a look at the meter and electric bill to really find out though.
#2 – I am definitely earning $0/hour with the time I save driving the Tesla. So I am not saving real money here. However, instead of sitting in traffic or getting gas, the time saved by driving this car could be used for something I truly enjoy (such as spending time with my wife and baby), time that is priceless.
#3 – You’re right, the financial analysis does not consider the opportunity cost of the down payment. That money could have been invested in the markets earning ~7-10% in returns. And the federal and state tax credit/rebate does not completely cover this down payment either. Plus I would have to wait until next year to receive it. This is a real opportunity cost.
I’m not sure you can quantify the saved time at $150/hr if the time you would spend fueling your old car, getting maintenance, etc. isn’t displacing potential income producing hours, that time was displacing leisure hours. While leisure is important, it doesn’t earn you $150/hr. I can value my leisure time at $1,000/hour but that doesn’t mean it’s a good financial decision to pay someone $1,000/hour to clean my house so I can sit on the couch.
Considering the opportunity cost of the down payment, the fact that saved time isn’t in fact worth $150/hour, the actual cost of electricity to power it and depreciation of the Tesla in the first few years, I fail to see how this purchase can be considered a good financial decision. Maybe a good lifestyle decision depending on your priorities, but it definitely isn’t making you money. Perhaps a third scenario of buying a Honda Civic should be considered and take a look at the net worth impacts for each of the three scenarios 5 and 10 years down the road.
I feel ya. Saved time doesn’t equate to $150/hr if I am displacing income producing hours with leisure hours. It’s hard to quantify.But I will say that my leisure time is generally pretty productive. I’m not a couch potato who watches 4 hours of TV a day. When not spending time with people who I love (time that is priceless), I am often either exercising (investing in my health), reading (investing in my future self), or entrepreneurial activities that have a potential to produce an income in the future. Time spent in traffic can add to stress and spending time in gas stations increases my exposure to toxic fumes and chemicals; none of this is good for my health and a liability to my future self. I agree that none of this is easy to quantify, but it’s a fun thought experiment.
I agree with you that buying a used Honda Civic for a few thousand dollars would have been a much better financial decision with respect to the impact on my net worth. That’s undeniable. But the point of this post wasn’t to show how buying a tesla is such a great financial decision. It’s not. The point of the article is to post some pictures of my shiny new toy and to think about the different ways that driving it is saving me time and money in order to rationalize such a large purchase.
Thanks for a thoughtful comment.
Best,
DMF
I have a tesla model S 90 D that I bought new in December 2015. I too upgraded from a Mercedes (2004 C320) and can also attest to the high cost of maintenance which increases with age.
Love my model S. Waking up with a full “tank” is a great feeling. I have a lot longer commute than you and definitely realize a significant savings when comparing cost of electricity to fuel.
Plus with autopilot it is an incredibly relaxing way to do long road trips (which for me I have unlimited use of the supercharger network)
Highly recommend tesla to anyone. Best car I have ever owned.
Hi Xrayvsn, thanks for stopping by! Yes, the unlimited use of the supercharger network is an awesome perk for Model S owners to have. I hear you can charge it to full with minimal waiting time, 15 min or something like that!
Wait what’s the enhanced auto pilot feature? Man I totally want electric driverless cars here! Thanks for supporting hahaha 😉
Enhanced autopilot is the feature that allows Tesla to drive on highways without the driver steering or pressing on the gas. It can stay in the center of the lane, change lanes, even self-park all on its own. It does this with the help of several cameras, radar, and ultrasonic acoustic location sensor sonars. High tech stuff!
Congrats on getting the car…
YOU MAKE $150 AN HOUR?!?!?!
Thanks Jeff! That’s what Clearer Thinking says how much an hour of my time is worth. 🙂
Wow, that was really interesting to go through those thought questions. My wife and I have always talked about how time is important to us than cashmoney. The best example came with a possible now failed trip to Vancouver BC with friends. They wanted to stay about 45-60 min away from the city. We wanted downtown, albeit more expensive but within walking distance from a lot of things we would take our kids to and dine at. Tried to find every possible way: drive, pubtrans, anything. So now we decided to turn it into…..
“Well, um, actually a pretty nice little Saturday, we’re going to go to Home Depot. Yeah, buy some wallpaper, maybe get some flooring, stuff like that. Maybe Bed, Bath, & Beyond, I don’t know, I don’t know if we’ll have enough time”
LOL! I guess after having kids, the weekends are dedicated to day trips to Home Depot, BBB, and Costco!
Nice car, doc! Glad you got your Model 3 with all of Tesla’s production issues. They seem like amazing vehicles… I always salivate when I walk by the Tesla store at one of our shopping centers.
I’m more of an all-cash kind of guy when it comes to buying cars, but everyone’s different. If you can afford it and it brings joy and value to your life, then go for it. There’s more to life than math and running the numbers.
Thanks SRGO!
I didn’t see a line item for the electricity expense to charge it…maybe I missed it.
It’s negligible. There is a free super charger near the gym that I go to and the supermarket that I frequent. So after my workout, it would be fully charged. When I can’t get it for free, I charge it at home. I have solar panels that are currently overproducing energy. I get a credit of $25 every month for this overproduction. I haven’t received a new bill yet, but for the amount that I charge at home I’m expecting a decrease of $5. So I would put the electricity expense at $5 a month. Not nothing, but in my opinion fairly negligible.
Such an amazing post , i visited your blog first time and found awesome and frugal things here
your post about driving tesla is great i really appreciate your effort in this article
Thank you for sharing with us
Thank you for the kind words Brandi! I’m glad you like the blog 🙂
Do not underestimate a value of replacing gas guzzling car with a clean Tesla – the value to the environment is huge. Average worker is not able to afford Tesla as yet, but with more highly paid professionals opting for electric vehicles, the cost of production will decrease and they will become more common/ affordable. I am planning to install solar system on my roof with batteries within next 2 years, and then I will be seriously looking at electric vehicles . Not sure if I want to pay that sort of money, but Nissan Leaf sounds like an affordable option.
Dr N
Thanks for stopping by, Dr. N.
I agree that electric cars will be replacing traditional gasoline-fueled cars in the future. The sustainability of our environment depends on it. 🙂
Yes, the Tesla is expensive. However, they do have a basic Model 3 with a price of $35k that isn’t much more than the Nissan Leaf. But the waiting list is long. I do hear that the Leaf is a good car.
I really want a Tesla model 3, but I thought we’d never be able to afford one.
Now I realise that buying one will actually SAVE me money, well I guess I better sign up! 😉
Love the pics, what an awesome motor. Enjoy!
Thanks for stopping by! The Model 3 is indeed a fantastic car. Are they available in the UK?
Man if I had your money I’d throw mine away! I almost bought one but got a Honda for a retirement car instead. I don’t drive much anymore so I spend maybe $800/yr on gas and $60 on oil/filter. The thing that pulled me up short was the battery. If that sucka craps… I’m probably paranoid.
Great read
I see how you are trying to justify a $770 monthly payment over 60 months but would not subscribe to this. You leave out the factors of risk and depreciation. What will this vehicle (it is very nice, I’ve driven a Model X) be worth at the end of your loan? So you see, your financing isn’t 3%APR, It’s 3% plus the annual depreciation. What if you lose your job? What if the $$$ you invest instead of paying cash for the car loses value? I respect different decisions but personally, I sleep better with no payments in the world and my Automobile Titles in my safe. Best of luck with your Tesla, it’s very nice.
Hi Scott. Thanks for stopping by and leaving a thoughtful comment. You’re absolutely right that I left out the risk of depreciation. I have no idea how much my car will be worth at the end of my loan. However, I don’t worry too much about depreciation because I am not planning to resell it. I generally drive my cars for as long as I can (until they no longer run). And with low maintenance, the Tesla is projected to have a long life span. We’ll see.
Fortunately, for me, I don’t have to worry too much about losing my job. My position is considered extremely safe and in the unlikely event that I lose my job, I’m confident I would be able to earn a similar income somewhere else. You’re right that there is a risk that the money I invest instead of paying cash could lose value. But I’m not too concerned about that either. I’m a long term investor. I am relatively young and can withstand a high risk tolerance.
Thanks again for the kind words!
-Dr. McFrugal
You’re very welcome for the state and federal tax breaks. Most of this tech………….EV’s, solar, wind……….. wouldn’t exist without taxpayer subsidies. I’m sure it’s a fine car but take away the freebies and it doesn’t calc. Also hope the batteries last. If you have to replace them you’re sunk. Enjoy the ride but quit trying to justify it as frugal.
Thank you.
Learning to change your own oil. Time value that pays dividends.
Your’e right. There are so many skills that we can learn to save money!
I’m a huge Tesla fan and am justifying a M3 or MS purchase myself. How do you calculate in the increased cost of insurance and DMV fees?
The DMV fees were included in the final purchase price. The increased cost of insurance was actually substantial. Just for the Model 3 it was $1,200 a year. However, I lowered the coverage and premiums of the other vehicles that are covered in our household. The premium on my old car was decreased by $200 and the premium on my wife’s car was decreased by $300 a year. My wife is no longer commuting to and from work (she’s on maternity leave) so that’s how we were able to lower her premiums. So we are ending up paying about $700 more for insurance.
Did you add the cost of having to hold comprehensive on the Tesla vs not having to with an older car?
I have a reservation and could configure, but whats holding me back is this: Modern ICE cars are at the top of their game right now, they essentially don’t break. My last 5 used Lexuses have all been wonderful, and not expensive to run and maintain. and oh so reliable. My wife’s Hondas and Toyotas have also been cheap to maintain, and all of them have features that the Tesla model 3 will never have, like tactile controls and sunroofs that open. And all were bought for with cash, no need for expensive comprehensive insurance.
I have driven the Model X, and it handled amazing and all, but you know … when i got back in the lexus RX hybrid i had at the time, with its Mark Levinson stereo and excellent controls and comfort … i really didn’t feel like i was taking that much of a a step back. I would love to experience the Tesla Model 3, but its gonna cost alot more money than these nice used cars ive been getting the last 20 years.
Your right, ICE cars are better than ever now. Especially Hondas and Toyotas which are known to be reliable with low maintenance costs. Teslas are very nice cars, but they are expensive (even the entry level Model 3 is pricey when you add in the upgrades). However, I was paying a lot to maintain my old Mercedes, I have solar panels that are overproducing electricity (so much sun in Southern California), and I often have to commute fairly far (> 20 miles). So for me, the Tesla is a money saver over my old Mercedes. But I acknowledge that everybody’s situation is different.
If I was to get a ICE car, I would definitely consider a used Honda or Toyota hybrid with great fuel economy. Those Lexus RX hybrids are indeed nice!
Great article. We are in a very similar position as far as costs (solar panels, old care etc.). The Model 3 will be my wife’s car because she has the long commute of 3 miles each way. We live in Los Angeles, so that 3 miles can take as long as 35 minutes! Obviously we don’t use much gas, but not having to go to a gas station, repair shop, smog check station, and oil change pit is a HUGE plus to our quality of life.
Totally agree with you! Quality of life is so important 🙂