In a blog post I published a couple of months ago on how I prioritize spending my money, I suggested that I regretted buying my Tesla.
I’ve since received about a dozen emails from people on various questions and issues, like the environmental footprint, electricity savings, and so on.
I thought I would clarify and expand on my comments, as it seems there’s some interest in electric vehicles, and Tesla in general.
To clarify, here’s what I wrote a few weeks ago in that post:
A friend of mine took possession of his Tesla Model 3 a few weeks ago. I asked him what he thought of the car and his early impressions. (As an FYI, the Tesla Model 3 is a new model, which was just recently released and is smaller than the other two Tesla models, S and T.)
He said something interesting that I hadn’t thought of. He said that owning a Tesla is like being part of a cult-like club of electric and technology vehicle enthusiasts, the likes of which he’s never seen from a car. He equated it to the euphoria in the early days of the iPhone.
I would tend to agree with my friend’s comments.
I’m a tech guy, not as much today as I was a number of years ago, but I like technology.
Granted, I was in the technology business for so many years, so I was always keeping abreast of the latest and greatest consumer and corporate toys.
And that is precisely why I bought the Tesla. Because I like tech toys.
Is Tesla The Ultimate Tech Toy? Is It Worth it To Own a Tesla? My Battle To Keep, or Not Keep My Tesla
I realized the moment I stepped into the Tesla for the first time that I was looking at technology that was truly game-changing and would have wide-ranging impacts on the automotive industry.
There have only been a small handful of times in my lifetime where I recognized—immediately at first sight—that I was looking at technology that would revolutionize its industry.
I’ve had that “ah-ha” moment on only 5 occasions in my lifetime. Don’t get me wrong, there have been dozens of game-changing inventions in the last 100 years (lightbulb, telephone, and so on), but I’m referring to technology that I’ve personally witnessed.
I had that same ah-ha moment with the first computer I owned in the early 1980s, my first experience with the internet in 1994, GPS technology in 2007, and the iPhone in 2008.
Each and every time, I knew immediately that I was witnessing the beginning of a new era in technology. And Tesla was one of those transformative technologies for me.
Buying the Tesla Was an Impulse Purchase!
I hate to say this, but the Tesla was an impulse purchase. I never thought I would buy a Tesla when I entered the store in July 2016. I was just going to check out the car.
The sales rep asked if I wanted to take the car for a test drive. I felt bad because I had no plans for buying one.
I was hooked within the first five minutes. He took me on the highway, activated the autonomous mode, I took my hands off the steering wheel, and the thought of buying the car started to cross my mind.
The sales rep then told me to push the pedal. The car took off like a bullet.
He demonstrated the iPad-like Tesla control panel. The programmability of the car. The software upgrades. The on-screen games (not played while driving of course). The electric charging details.
The Tesla sales rep brought me back to the store after the test drive, and literally, twenty minutes later, I had bought the car.
It’s one of two large impulse buys I’ve made in my lifetime, and the other I am too embarrassed to write about.
I’m a methodical guy. I think through things. I didn’t think through that car.
My Life Circumstances Have Changed. The Tesla is Way More Car Than I Need
Fast-forward (no pun intended) three years, and my life circumstances have changed.
When I bought the car, I was still driving to and from work every day and was on the road frequently visiting clients and going to supplier meetings. I drove anywhere from 15,000 to 20,000 miles a year (20,000 to 30,000 km a year).
When I bought the car, I wasn’t planning on selling my business within 12 months, and the thought of semi-retiring wasn’t on my near-term radar.
My life circumstances changed (you can read more about that here), and so I now find myself with a very expensive car that sits in my garage most of the year.
I think I’ve driven maybe 3,000 miles in the last year, and as a result, I’m not getting anywhere near the enjoyment out of the car that I once did. Most days, I go to the gym and home, and that’s it.
At 3,000 miles a year, there’s no way I am even coming close to covering the cost of the car through the gas savings. At 25,000 miles a year, the economics make more sense. I would be better off selling the car while it still has decent value, and trading it in for something far less expensive.
Before we move into the next section on the total cost of ownership of a Tesla, I found this fun video of a Tesla racing against a Nissan-GT-R. You can clearly see the speed of the Tesla when it takes off.
Reasons to Buy An Electric Car, and The Tesla Cost of Ownership Comparison
There are many variables that need to be taken into consideration when looking at an electric vehicle. In summary though, the reasons to buy an electric car include:
- Cost of the electric car
- Price of gas
- Price of electricity
- Cost of a similarly sized gas car
- Amount of driving done per year
At $120,000 for the Tesla (taxes included), you have to drive a LOT to make up the differential between electricity charges and gas spent, even though electricity charging is substantially less than the cost of gas.
To be clear, I didn’t buy the car because I was going to save money on gas. And, yes, the environmental footprint did factor into my decision.
Having said the above, in the cost of the vehicle (gas vs electric models being equal), the economics of an electric vehicle will win in almost every geographical region of North America.
Taking a look at the following North American map (source), the most expensive area for electricity in North America is San Francisco at $14.85 per kWh, and the least expensive in Montreal at $5.18 per kWh. Most of the cities fall into the $8 per kWh range
According to research studies, it will cost anywhere from $10 to $18 for a full 295-mile charge, but we’ll use the number $15.29, as per the study.
Some quick back-of-the-napkin math and the average cost to charge is approximately 5.18 cents per mile, or $5.18 per 100 miles.
Having said the above, I get free Tesla charging, so other than wear and tear, it costs me literally nothing for a long-distance car trip. In fairness, Tesla has since eliminated the free charging, but my car was grandfathered in.
The cost per mile to drive the most popular gas-powered cars is approximately 20 cents per mile or, roughly,400% more.
The cost savings given various driving distances are as follows:
|5,000 miles driven per year
|$741 saved per year
|12,000 miles driven per year
|$1,778 saved per year
|20,000 miles driven per year
|$2,974 saved per year
I’m clearly using estimates, and the actual differences will vary considerably depending on the price of gas and electricity. However, regardless of where you live in North America, it will always make economic sense to buy an electric vehicle.
In fact, if you drive 20,000 miles per year, you can afford to buy a more expensive car worth an additional $2,974 a year in lease payments. Or if you’re a wealth creator, invest the $2,974 differential in the stock market at 8% returns per year. In 10 years (the average lifespan of a car), you’re looking at over $46,000 in compounded earnings. $46,000 buys a lot of car.
Does it make sense to buy an electric vehicle vs a similarly priced gas vehicle?
Absolutely. And the more driving you do, the more economic sense it makes. If you’re going to own a car, buy electric, not just for the environment but for your pocketbook.
In my situation, there’s no way I would ever have spent $120,000 on a gas car. Not even close. Tesla was an impulse buy during a different stage in my working career. And my next car, if I do own one, will be something much more economical. Electric, yes, but not nearly as expensive. Maybe Tesla Model 3. Don’t get me wrong, I really enjoy driving the car, it’s just that The Tesla Model S doesn’t fit my wealth-creating, pragmatic sense.
If you enjoyed this post, you might also enjoy this one: How Much Money Do You Need To Never Have To Work Again? Let’s Do The Math.
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Also, I published a book during the summer of 2018, “The Kickass Entrepreneur’s Guide to Investing, Three Simple Steps to Create Massive Wealth with Your Business’s Profits.” It was number 1 on Amazon in both the business and non-fiction sections. You can get a free copy here.