Tesla Lease vs. Loan: Which Is the Better Option?
Leasing may save you money on monthly car payments, but buying a Tesla will create more value in the long run.
Written by Sarah Gray
Reviewed by Jessica Barrett
Leasing may seem like a great way to drive a Tesla without the higher monthly payment of a loan, but when you consider the lost investment on car payments and maintenance, not to mention inconveniences like mileage limits, a loan may just be the better option.
Let’s be honest—Teslas are expensive. However, they offer drivers the opportunity to save hundreds a month on fuel costs, and that’s why some may feel leasing a Tesla is a great idea. But when you consider that at the end of your lease, you’ll be out thousands of dollars with nothing to show for it, is leasing a Tesla really a better option than buying?
To help you decide whether you should lease vs. buy a Tesla,
Jerry
, the car insurance
app, has considered all the pros and cons. At the end, we'll even show you how to save money on your Tesla insurance costs
.Tesla lease vs. buy: which is the better option?
Before you can decide whether it’s better to lease vs. buy a Tesla, there are several factors you need to consider.
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Qualifying
First, unless you plan to lay down the cash for your car, you’ll need to find out if you qualify for financing. Tesla doesn’t publish its minimum credit score requirements for financing, so the best way to determine if you qualify for a lease or loan is simply to apply.
Even if your credit score is perfect though,
Tesla Financing
only offers leasing and loans in the following states:But, don’t worry! If Tesla Lending doesn’t operate within your state, you still have the option of third-party financing for a
car loan
or lease. MORE: How does your credit score affect car insurance?
Cost to lease vs. cost to finance
Once you’ve determined you can get a Tesla, your next concern is likely the cost. So, let’s see how pricing breaks down for each Tesla model based on leasing versus buying.
Model 3 w/ $4,500 down payment | RWD (36-month, 10,000-mile lease) | RWD (loan) | Long Range (36-month, 10,000-mile lease) | Long Range (loan) | Performance (36-month, 10,000-mile lease) | Performance (loan) |
|---|---|---|---|---|---|---|
Vehicle subtotal | $48,490 | $48,490 | $59,490 | $59,490 | $62,990 | $62,990 |
Upfront payment | $5,714 | $4,500 | $5,884 | $4,500 | $5,974 | $4,500 |
Monthly payment | $691 | $713 | $689 | $887 | $779 | $942 |
Total payments | $24,876 | $51,336 | $24,804 | $63,864 | $28,044 | $67,824 |
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Leasing a Tesla gets you lower monthly payments than a loan, but buying is more cost-effective in the long run since your lease payments will add up to about half the value of the car.
MORE: How to calculate a car lease payment
Lease and loan terms
A big part of how your payment is calculated is the length, or term, of your loan or lease. Tesla offers a 24-month lease option on the Model S and
Model X
, while the Model Y and Model 3 are only eligible for 36-month leases. Loans are offered at 36-, 48-, 60-, and 72-month terms on all models. How long or short of a term you choose will not only affect your monthly car payment but also the total of your payments. For example, if you chose a 36-month loan for a base Tesla Model X, your monthly payment would increase from $1,897 to $3,568, but you’d only be paying that amount for three years as opposed to six, and your total payments would decrease by almost $8,200.
On the other hand, if you decrease your lease term on the same Model X from 36 to 24 months, your monthly payment will increase from $1,817 to $2,209, but your total payments will decrease by over $12,000.
Key Takeaway It’s important to consider not only how much you’re able to pay each month but also how long you want to make that payment and how long you want to drive your Tesla.
Depreciation rates
Depreciation is the rate at which a vehicle loses value over time, and electric vehicles (EVs) can depreciate more quickly than standard-combustion cars. This is a key reason nearly 80% of new EVs are leased rather than bought.
That said, Tesla seems to have dodged the proverbial bullet here—
a recent study
reveals that Teslas fare much better than other EVs when it comes to depreciation. A Tesla Model 3, for example, averages only about 10% depreciation over three years. This means you could recoup a good deal of your costs at trade-in or sale if you choose to buy.Electric car tax credit
While Teslas are no longer eligible for federal hybrid or electric tax credits, you could still be eligible for state incentives depending on where you live. These tend to be higher when you purchase or finance your EV rather than leasing it.
To make things easy, Tesla has compiled a list of
all states offering EV incentives and the associated values
.Mileage restrictions
When you purchase or finance your Tesla, you get to decide when, where, and how often to drive it. When you lease, you choose whether you get 10, 12, or 15,000 miles per year. If you go over this limit, you’ll be charged an excess mileage fee.
Choosing a higher-mileage lease will increase your monthly payment. Choosing a 15,000-mile lease on a base Model 3, for example, increases your monthly payment from $691 to $769.
If you plan to put a lot of miles on your new Tesla, buying is certainly the better option.
MORE: Cheap car insurance for low-mileage drivers
Ownership
Is a Tesla electric vehicle worth it? One of the biggest considerations in deciding whether to lease or buy your new Tesla is whether you want to keep it.
When you make your last loan payment or hand over cash for a Tesla, it’s all yours. But when you make your last lease payment, you have to give the car back. That means all the payments you’ve made and all the money you’ve spent on maintenance is gone.
Range and performance
While choosing to buy or lease won’t directly affect your Tesla’s performance, leasing does leave you open to more easily taking advantage of improvements to things like battery range and powertrain performance.
For example, if you bought a 2012 Model S, your Tesla would have a range of 265 miles. However, if you leased a new one every three years, you’d now be taking advantage of the 2022 S’s 400-mile range.
MORE: What is the maximum Tesla Model Y range?
The bottom line: Should I lease or buy my Tesla?
Leasing can be a good idea for some people in certain situations. For example, if you own a small business and use your car for that business, you can often deduct the cost of the car on your taxes. Keeping yourself in a lease ensures you’ll always have that deduction.
A lease can also be a viable option for someone who values always having a new car and is comfortable knowing their payments are not an investment but just an expenditure.
In just about any other case, it makes more sense to buy or finance than to lease. Once your loan is paid off, your only expenses will be maintenance, insurance, and taxes, and you can look forward to getting at least some of your investment back when you sell or trade in your car.
MORE: What is the maximum Tesla Model S range?
Where to lease or buy a Tesla
Whether you choose to lease or buy your new Tesla, the simplest option is to head to
Tesla’s website
to build and price your vehicle. Once you place your order, you can pick up your new Tesla at a delivery center, or it can be delivered to your door for a $1,200 fee.How to find affordable car insurance for your Tesla
Once you’ve decided whether you want to lease vs. buy a Tesla, you need to think about getting it insured. While Tesla’s may not be cheap, they can help you save a lot of money on car-related expenses. But
Jerry
can help save you money on another of the biggest car-related costs—car insurance
.When you shop for car insurance on the Jerry app, you’ll get offers based on a cross-comparison of quotes from over 55 of the top insurance providers in the nation in about 45 seconds. Just tap your top pick, and Jerry takes it from there, setting up your new policy and even helping you cancel your old coverage.
And the best part? The average Jerry user saves over $800 a year on car insurance!
“
Jerry
is an amazing app. Thanks to it, I saved a lot of money on my Tesla Model 3’s insurance. I’m so glad I downloaded the app!” —Erza S.MORE: Winter tires vs. all-season tires: Which is better?
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FAQ
Can I buy my Tesla at the end of my lease?
Currently, only the Model X and Model S are eligible for end-of-lease buyouts.
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