Want To Trade In Your Tesla? How That Could End Up Costing You
Written by
Cynthia Measom
Edited by
Jenna Klaverweiden
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
If you’re thinking about trading in your Tesla, you might be in for a shock. A recent study and reports from owners show that Tesla vehicles are depreciating much faster than expected.
This is a big problem for owners who want to trade in their cars without losing a significant amount of money.
Tesla’s Depreciation Problem
Tesla, known for its cutting-edge technology and sustainability efforts, is dealing with a serious depreciation problem. As reported by Diminished Value Carolina, a study by iSeeCars shows Tesla cars are losing value at nearly 30% year over year. This is much higher than other brands like Chevrolet, which has a modest depreciation of just 0.4%. The study looked at over 1.8 million used cars and found Tesla models depreciate faster than any other electric vehicles — and over 70 times faster than Chevrolets do.
Barron’s reported one Tesla owner’s frustration after receiving a trade-in offer for his one-year-old Model 3. He was offered $33,000 for a car he originally paid close to $50,000 for, which equaled a loss of about one-third of its value in just a year.
According to Kelley Blue Book, most cars have a 20% drop in value in the first year, which is much less than the almost 30% for Teslas.
Factors Contributing To Tesla Vehicle Depreciation
Geoff Cudd, consumer advocate and owner of FindTheBestCarPrice.com, said that Tesla’s high depreciation rate compared with Chevy’s and other brands’ can be attributed to the following factors.
Quickly Outdated Technology
While the tech in your new Tesla might have been quite impressive, the tech and design of the newer models are more advanced.
“The rapid pace of technological advancements in Tesla vehicles often makes older models seem outdated quickly, driving down their resale value,” Cudd said.
Pricing Strategies
In mid-2022, Tesla’s vehicle prices were at their highest, according to Barron’s. Since then, rising interest rates, better vehicle supply and increased electric vehicle competition have forced Tesla to cut prices to keep demand up. Tesla began these price cuts in early 2023, and they were successful, boosting Tesla’s sales by almost 40%.
But these price cuts haven’t been as positive for Tesla owners. Because used car and new car prices are always linked, the lower prices for new Teslas have seriously hurt the resale values of used ones. Overall, Tesla’s strategy to cut prices boosted sales but caused rapid depreciation for current owners.
“Tesla’s pricing strategies, including recent price cuts, have further affected the resale value of used Teslas by creating a perception of instability in pricing, leading to lower confidence among buyers in the used market,” Cudd explained.
Rental Car Market
Cudd said that large-scale fleet sales by rental companies can flood the market with used vehicles, driving down prices due to increased supply.
Hertz recently sold its surplus of Tesla 3s for less than $25,000, reported Barron’s. The retail price for a new Tesla 3 is $40,630, according to Car and Driver.
Higher Interest Rates
Cudd pointed out that rising interest rates also affect car financing costs, making new purchases less attractive and putting pressure on used car prices.
Competition
Last but not least, Tesla isn’t the only electric car on the market.
“Increased competition in the EV market forces Tesla to continually innovate and adjust prices, which can negatively impact resale values,” Cudd said.
What Rapid Depreciation Means for Potential Buyers
For potential buyers, the rapid depreciation of Tesla vehicles is both a warning and an opportunity. High depreciation rates might deter new car buyers, but they also offer a chance to buy a used Tesla at a lower price.
What Rapid Depreciation Means for Current Tesla Owners
If you own a Tesla and are thinking about trading it in, you might want to consider the potential financial loss compared with the benefits of getting a new model. Also, checking out other resale options, like private sales or third-party dealers, could get you better offers than trading your vehicle in directly with Tesla.
More From GOBankingRates
