Tesla Depreciation Rates

Both luxury and electric cars tend to depreciate faster than average, but Tesla appears to be bucking this trend.
Written by Amber Reed
Reviewed by Julian de Sevilla
Some Tesla models depreciate as much as 13% in their first year, but they’ll all end up losing between 40-50% of their value within five years. 
Depreciation is the price you pay for that new car smell. All cars lose value over time, but the rates at which new cars depreciate are particularly steep. It’s an important factor to consider when you’re buying a car, and it can help you determine if it’s a wise purchase to make in the long run. Take some time to learn about Tesla’s depreciation rates — you might be glad you did! 

Do Teslas hold their value?

In general, yes! Teslas hold their value fairly well and have an unorthodox depreciation pattern
The average car loses about 20% of its value in its first year and around 40% in five years, but the 2022
Model X
and
Model Y
only lose about 13% of their value in the first year.
The
Model 3
has an astonishingly low rate of 6.7%. The
Model S
has the highest one-year depreciation rate of 20.9%, which, as the industry average, isn’t particularly high.
Those abnormally low percentages don’t hold true past the first year, though. Like most other cars, any given Tesla will lose between 40% and 50% of its value within five years.

What does “depreciation” mean? 

In short, depreciation is the difference between the purchase price of a car and its current market value. If you’ve ever bought a new car, you’ll know that in general, it begins losing value the minute it leaves the dealership. There are several different factors that go into a car’s depreciation rate, including MSRP, mileage, ownership history, condition, and market conditions.
Ignoring
regular maintenance
or piling on the mileage make a car depreciate faster, as do accidents or body damage. Some brands simply depreciate faster than others —
BMW
s are notorious for depreciating quickly, while sturdy
Subarus
hold their value with the best of them. 
The costs of owning a car involve way more than the sticker price, and depreciation is an often overlooked part of the true cost of owning any vehicle.
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Do Teslas depreciate faster than other luxury vehicles?

They don’t! Tesla has made a name for itself with innovation and disruptive design, so it should come as no surprise that they don’t behave like other luxury cars do when it comes to depreciation. 
At the end of five years, other luxury vehicles like the
Mercedes-Benz
E-Class have lost almost 70% of their value, while a Tesla will have lost anywhere between 40 and 54%. Other EVs like the
Toyota Prius
can be expected to have a competitive depreciation rate of 17-20%, while the economical
Nissan Leaf
loses value at the same rate as the aforementioned E-Class. 
Teslas are fairly new, so time will tell how their value will hold up in the long run.

Tesla depreciation rates

Want to see it by the numbers? Take a look at the table below to see Edmunds’ depreciation data for all four base models of Tesla
These are all based on an average of 15,000 miles per year, and the assumption that the car has seen regular maintenance. The actual value of your Tesla will vary based on the model year, what you paid for it, trim level, options, and condition

Tesla Model S depreciation

Years
Depreciation rate
Residual value
0
0%
$106,377
1
20.9%
$84,077
3
38.2%
$65,660
5
54.6%
$48,268

Tesla Model 3 depreciation

Years old 
Depreciation rate
Residual value
0
0%
$45,877
1
6.7%
$42,792
3
24.2%
$34,735
5
40%
$27,130

Tesla Model X depreciation

Years old 
Depreciation rate
Residual value
0
0%
$122,377
1
13.5%
$105,845
3
33%
$81,904
5
51.5%
$59,289

Tesla Model Y depreciation

Years old 
Depreciation rate
Residual value
0
0%
$71,377
1
13%
$61,994
3
33.1%
$47,740
5
52%
$34,278

How to find out how much your Tesla has depreciated

It’s a good idea to be aware of your vehicle’s depreciation, especially with an expensive car like a Tesla. 
To figure out how much your Tesla has depreciated, take its current fair market value and subtract it from your original purchase price. To find your current fair market value, look to trustworthy sources like Kelley Blue Book or Edmunds. If you prefer, you can also have your Tesla professionally appraised. 
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How to limit Tesla depreciation

There’s no way to prevent your car from losing value, but there are some ways to limit it:
  • Store smart: A garage or covered parking spot protects your car from the elements and slows down wear and tear on the exterior.
  • Mileage matters: If you drive more than an average of 15,000 miles per year, then you’ll see a faster rate of depreciation. Driving less helps retain its value.
  • Maintenance: Well-cared-for cars hold more value than ones that have seen hard use and/or neglect. With a Tesla, the health of the high-voltage battery is a particularly important factor in determining its value, as those are extremely pricey to replace.
  • Color: Candy-apple red may be fun, but vehicles that are white, black, or shades of gray and silver depreciate at a slower rate than flashier shades.

Why you should buy gap insurance for your Tesla

With a high-end car like a Tesla,
gap insurance
can save you money if you’re in an accident shortly after purchasing it.
New cars depreciate quickly, and in the early days of ownership, it’s possible that you’ll owe more on your Tesla than it’s worth. Gap insurance (for “Guaranteed Asset Protection”) makes up the difference between what you owe and your Tesla’s
actual cash value
if it’s totaled or stolen. Without it, you could end up still owing money on a car that you don’t even have anymore. 
In some cases, a lender will require you to get gap insurance before they’ll finance the car. But even if they don’t, it’s a smart move—especially if you have one of the more expensive models or have financed a large amount of the purchase price. 
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