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Tesla just brought back the 1.99% APR financing promo for the Model Y through August 31 2024 so in this brief video I’m going to show you how to effectively get 35% off a new Tesla Model Y and no I’m not including gas savings.
1.99% is almost free money.
You can also extend the loan term to 6 years.
Using round numbers,
The base long range rear wheel drive model Y can be had for $45,000.
It qualifies for a federal EV tax credit of $7,500 deducted from the purchase price, dropping it to $37,500.
Let’s assume a small down payment of $500 and a loan for $37,000.
The loan would end up costing about $2,000 in interest over 6 years for a total loan cost of $39,000.
Suppose I took the $37,000 I would have paid cash for the car and put it in a high-yield savings account currently paying 5% APY.
Let’s also assume you’re making the monthly car payment of about $550 from your earned income so you don’t have to dip into the savings at all.
5% is pretty juicy right now but it may not stay that high. Let’s be pessimistic and say rates might drop half a percent each year over the next 6 years.
The $37,000 in the savings account earns me about $9,000 in interest over 6 years, growing to about $46,000, disregarding taxes.
The salient takeaway here is not that it’s then suddenly a cheap car (it’s not) or even that you should buy one, but rather that, via a tax credit and some simple, virtually riskless interest rate arbitrage, you’ve effectively reduced the initial price by about 35%.
Now just for fun, let’s be optimistic and assume the 5% APY on the savings account stays the same for all 6 years and run the numbers again. That would result in earned interest of about $12,500, effectively reducing the initial price by about 40%.
This does again ignore taxes on earned interest, which is going to be highly personal, but it also ignores gas savings, so those probably easily cancel out. At 10,000 miles a year, $4 a gallon, and 25 mpg, that’s a gas savings of $1,600 per year for a total of $9,600 over 6 years. Electricity costs for charging should be about 1/4 of that, so if we really want to be comprehensive, that’s about an extra $1,000 a year in gas savings.
Does this financing offer have you considering buying a new Tesla Model Y in 2024? Let me know in the comments. Thanks for watching.
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Disclosure: M1 High-Yield Cash Account(s) is an investment product offered by M1 Finance, LLC, an SEC registered broker-dealer, Member FINRA / SIPC. M1 is not a bank and M1 High-Yield Cash Accounts are not a checking or savings account. The purpose of this account is to invest in securities, and an open M1 Investment account is required to participate in the M1 High-Yield Cash Account. All investing involves risk, including the risk of losing the money you invest. Stated APY (annual percentage yield) with the M1 High-Yield Cash Account is available from date of account opening and is accrued on account balance. Obtaining stated APY requires a minimum initial deposit of $100. APY is solely determined by M1 Finance LLC and its partner banks, and will include administrative and account fees that may reduce earnings. Rates are subject to change without notice. M1 High-Yield Cash Account is a separate offering from, and not linked to, the M1 High Yield Savings Accounts offered by M1 Spend LLC’s banking partner. M1 is not a bank.
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