You’re in the market for a new car, and you’ve narrowed it down to two different choices: a run-of-the-mill Honda Odyssey Minivan; or a brand-new $85,000 Tesla Model S? Which do you choose, and more importantly, which is cheaper to own?
At first glance, most folks would opt for the Japanese-made Honda Odyssey. After all, at just $44,450 for the high-spec 2014 Honda Odyssey Touring Elite, the versatile family minivan will save you more than $40,000 off the purchase price at the outset. There’s no way it can be more expensive to own than the luxury plug-in, right?
No, but the cost isn’t that different, as Silicon Valley resident Paul Lee discovered. Like many families, the Lee family have more than one car. Six years ago, the family purchased a Honda Odyssey as the main family workhorse, followed three years later by an all-electric Nissan LEAF.
But in Paul Lee’s words, “my wife and I finally reached the point where we realized the Odyssey was overkill. We had 2 kids with no plans for a 3rd, and the car had always felt big. It was time to change cars.” And so, they started researching a replacement.
Searching for the right car
Starting with a list of practical cars as well as a few ‘fun’ ones, the Lee family started to whittle down their list of choices. Initially, they included cars like the BMW 3-Series 328i and 328d wagon. Along a similar vein, they looked at BMW 3-Series wagon’s nearest rival, the Mercedes-Benz E350 wagon, and even considered cars like the Subaru Outback and Forester for their all-wheel drive capabilities.
Despite owning an electric car however, the Lee family ignored the possibility of a Tesla Model S. That wasn’t because of impracticalities associated with electric cars however: it was associated with the cost of the Model S.
As Paul Lee puts it, “I was convinced that I was the last person who was going to buy a Tesla Model S. The car was undeniably beautiful and impressive. But it was ostentatious. Too wide. Not versatile enough for long road trips.”
It was also too expensive, the family decided. Why spend $85,000 on a family electric car?
After his brother sent him some links to Tesla Model S videos however, Paul Lee admitted he started to pay attention to the Model S. Researching for more than 6 weeks, he read up on every site he could about the Tesla Model S. He paid attention too to all the investor presentations and reports, poring over them all until he was convinced it was worth giving a Model S a test-drive.
“My wife and I did 3 test drives. First, I test drove an S60. Then, my wife drove an S85. Finally, I drove P85+,” he explains on his blog. “When I floored it outside the Tesla Fremont store, it was an out-of-body experience.”
Doing the Math(s)
As many Tesla fans have told us, once you’ve had a test drive, you very quickly try to figure out a way of affording one. For the Lee family, this involved some very in-depth mathematics, with Paul using everything he knew about buisness evaluations, cost analysis, and accounting.
The initial results weren’t promising. As he’d expected, Paul Lee found that over an eight-year ownership period, cars like the Toyota RAV4 EV — which the family had just purchased to add to the fleet — were far more financially viable than the Model S. But as he notes, “that’s what happens when you’re almost giving the car away.”
His analysis, which included things like wear, tear and battery replacement scenarios, was trying to build as realistic a picture as possible of ownership. Having seen many other cost analysis projections from other would-be owners, the Lee family felt they were missing something. So they opened it up to discussion, calling in friends and contacts on the Internet to help refine the model.
Paul’s helpers, a fellow Harvard Business School alum, a Brain consultant with a PhD in Physics, and other MBA graduates and ‘really smart people,’ tweaked his model and helped refine it. As the feedback came in, the figures started to codify into a coherent picture.
The Model S was far more affordable than all of the other luxury cars the Lee family was considering. More astonishingly, it seemed to even beat the Honda Odyssey. While the Model S looked in the model to lose an additional $25,000-$30,000 in depreciation over the Honda, the gasoline savings and maintenance savings — which totalled an estimated $25,000-$35,000 over the same eight-year ownership period, soon outweighed the electric car’s higher deprecation.
Not quite as cheap…
Convinced, Paul and his wife made the purchase decision, and placed an order for a Model S, taking delivery for it in March. Selling their Honda Odyssey and Nissan LEAF, they’re now a Tesla Toyota family, with the Tesla Model S and Toyota RAV4 EV taking care of household transportation.
Shortly after publishing his story online, Paul’s analysis was picked up by Hacker News, whose eagle-eyed math-heads spotted a problem with his cost analysis model.
Despite double-checking his figures, Paul’s analysis had misevaluated fuel costs for the Honda Odyssey, making it appear more expensive to run that it would be in reality. Adding an additional line item to account for tire wear and tear, the spreadsheet crowned a new winner: the now sold Odyssey, beating the Tesla Model S by about $5,000 in terms of cost analysis over eight years. Or if you prefer, $600 per year over the eight years of ownership.
$600 more per year… for a luxury car
The fact remains however that this analysis — which you can see yourself online (and Paul is happy for folks to tweak, add to, and critique as they wish) — shows that the luxury Model S costs just $600 more per year to own than a run-of-the-mill Honda minivan.
We’re sure someone, somewhere could make similar cost benefit analysis arguments for other electric cars like the Nissan LEAF. We’re sure too, that not everyone is willing or able to pay an extra $600 per year for the prestige of a Model S.
But we’d find it tough not to say yes. What about you?
Leave your thoughts in the Comments below.
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