In the market for a new car? Thinking about getting an electric vehicle to save the environment (and gas money)? Tesla (TSLA) might just have the car you want. 

Tesla’s Model S is its most popular model, and it comes with a few options. In America, consumers have three choices of Model S that vary based on the number of motors and battery power. For this article, the most popular Model S 85D will be used, as it is the middle option.

Key Takeaways

  • Tesla's are popular, but expensive electric vehicles, starting at $85,000 for the base Model S.
  • Owning a Tesla, however, can be affordable as there is no need for gas or oil changes.
  • Some Tesla owners can further benefit from electric vehicle tax breaks and lower ongoing maintenance costs.

Initial Cost

The initial cost of purchasing a Tesla Model S 85D is steep: $85,000 without any options or upgrades (the basic Model 3 starts at around $40,000). There is a federal tax credit available worth $7,500, and California, Colorado, Georgia, Massachusetts, and Utah offer state tax incentives.

The options available are pricey but feel like necessities. There’s the autopilot feature, Smart Air Suspension, and upgraded sound system, each at $2,500; higher quality finish for $5,000; executive rear seats for $3,000; the Subzero Weather Package for $1,000; and two additional seats for $3,000.

Let’s add everything but the luxury finish and rear seats. Now, a car that seats seven will cost $96,500. Leasing is available; for 15,000 miles a year, the monthly charge is $1,038 without options.

The car is expensive, but the initial cost is slowly recouped over the years though savings on gas, maintenance, and intangibles like convenience.

No More Stopping for Gas

First, the biggest savings: no more expensive gas. With 100 miles using 34kWh (about 100 MPG) and electricity costing an average of $0.12/kWh, the yearly cost to drive a Tesla Model S 85D 15,000 miles is $612. Compare that to Toyota (TM) Camry’s 30 MPG and an average cost of gas of $2.40 per gallon. At 15,000 miles per year, the Camry will cost $1,200—almost double what the Tesla Model S 85D costs.

What’s more, the Model S 85D will likely cost less than $1,000 for a long time whereas oil prices change daily and could return to $4+ at any time in the future.

Another benefit of plugging in instead of fueling up is the peace of mind that comes from knowing each morning that the vehicle is ready to go. No more planning to stop at the gas station, no more standing in the cold or smelling gasoline fumes—just plug in at night, unplug in the morning and the battery is full.

Other Savings

Tesla’s Model S 85D has far less projected maintenance because its electric engine has far fewer moving parts than a regular internal combustion engine. The battery is guaranteed for eight years with unlimited miles and, after that, is replaceable for $12,000. The vehicle comes with a limited warranty and $600 yearly inspections are optional.

All Model S cars financed through Tesla come with the option to sell the car back to Tesla at a fixed price at the end of the term. This price is about 46% of the purchase price or $44,390 for the Model S 85D example.

The Math

Let’s add everything up. The initial cost, including all options, is $96,500. With 15% down and 2% financing over five years, the interest charges would be $4,237.87, bringing the grand total to $100,737.87.

When we apply Teslanomics (subtracting every dollar possible to lower the effective monthly payment), we can subtract $7,500 in federal tax incentive as well as the gas savings of $600 per year and an average of $400 per year on maintenance.

After five years and $100,737.87 in costs, the savings add up to $12,500. Selling the Model S 85D back to Tesla earns about $44,390 (although it could bring in more if sold on the private market), which brings the car’s net cost for five years to $43,847.87 or $730.80 per month.

The Bottom Line

The cost of a luxury sedan is about $730 a month. For the same price as a Lexus or an Audi, you can purchase a Tesla Model S and benefit from the convenience of not having to fuel up, the peace of mind and extra time that comes from not having to worry about maintenance issues like oil changes or buying new filters.

Couple that with the fact that the car seats seven (or has more storage space)—and its claim of having “the highest safety rating of any car ever tested”—and Tesla’s Model S is a strong economic choice for today’s consumers.