How to Get 33% off a New Tesla Model Y (0.99% APR Promo)

Here’s how to effectively save 33% on a new Tesla Model Y…

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So I found it very interesting to learn that Tesla is currently offering 0.99% APR financing on new Model Y’s through May 31:

That’s almost free money.

You can also extend the loan term to 5 years:

I was curious to see how the numbers might play out realistically.

Using round numbers, 

• The base model 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 down payment of $3,500 (about 9%) and a loan of $34,000.
• The loan would end up costing about $1,000 in interest over 5 years for a total loan cost of $35,000.
• Suppose I took the $34,000 I would have paid cash for the car and put it in a high-yield savings account currently paying 5% APY. (See disclosure below following post.)
• Let’s also assume you’re making the monthly car payment (about $581) 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 0.5% each year over the next 5 years, i.e. 5% > 4.5% > 4% > 3.5% > 3%.
• The $34,000 in the savings account earns me about $7,500 in interest over 5 years, growing to about $41,500, 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 an immediate tax credit and some simple, virtually riskless interest rate arbitrage, you’ve effectively reduced the initial price by about 33%.

Now just for fun, let’s be optimistic and assume the 5% APY on the savings account stays the same for all 5 years and run the numbers again. That would result in earned interest of about $9,500, effectively reducing the initial price by about 37%.

On a similar note, while I’ve got you, this is also why we say it makes little sense to pay off your mortgage early if you’ve got a low rate like 2-3%.

In the interest of full disclosure, before you guys come at me, 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/gallon, and 25 mpg, that’s a gas savings of $1,600 per year for a total of $8,000 over 5 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/year in gas savings, boosting our initial price reduction calculation from 33% to 43%.

Note that the advantage of utilizing this financing offer does NOT require having $34,000 cash on hand, which admittedly may be unrealistic; that was just my hyperbolic example to illustrate the opportunity cost.

It works the same on the other extreme. As long as you have $1 more than the minimum monthly payment, it's advantageous to put that $1 in a high-yield savings account as described for the interest rate arbitrage. That's sort of the whole point – here it makes objective sense to utilize the low-interest debt and pay the minimum monthly on the loan. Obviously if you can't afford the minimum monthly payment, you shouldn't be looking at this car in the first place.

I’ve always said I’d never buy a new car, and I’m not even really interested in a Tesla in the first place, but I find this whole situation quite intriguing from a purely financially opportunistic perspective.

Does this financing offer have you considering buying one? Let me know in the comments.

Get that M1 high-yield cash account here.

Get $1,000 off a new Tesla with my referral link: https://ts.la/john869176

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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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