Clickbait title? Yep. Am I serious though? Yep. And here’s why…
Full disclosure: this article/blog/whatever has been a thought of mine for the last year and a half. I’ll warn you, this is my longest blog yet, but I also think it might be the most interesting one. This isn’t a blog a normal CFP professional would write, but I’m not your run of the mill 1990s financial advisor. I think differently, and I think about things most people don’t.
In my last two blog posts about cars, I mentioned that when most people see a fancy new car they think, “Wow that’s a nice car!”. I, on the other hand, start to figure out their monthly payment and terms of financing. Although, I have to admit that when I first saw Teslas 10 years ago, I saw the ‘wow’ factor. I was impressed and fascinated by them. But eventually those ‘wow’ Tesla moments passed. Today Teslas are everywhere, particularly the Model 3, which is their most affordable car at $35,000 to $45,000 and for good reason. The cars get excellent mileage per charge, they charge quickly, they’re sleek, and they use Tesla’s vast charging network which is unmatched in the US. Lastly, they’re affordable… for EVs.
So why do I think my kids will drive one when they’re old enough? Let’s first look at what a Tesla Model 3 is right now. It’s a midsize sedan that runs on electricity. It gets good safety ratings. It can go 200-350 miles on a single charge and there’s a vast network of charging stations which will, in theory, only go up in the coming years. It’s mass produced making parts and replacements available, and its technology allows for it to be updated in a timely fashion. To this point in time, Tesla is the only major EV player currently manufacturing EVs on a grand scale in the US.
That said, not everything is perfect with Teslas (and all EVs). There are definitely some pitfalls: they rely on electricity, not gas, which can make recharging an issue especially away from home. They’re also considerably more expensive than non-EVs (about $10,000 more). But the big pitfall currently, is that their batteries lose power over time and their range drops. It’s estimated that Teslas will need new batteries every 8-10 years or so, and the replacement batteries cost anywhere from $10,000 to $20,000. Without that replacement, a car's range can go from 350 to 150 to … 50 miles? Who knows. Stick with me here because this article includes a ton of speculation but hey, you’re the one who clicked on it…
Every single pitfall I just listed actually pushes Model 3s into “perfect teenager car” territory. All those 2023-2029 models will need battery replacements by the time 2037 rolls around. That ten year old $40,000 vehicle you bought that would normally be worth $20,000 needs a new $15,000 battery. Do the math, it’s probably not worth replacing it and your range has dropped from 300 to 150. Anyone who bought the car with range in mind will want to offload it and the battery replacement will put downward pressure on resale prices, making a 2025 Tesla Model 3 an affordable car for first time drivers. People who commute a lot or who don’t have access to charging every night (at home) will really care about the range, but that’s not my teenager. They live at home, don’t work far away distances, and will trade the lower range for being able to buy a car that otherwise wouldn’t be as cheap.
There are some other facts that go into this very real possibility. We live in a single-family home with the ability to have the car charged safely overnight in our garage or driveway. We also won’t be relying on this car to drive long distances; it would simply be a short-term or runabout vehicle for the kids to get themselves places. Sure, the automotive, road, and car insurance landscape could be completely different by 2037 (look out for a blog about that in the future), but for argument's sake I’m assuming nothing too, too drastic will happen by then.
“Tom you’re delusional, I’m not putting my kid in a car that can go 0-60 in 2.9 seconds!!!” I completely agree with you, but Tesla already lets you set maximum speed limits for their cars. I bet by 2037 you’ll be able to limit which driving modes you can put EVs in. Hover Parenting 2037, ENGAGE!!! You’ll also be able to track your kids’ Tesla wherever they go. If you have two kids, I envision a future feature where each kid will have their own “login” for the vehicle so you know which one is driving and which one speeds more. With its cameras, you’ll be able to see where they parked and even who is with them. If you think all of this is crazy, I agree, but states already have limitations on what first year drivers can do, and car trackers for kids have existed for two decades already. Who knows, maybe by 2037 our kids won’t even be actively driving but instead be in self driving vehicles.
So how does this article relate to financial planning? Maybe you’re in the car market, or going to be in the next 5 years and you’ve got a young child, then a Tesla might make sense. For years Subaru ran commercials about how you should buy their very safe cars because they’re also reliable, and one day they’ll be your kid’s car. I wouldn’t be surprised if Tesla started running those same ads. Even if you don’t have young kids, if you’re looking to buy an EV but are hesitant about the battery replacement cost, this could be an alternative. Don’t replace the battery, recycle-down the car to a younger driver, or sell it to someone who doesn’t need the 300+ mile range. And you never know, maybe the government will start subsidizing batteries in 5-10 years. Likewise, if you’re thinking of buying any EV, make sure you’re taking into consideration the battery replacement costs and how it affects your resale value. That can impact your personal finances and how much car you can afford.
People think you work with a financial advisor so they can help you make more money investing. That advisors only care about investments and stocks. And while that might be a small part of it, I believe there’s a lot more to it than that. I think about things that the average person doesn’t. I worry about things that the average person doesn’t. Heck, I worry and look at things that even other advisors don’t. I don’t just care about my finances, I care about everyone's finances. So schedule a free call to talk to me and see how I’m different. I’ll keep going along worrying and thinking about things as random as the future of Tesla Model 3s so that you don’t have to.
***Disclosure: Melissa proofreads these and last night she asked, “So what, we’re buying a Tesla in two years so Pat can drive it in a decade!?” No, lol. A Model 3 doesn’t fit our family right now, but I can see how Model 3s sold this decade will be a perfect “beater” car as they age***
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