This article describes options for UK owners wishing to sell their Tesla Model S in the UK.
Introduction and context
To provide some context for the article I think that it is worth mentioning that I am a long time car enthusiast and have owned a variety of high performance and super cars. I currently own a P85D and have had two previous Model S.
I totted up in my head before writing this article and worked out that I have owned more than 50 sports and luxury cars so far and, as a result, I am well acquainted with the car market and car dealers in the UK.
Tesla Model S residuals
There has been considerable interest and concern from owners and potential owners about what a car as innovative as the Model S might be worth in the future, so much so that Tesla introduced a Future Value Guarantee scheme to compliment the car when financed through its preferred funding partner in the UK, Alphera. The scheme is extremely useful because, if nothing else and whether you use it or not, it provides a floor for the value of a used Model S. Tesla Model S deliveries began in June 2012 (and in the UK in 2014) so, whilst the car is relatively new to the market, there is already some good evidence of residual values.
In the USA Tesla has introduced a pre-owned scheme which provides a good barometer for the value of used models in addition to various studies that show the Tesla Model S to have strong residual values. In the UK the market is in its infancy but early indications are positive, with used cars selling at close to list price and the Tesla Model S now featuring in trade bibles such as CAP (these predict future values and are used by finance companies and dealers for valuation purposes).
I think that Tesla Model S owners can, with some confidence, be assured that they have invested in a highly desirable vehicle which, when combined with a well thought out disposal strategy, will yield a relatively low total cost of ownership versus other comparable cars.
Before we delve into the available routes for selling your Model S it is worthwhile ensuring that everyone is up to speed as to how, and on what margins, car dealers operate.
For the purpose of this article I will assume that people are trading up or down by no more than one level to a Model S from a similar marque/model (low-end and very-high end car dealer economics vary radically from one another). Therefore the dealernomics to which I am referring span premium brands such as BMW/Mercedes and luxury brands such as Bentley (you might be interested to know that a surprisingly high number of Model S owners are ex Bentley owners).
When you take your car to a dealer, either as a part-exchange or with a view to their buying the car from you as a straight purchase, the dealer cares about one thing only – how much profit they make from your transaction. To that end the dealer will appraise the car in terms of specification, mileage and condition. In dealer parlance the spec really refers to colour (interior and exterior) and options on the car (which they tend to value when they sell the car but not when they buy it). In terms of condition the dealer will look for any preparation (“prep”) that the car might need before it can be “retailed”: curbed wheels, bodywork damage or interior tears etc.
At this level the dealer will have approximately 10-12% of the retail value of the car as gross margin (this will take account of a warranty of some kind, contribution to overheads (someone has to pay for the coffee machine…), any prep required and VAT on the profit element of the margin).
Finally it is worth explaining that when you take your car in to part-exchange it for another car the dealer may not in fact take your car into stock to retail himself as your car may be too old (main dealers’ usual limit is 4 years old), the mileage may be too high, or the colour or spec too weak. Instead he may get what is known as an underwrite on the trade value of your car from another dealer so that he can offer you a “cost to change’ and then sell your car on to the other dealer. The cost to change is the price of his car minus the underwrite he gets for your car (minus any finance that might be outstanding on your car). The part-exchange is where dealers often maximise profit in a deal: by moving around the price of the trade-in, their car and finance deposits they have three levers to pull in the deal.
Options for selling your Model S
You essentially have 4 options for selling your Model S in the UK
Trade-in or sell to Tesla Motors UK
Tesla calculates selling price for their ex-demonstration and service loaner fleet to customers at approximately a loss of 1% of value for each month of ownership plus £0.40 per mile. Until June 2015 what they offered to buy your car at as a straight purchase or as part of a trade-in was rather more pessimistic (especially when it came to heavily loaded and/or non AutoPilot cars. It will be interesting to see how dual motor versus non dual motor pricing pans out…) but Tesla has recently reworked the depreciation curves to significant benefit to its owners: in a recent example of a P85+ trade-in the revised offer from Tesla was £7,000 higher than the original.
Please note: Tesla purchase quotes for your Tesla Model S are valid for 7 days. You can request a price for up to 120 days into the future (which is the typical UK lead time for someone ordering a new Tesla) which I believe is unique in the UK motor industry.
Two examples of actual trade-in offers from Tesla:
- 2014 P85+ fully loaded (all options) which listed at £101k (net of £5k Govt. grant). Quote for trade-in at 13 months old with 20,000 miles is £67,300
- 2014 P85 loaded (no 21″ alloys) which listed at £92k (net of £5k Govt. grant). Quote for trade-in at 16 months old with 24,000 miles is £60,800
Trade-in or sell to another car dealership
In the UK the Model S market is in its infancy, with only a handful of dealers advertising cars and very limited knowledge of the vehicle even from those dealers who have encountered Teslas in the wild. This is quite understandable given the speed and breadth of changes to Model S in terms of key features (AutoPilot and Dual motor) and the changes to the pricing and option pack that have occurred recently. Asking a dealer what the list price is will send them into a tail spin: is that with or without the grant, current pricing (Tech pack is no longer, powered boot moved into an option pack, AutoPilot needs to be enabled) or pricing when the car was built? You get the idea…
Because of a lack of familiarity with the car I would argue that you are unlikely to get a favourable offer by going this route: the most likely course of action by the dealer is for him/her to get an underwrite for your vehicle and to trade it out. This may change in the future as the cars become more common but at present this will be a challenging path to tread.
Sale or Return with a car dealership
This is an interesting option that I am familiar with after having sold two Teslas of my own this way. It provides for a return of value to the owner that is higher than a part exchange or straight sale to a dealer but will not provide funds immediately.
Dealers will, in addition to selling their own stock, take customers cars on a Sale or Return (SoR) basis. Any kind of arrangement is possible through negotiation but typically the dealer will take custody of the vehicle, prepare it for sale, photograph it and deal with enquiries. Once the car is sold the dealer pays the owner the sale value less an agreed commission (typically 5%).
Sell the car yourself
Unless you have a friend or acquaintance who wants to buy your car this is not a realistically achievable route to market for your Model S.
You do occasionally see privately advertised cars whose price is above £30k (which is, in my opinion, the threshold for privately selling a car in the UK) advertised on Autotrader and eBay but the advertisers are likely to learn the hard way that selling a car without dealer facilities – inflexible viewing times, no finance available and no comeback in the event of a problem (legal issues around outstanding finance etc.) – will be very challenging if not impossible.
In conclusion, if you are in a hurry then sell or part-exchange your car with Tesla but if you aren’t (and you want a little more money) then arrange a SoR deal with an independent dealer.