Introduction and context

For most potential Model S buyers, understanding the relative costs of ownership compared to those of alternative vehicles is a significant factor in the decision to purchase. Even those who want to buy a Tesla primarily for its fantastic performance will want to at least consider what the costs will be. There doesn’t seem to be much unbiased Total Cost of Ownership (TCO) analysis available and so I will attempt to provide some answers.

The Model S competes with various types of ICE cars in different ways. On performance it can be compared to many sports coupés, whilst on size and practicality it can be compared to a number of large executive saloons. Given the variables in such a large number of comparables, the only way to make a meaningful analysis is to compare the Model S against specific ICE cars with similar performance and comparable size. For this article I have chosen three models: the BMW 740D, the Audi A7 3.0 BiTDi and the Mercedes S63 L AMG. In all cases these are compared to the 85D, which has 4 wheel drive and offers a 0-60mph performance of 4.4 seconds. Of these, the S63 is the only one with directly equivalent performance as the Audi and BMW are nearly a second slower to 60mph. The Tesla has more internal space (especially luggage capacity) than any of the three.

The cost of ownership factors

When considering the cost of ownership of any car numerous elements must be taken into account: purchase price, rate of depreciation, servicing, maintenance and consumables costs, fuel cost, and tax and insurance costs. I have assumed a personal purchase for this analysis, but if the car can be bought via a company and provided as a company car then there are additional tax advantages in favour of the Tesla.

Purchase Price

Tesla’s sales team operates differently from conventional car dealerships: They are all directly employed by Tesla and do not work on a sales commission basis. Tesla owns and operates all showrooms, and pricing is transparent and fixed. The process is that you use their on-line configurator to select the features you want and this determines the price. In the UK the government offers a fixed £5,000 grant to purchasers of EVs, so this can be taken off the purchase price (Tesla does this for you on their website).

There is no negotiation when buying a Tesla and no ‘extras thrown in’, so this makes it easy to say what the cost of a Model S will be, but the same is not true for ICE cars since the buy price can vary dramatically depending upon the buying circumstances. As a general rule a savvy buyer should be able to negotiate between 5-8% off the list price of an ICE car so I have assumed a 6% discount from list for the three ICE cars shown, and no discount for the Model S.


The biggest single factor in assessing the relative costs of different cars is the cost of depreciation since the value of most ICE cars declines rapidly from new to around 40% of original value after 3 years. The so called ‘premium’ brands (BMW, Mercedes, Audi, Jaguar, Porsche etc.) generally offer better resale values than lesser marques but depreciation significantly impacts the overall cost of ownership of any car. For ICE cars this rate of depreciation is strongly linked to the age and mileage of the car. Inevitably, the same will be true for Teslas, but there are several areas where the Model S differs from ICE cars:

  1. Teslas have far fewer moving parts (there is no complex engine or gearbox) meaning that they should be less likely to suffer a mechanical failure than ICE cars.
  2. A major part of the cost of a Model S is the battery and this, along with the drivetrain, has an 8 year unlimited mileage warranty.
  3. Tesla is more committed to updating their cars with new software functionality than other car manufacturers, so the cars are less likely to ‘age’ as fast as conventional ICE cars.
  4. With some manageable caveats, Tesla guarantees to buy back your 3 year old Tesla – provided it was purchased on a Hire Purchase basis from Tesla’s leasing partner Alphera – for at least 50% of the basic purchase price and 43% of the price of any optional extras (assuming they have done no more than 45,000 miles in that period). This sets an effective floor on the price of a 3 year old Model S.

These factors combine to suggest that the depreciation of Teslas may be less than that of most ICE cars, although it is not yet possible to say this definitively. Many commentators believe that the Model S will be worth significantly more after 3 years than the buy back price offered by Tesla themselves. Tesla Motors has recently introduced a used car sales programme in the US, via their retail network, so it will be able to manage the resale process. The 1 year depreciation experience in the US shows around a 20% depreciation, compared to an S-Class Mercedes which is about 35%, so this bodes well for the 3 year old car valuations.

Service and Maintenance Costs

The Model S has a much simpler mechanical construction than any ICE car and there are therefore far fewer moving parts to wear out. This should result in better reliability and lower maintenance costs in the longer term, but this advantage will not become apparent until the Model S gets much older. In the first 4 years of motoring little tends to go wrong with premium brand ICE cars so the main cost comparison for the purposes of this study is with the quoted service costs.

The annual service cost quoted by Tesla is currently £550 (or a total of £1800 if pre-bought for 4 years) which includes all consumable items except tyres. Some owners think this service cost is unnecessary as, unusually, no servicing is required to keep the warranty valid. The regenerative braking feature means that the brake pads wear out more slowly than on ICE cars, so I have allowed for 1 brake pad change for the ICE cars but none for the Model S.

Currently, based on experience from the US and mainland Europe where the car has been available for longer, I think it is fair to say that Tesla reliability is on a par with other luxury cars. See for a brief video summarising the situation. Tesla’s warranty is whole-vehicle for the first 4 years and 8 years on the drivetrain and battery, and the service centres have an excellent reputation for helpfulness, the provision of courtesy cars, and for going above and beyond the call of duty.

For this TCO comparison I have used pricing quoted by Audi, BMW and Mercedes dealerships, and estimated the cost of replacement items such as pollen filters, and wiper blades etc.

Fuel Cost

This is a much easier topic to discuss as, since we are talking about the cost per mile of electricity versus the cost per mile for petrol or diesel, the answers rely mainly on arithmetic. At a basic level the answer is simple: A Tesla Models S offers a MUCH lower fuel cost than any ICE car, especially those that deliver comparable performance. In this comparison I have included the very fuel-efficient BMW 740d and Audi A7 3.0 BiTDi diesels that claim to deliver well in excess of 40 mpg, while the petrol engine Mercedes only claims 28 mpg. However, since it is well known that real world experience is significantly worse than the testing results, I have assumed actual usage will be 20% less than claimed by the manufacturer. The Model S’s real world performance is also less than the headline “300 miles” range claimed since, unless one drives at a steady 50 mph (and who does that?), the range is more realistically around 220 miles, so I have worked on that basis. I also assumed that 90% of the electricity used to charge the Tesla will be from overnight charging at home on an Economy 7 tariff, and that the remaining 10% will be ‘free’ from Tesla superchargers or other charging networks.

From the results of this comparison one can say that the ICE cars of comparable performance and size cost between 4 and 6 times more to fuel than the Model S, which costs only £28 per 1,000 miles for its electricity, so the more miles you do the more the Tesla will save you.

Car Taxes

Please note that in the July 2015 budget new rates of Vehicle Excise Duty (VED) were announced for cars registered from 2017: this article will be updated to reflect these changes.

In the UK, the government-levied car tax is dependent on the CO2 emissions. As the Model S has zero emissions, it has zero car tax. In comparison, a fuel-efficient diesel such as the BMW 740d costs £135 per year, while the slightly less efficient Audi A7 3.0 BiTDI costs £285. The far less efficient Mercedes S63 costs a whopping £490 per year in tax (and £860 in the first year). It is likely that the CO2 emission weighting will increase in future years, so this saving will probably become more valuable over time.

The UK government also incentivises the use of EVs by offering better benefit-in-kind (BIK) terms for company cars that have zero and low emissions. In previous tax years this meant there was no benefit in kind tax for Teslas, but EVs now attract 5% rate (compared to the maximum of 37%, depending on the CO2 emissions rating of your vehicle). The BMW 740d in this comparison has a BIK of 27%, while the Audi is at 31% and the S63 is at 37%. The government have already published their plans on how the incentivisation of low emissions vehicles will increase in future years – see for the figures to 2020.

This BIK incentive is only of value if you are able to have the company that employs you purchase the Model S, so whilst this makes a Tesla even more attractive for some it does not count for those of us who are making a private purchase.

Insurance Cost

The Tesla Model S is one of the safest vehicles on the road and has been given the highest safety rating score by the European safety certification body (Euro NCAP). However it will still be involved in accidents and, as it has an all aluminium construction, bodywork repairs are more expensive than conventional steel bodied cars (mainly because there are far fewer bodyshops authorised to deal with such repairs). On the other hand the Tesla has fewer complex mechanical components – no expensive ICE and gearbox – so, apart from damage to the battery floor pan, the costs associated with accident repair could be lower than an ICE car.

Because insurers have less experience of the actual costs of a Tesla than for most ICE cars, they tend to apply a risk premium so it is well worth shopping around to find the best quote. When I first insured my Model S I had quotes ranging from less than £500 up to £1800 for comparable cover and excess. Needless to say I used the lower quote from a company who have already insured many other Tesla owners so understands better the likely claims and costs. In comparing insurance costs for the Model S and the three ICE models I used an on-line comparison site using my personal details and then choosing the lowest policy cost that I could be comfortable using (i.e. known brand, with comparable excesses etc.). My general conclusion from this exercise is that the Tesla is no more expensive to insure than a comparable ICE car, and can be less. What was staggering was the huge variation in quotations for all the car types. Everyone’s personal details are different, so the premiums may come out differently for you. As a side note, many of the insurers required the fitting of a tracking device on vehicles of this value. This is not possible on a Tesla as it would affect the electrics and is, in any case, unnecessary as the phone app shows the location of the car automatically. Fortunately there are other insurers who do not make this stipulation.


Weighing up all these factors is none too easy and so, if TCO is a major factor in your decision, I think it is worthwhile making your own comparison between the specific Tesla Model S spec you desire and whichever other new car model(s) you have been thinking about buying. In the table below I have compared all the factors discussed above for the Audi, BMW and Mercedes, and arrived at a TCO per 1000 miles based on ownership for 3 years with an annual usage of 12,000 miles. I began this comparison thinking that there would be a premium for the Tesla because of its high battery cost, but have been surprised to discover that there does not seem to be a premium for buying a Model S when you take into account the cost of the various optional extras that bring the technical spec of the ICE cars in line with that offered by Tesla. From a wider comparison of the purchase price against other high performance luxury saloons that I have also undertaken (not shown here), I discovered that the Tesla is actually very good value for money in terms of all the features and performance offered. It also wins hands down on luggage capacity – it is way ahead of any other saloon.

In general terms one can say that the servicing cost is likely to be comparable to that of the ICE cars, while the running cost (for fuel) will be very significantly lower for a Model S. You will also save an increasing amount on tax, especially if the car is provided as a company car. The insurance need be no greater than a comparable ICE car as long as you shop around. Finally, depreciation is likely to be better than a premium executive saloon of comparable performance, and comparable purchase price, due to the far longer warranty and buy-back price level.

All of these considerations bring me to the conclusion that if you want a large luxury saloon and intend to spend £60K or more, the Tesla Model S is the best car to go for since it offers the best performance, most luggage capacity, and lower TCO of any comparable spec premium brand ICE car. The only thing missing is the noise of the engine!

TCO for Tesla Model S vs Audi A7 3.0 TBD vs BMW 740d vs Mercedes S63L AMG


  • 36,000 miles over 3 years
  • insurance will vary depending on location, driver characteristics etc.
  • annual service and one set of tyres
  • Depreciations assumed: Tesla 50%, BMW & Audi 55%, Mercedes 70%
Costs Purchase Price Road tax Insurance Service Tyres Brake pads Fuel Depreciation TCO over 3 years TCO over 1,000 miles
Tesla 85D with sunroof £69,030 £0 £1,500 £1,650 £1,000 £0 £1,001 £34,515 £39,767 £1,105
Audi A7 3.0 BiDi quattro £62,002 £855 £1,800 £1,500 £1,000 £370 £4,700 £36,076 £46,302 £1,286
BMW 740d with sunroof £64,719 £405 £1,800 £1,500 £1,000 £380 £4,246 £35,595 £44,926 £1,248
Mercedes S63L with sunroof £112,941 £2,580 £2,250 £1,800 £1,000 £400 £7,521 £79,059 £94,609 £2,628

Purchase Price Qualifications:

Where possible I have included the various optional extras that add the equivalent features to the Model S (eg LED lights, autopilot and parking features etc.). I have assumed leather seating and the autopilot options for the Tesla pricing.

I have assumed a 6% discount on dealer OTR pricing for the ICE cars, but no discount on the Tesla.