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Tesla’s scammy Model 3 pricing

Rick Newman
Senior Columnist

Come on, Tesla.

The electric carmaker finally found a way to lower the price of its “mass market” Model 3 sedan to $35,000, as it has been promising for several years. But if you visit Tesla’s website, you’ll see an even better deal. Tesla lists the entry-level price of the Model 3 as a mere $24,450, as you can see here:

Model 3 list prices posted on Tesla's web site.

Wow! What a deal! For the price of a humdrum Toyota Camry or Honda CR-V, you can drive off in one of the most exciting cars on the market.

Right?

No. Not right. There’s an asterisk next to the $24,450 price, with a note at the bottom saying “prices above include potential incentives and gas savings.” Car dealers are famous for fishy pricing claims, but this is a new innovation. When you click to learn more, you discover the following:

The real base price is $35,000. That’s what you pay for the car, not including taxes.

“Potential” incentives might save you $6,250.

“Gas savings” might save you another $4,300.

Here’s the fine print:

Model 3 pricing fine print

So the possible savings add up to $10,550. If you subtract that from the actual price, you end up with a “price after estimated savings” of $24,450.

If you look hard, you can find needed disclaimers on Telsa’s website, so this is probably legal. But it’s scammy, especially for an automaker supposedly peddling luxury and sophistication. And most buyers will never realize $10,550 worth of estimated savings.

[Check out our video review of the Model 3.]

If you follow the steps all the way through to the order page on Tesla’s site, you learn that potential incentives include a $3,750 federal tax credit, which every buyer will qualify for. That lets you slash $3,750 from your federal tax bill, so that’s a direct savings, as long as you remember to apply for the credit. But Tesla also counts a $2,500 rebate if you live in California. Only 12% of Americans live in California. So most of us won’t get to save $2,500.

Here’s how Tesla estimates a buyer will save $4,300 in gasoline costs. Tesla estimates the average annual gasoline cost for somebody driving up to 15,000 miles per year, averaging 28 MPG and paying $2.85 per gallon for gas. Then it compares that to the cost of powering a Tesla off the electrical grid, which costs less. Multiply that by six years and you get a savings of $4,300.

Well, okay, but why stop there? You’d save even more money if you never drove your Tesla and spent nothing on fuel. If it costs about $500 per year to power a Tesla, for instance, and you never drove it, well, you’d save that $4,300 in gas money not spent, plus another $3,000 in electrical fueling not spent, bringing the estimated cost all the way down to $21,450. That’s cheaper than a Toyota Prius!

You’d save even more if you never registered your Tesla and never insured it. Just keep it in the garage for people to look at. Call it a piece of art and donate it to a museum, and you might be able to claim a tax deduction that will get the cost well below $20,000.

Many factors beyond the purchase price go into the real cost of owning a car, including depreciation, maintenance, repairs, interest paid on loans if you finance, taxes and the opportunity cost of not spending your money on something else. The cost of fuel is one factor, but hardly the only one.

There are many scams in the car business, such as advertising a car at an unusually low price that turns out not to be available when you get to the dealer. Automakers often list attractive features as “available”—meaning you have to pay extra for them—next to a base price that doesn’t include those features. There’s always a delivery fee, typically $500 or more, that’s not normally included in the advertised price. And of course salespeople try to upsell many types of warranties and paint and wheel protection that are almost never worth the money.

The Tesla Model 3 starts at $35,000. If Tesla feels it’s offering a great car for the money, the company should be proud to sell it at that price. Federal tax credits lower the cost to $31,250, for now, which Tesla should helpfully point out to buyers. As for fuel savings, sure, provide the info and let us ponder. But don’t treat car buyers like rubes who have never driven around the block.

Confidential tip line: rickjnewman@yahoo.com. Click here to get Rick’s stories by email.

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Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman