Got into it with a fellow engineer on Facebook last night.
Apparently you can buy a used Tesla for $64,000 dollars.. Cool!
Here is the conversation..:).. he just doesn't get it.. Intelligent guy too.
Me: Nope.. I prefer retirement..
Friend: if you done your math right, this can be your retirement! No more dependency on gas even if the price goes up to $6 when you are 60. And free road trip until the day you drop.
Me: Riiight.. $64k for a car compared to my 99 Neon (36mpg) which cost me 350 bucks (OK I rebuilt the engine and transmission for $1000).. Thats an extra $62,500/ $6 = 10,416 gallons or (*36) = 375,000 miles! You think this thing will still be going in nearly 400,000 miles? How many $2000 battery changes in that number of miles?
Oh.. and lets not even talk about the average compound 8% growth (average growth of the stock market since 1872) on that you lose by not investing that $64k... Ohh lets do that math.. 375k miles and say 15k per year is 25 years. so 64,000*1.08^25 = $438,000.. I.e thats what that piece of junk has cost you over 25 years... Not including battery replacements
Friend: Hey if your neon can last another 375k miles that's good for you. If you can indeed get true net 8% growth in your portfolio, that's impressive too considering that's beating most of the investors even some elite financial investment services...although I can't help but wonder what are you gonna do with 438grand after 25yrs??
Me: 8% growth is a conservative number, you can EASILY get this by simply investing in a stock index fund. In fact almost ALL so called financial service providers lag behind the market index.. so why not simply invest in the index?.. In fact the fees for doing so are miniscule compared to what these so called professionals charge.. I did tell you I AM retired right? I have been doing this for the last 10 years or so.... The Tesla does not run on free fuel either.. It runs on an average of 52% coal (nor will it or the Neon last 375k miles) so my analysis was overly conservative. There are about 125,000BTU's in a gallon of fuel and gas engines are about 33% efficient. Take an average cost of electricity of 10 cents per KW-H and you can calculate the approximate fuel cost to run the Tesla, then compare the true fuel costs of an equivilent gas powered car.. The 25 years was the time you'd have to own the Tesla to pay for itself in fuel.. I was simply pointing out is a VERY poor investment.. In fact Joe's point is elevant.. its an expensive luxury toy, not a cost efficient form of transport. As it would reduce my portfolio from what it would be by $438 after 25 years.. I'll just keep earning my 8% plus instead... Except in 2013 I earned 32% on my S&P500 Vanguard index fund....
Me (again): So I looked it up.. The actual annualized gain with dividends of the S&P500 since 1871 to 2014 is 9.11%. That of course includes two world wars, cuban missle crisis, 1929 depression, 2000 dot com bust and the 2008 meltdown. To invest in the Vanguard VTAX fund it costs 0.02%.. verses so called experts at 1 to 1.5%. As I don't make numbers up, here is the link so you can prove it to yourself.
Friend: all I can is my math is different than yours (can this guy do math?) but I don't have time to elaborate here (e.g. say if one is replacing a 18mpg car, and if one is paying with a 1% interest loan instead of all upfront)....you finally retired now? No wonder I haven't seen you much on site anymore
Me: Oh I was retired before.. I was just doing the occasional job for fun. Its dried up at the moment.... OMG, your financing cars???.. whats a car loan?.. I've never had one..... just buy a car that does 36mpg. My math looks slightly worse if you compare to my Wifes 2 year old Chevvy Cruze which we paid $12k for (cash of course).. Now the cost difference is ONLY $52k... also does 36mpg. so over the same 25 years the cost difference is 52*1.0911^25 = $459k.. if you took that difference and invested in a Vanguard VTSAX fund. Still assumes the Tesla costs zero in fuel and battery replacements so the cost is worse than that. Moot point anyway, its not finacially viable.