The Tesla Depreciation Problem No One's Talking About

Hey everyone, welcome back to Behind the EV Wheel. Today we're going to be diving into used car values and trade-in options, especially for older Teslas with Model Hardware 3. If you're thinking about selling or trading in your Tesla Model 3, you'll want to stick around because the market is changing fast. Over the past year, the used Tesla market has taken a serious hit. The average price of a used Model 3 has fallen from around $42,300 in 2022 to about $31,400 in 2023. And now in 2024, we're seeing a dip below $30,000 in many cases. And as you can see on the screen, these different price levels, and the average trade-in value now is around $23,747. The lowest estimated value based on Kelley Blue Book is around $17,752. So what is driving this downward trend? A few key factors. Tesla's frequent price adjustments on new models play a big role here. So if you get a brand new Model 3 with the latest features and qualify for the $7,500 federal tax credit, why pay almost the same for a used one? So everybody's just going to get a new car, and that's part of the challenge that we're facing for the hardware 3 vehicles is a growing market for the new cars but a lessening market for the older models. So Hardware 3 versus Hardware 4 debate out there, it's another major factor in affecting resale value. The introduction of Tesla's Hardware 4 has changed the dynamic. As you can see on the screen The processor power for the Hardware 3s was slower, and obviously the Hardware 4 is faster. Camera quality, uh, on the Hardware 3 is fairly standard. I believe it's like, uh, 1.3 megapixels. But the camera quality on the Hardware 4 is much higher resolution and is better able to see in bright and dark situations even better. So that gives more information to the processor to make better choices and decisions about what the car is going to do. And the sensor suite— the Hardware 3 has fewer sensors, even though my Model 3 has ultrasonic sensors on it. But I guess the Hardware 4 models have more sensors. The FSD capability on the Hardware 3 is limited, as we've all found out the hard way here. And the Hardware 4 models are a little bit more future-proof, though I would say that there's probably a limit to what it's capable of doing too as you look to, to the future in a new vehicle. Cars that have the Hardware 4 equipped technology are definitely at an advantage right now. They're going to get the the upgrades, the version 13 and the version 14, which I'm increasingly starting to hear about, is going to be coming at some point. It may be coming just prior to June, which is when the first trial in Austin is going to happen with the Robotaxi. So that's probably— version 14 is probably going to be where we see the really no steering wheel, no pedals type of vehicles actually hit the road. And the older Teslas just may not get updates to the Full Self-Driving as we look to the future. And there is going to be a cap at how many updates the Hardware 3 cars will get around the FSD, probably some bug fixes and some improvements. But for buyers, this raises a big question. Do you get a cheaper used Model 3 with Hardware 3, or do you spend more for a newer model that has Hardware 4 that might have better long-term software support? That's all of our choices here. So should you trade in your car, sell privately, or hold is really the question that all of us are facing right now. And on the screen here, I'm showing you, I think it's important that each of us go through and use a depreciation calculator and estimate your Tesla's future value. Get a free appraisal through Kelley Blue Book for trade-in offers and consider private seller exchanges to sell your, your Model 3 or your Hardware 3 vehicle. Really to get the most from it as you can, because if you trade it in, you're typically gonna pay a little premium on that, on what you get out of the sale of the vehicle if you trade it in, because the people that are receiving the vehicle are gonna wanna have enough margin to be able to sell it and make a profit themselves. So if you do a private sale, you're probably more likely to bring in more of an income, but it's also less likely to be associated with a, a financing option. So you're probably dealing with a cash sale. Possibly, or if that buyer works with a bank, they might be able to transact that. Seller type of a transaction is a little bit more limited, but I think that there are options out there through the seller exchanges out there that you might be able to look at. So if you're looking at selling your Model 3, are your best options— and there's people out there that are trying to sell their Model S's too, and their Model X, and and their Model Ys that are actually running Hardware 3 as well. So let's run through what the values of the cars are right now. The trade-in value for this car, the 2022 Model 3 Long Range, is $23,747 with a potential private sale value of $27,542. So that's a difference of nearly $4,000, and that's something to think about, I think. So what is the future of used Tesla prices? Will Tesla prices drop further in 2024? My guess is they probably will as a glut of Hardware 3 cars starts to pile up. And do people want to buy older technology with this that will not be able to support unsupervised full self-driving. I think it's a big question for all of us to deal with. Prices may continue to drop as more used Teslas enter the market. FSD hardware differences may create a pricing gap between Hardware 3 and Hardware 4 models. And Tesla's pricing strategy could shift again, and that could also affect used car values because Tesla all along— and I think if you've been a Tesla follower for very long, as I know, that's one of the big selling points for Tesla is their ability to drive costs down and bring lower prices to the market. Now that creates a problem for all of us. If we're an older Tesla car owner. But the bottom line is, if you're looking to buy a used Tesla, now might be a great time. But if you're selling, you might want to hold on to your car for a little bit longer. And I would tend to agree with that because Hardware 5 or AI 5 is not that far off. And so Do you want to invest in a platform, the Hardware 4, which may become antiquated within the next year? It's possible. So I'd love to hear your thoughts. Are you in the market for a used Tesla? Are you holding onto your Hardware 3 car or thinking about upgrading to Hardware 4 or Hardware 5? Let me know your comments below, and I will respond to all your comments as best as I can. So be sure to like and subscribe to my Behind the Wheel, or Behind the EV Wheel series. And if you have found this video helpful, share it with a friend who may be thinking about buying or selling a Tesla. Thank you for being here with me again in this episode of— thank you for watching. Have a terrific rest of your day. Thanks.