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Does the Tesla Model 3 hold its value?

Cars typically lose a ton of value once they are driven off the lot, but how well does Tesla’s Model 3 hold its value?

Tesla model 3 on purple background
Image: KnowTechie

Quick Answer: Yes, the Tesla Model 3 holds its value better the most other EVs and gas-powered cars. The low depreciation rate is due to high demand for the vehicle, accompanied by limited supply.

As you may know, driving a brand-new car off the lot causes a big chunk of its monetary value to magically disappear. Estimates vary, but most sources put the number between 10 and 15 percent.

By the end of the first year, a typical car will have lost another 10-15 percent of its value, which, in a worst-case scenario, could mean a 30 percent drop in the resale price since the time of purchase.

Clearly, the typical automobile isn’t a sound investment if you hope to make money on the resale. But does this rule hold true for electric vehicles? Generally, yes. In fact, most EVs depreciate at a faster rate than gas vehicles.

The Tesla Model 3, however, appears to be an exception to the rule. So, let’s discuss the low depreciation rate of the Model 3 and try to answer why it manages to hold its value better than the rest.

Do Tesla Model 3s hold their value?

Short answer: Yes, more so than most other cars.

The Tesla Model 3 defies conventional wisdom and holds its value better than most other EVs and many gas-powered cars. But how well does Tesla’s entry-level offering hold its worth?

According to some estimates, driving a Model 3 off the lot doesn’t incur the same instant value drop of 10-15 percent that most other vehicles face.

Interestingly, the Tesla Model 3 retains most of its initial worth in the first two years.

Tesla model 3 price january 2023
Here’s how much a base Model 3 costs from Tesla (Image: KnowTechie)

At the three-year mark, the vehicle starts to depreciate at a fairly low rate—around 4 percent—maintaining up to 80 percent of its value in the first five years.

After five years, depreciation kicks in a little harder, with the Model 3 losing approximately 10 percent of its worth each year until hitting a floor at around 50 percent of its original value.

Now, these numbers are only guidelines, and many factors come into play, including the condition of the vehicle, miles driven, supply and demand, and other economic influences.

For now, however, the estimates provided should give you a pretty good idea of what to expect when it comes to a new or used Tesla Model 3’s resale price.

Why does the Tesla Model 3 hold its value?

Short answer: Supply and demand.

Tesla Model 3s hold their value due to a big demand for the vehicle and only limited supply.

If someone can’t get hold of a new Model 3, they’re going to look to the used market, stalling depreciation and keeping prices high.

Tesla model 3 on road
Image: Unsplash

Sometimes, when demand for something is extremely high and supplies are super limited, you may even see used items increase in value after purchase.

Think of sold-out concert tickets, discontinued or rare items, and collector cars. Thankfully, the Model 3 isn’t quite at that stage yet.

If Tesla is ever able to ramp up production and meet demand, we would expect to see depreciation increase and used Model 3 prices drop. Currently, however, the Tesla Model 3 retains a great resale value.

Have any thoughts on this? Drop us a line below in the comments, or carry the discussion over to our Twitter or Facebook.

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Matt is an Australian writer with a degree in creative and critical writing. Prior to commencing his studies, he worked in tech support and gained valuable insights into technology and its users. He is also an editor and author coach at Dean Publishing.

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