You consider to buy a luxury sedan and you are seriously thinking about Tesla model 3. The non- Electric Vehicle (EV) options you consider is Acura ILX, which is available in Standard for $25,900, Premium for $27,880, and Tech for $29,780. You pay a higher price up front for Tesla and you want to evaluate whether it is worth in long term saving.

Teslas Model 3 has less projected maintenance because its electric engine. Furthermore, Tesla cars require no traditional oil changes, fuel filters, spark plug replacements or emission checks. The battery is guaranteed for eight years or 120,000 miles for long range and, on average lose 10% of its energy capacity on 100,000 miles and a life of a long-range battery is 500,000 miles. Tesla owners would then replace the battery for $12,000. Tesla only requires service on few items such as cabin air filter, tire rotation, brake fluid test, air conditioning service, change of wiper blades. No need for regular maintenance. The cost of tire rotation is $100, that has to be done on first year and every other year afterwards. The cost of full service is $500 and starts on second year and continues every other year. Assume annual cost of $500 for comparable luxury sedans and reserve $2000 for unanticipated maintenance costs on years 5, 10, and 15 of the lifetime for the gas engine comparable car. Cost of maintenance increase by 2% annually. The Federal government used to pay a sizable incentive for Tesla buyers before 2019. The new tax incentives from IRS website is as follows: Qualifying vehicles by the manufacturer are eligible for a $7,500 credit if acquired before Jan. 1, 2019. Beginning Jan. 1, 2019, the credit will be $3,750 for Teslas eligible vehicles. On July 1, 2019, the credit will be reduced to $1,875 for the remainder of the year. After Dec. 31, 2019, no credit will be available. Similarly some of the states had similar tax incentive of $2500 before 2019. Electric cars lose more value over time than traditional cars. According to Kelley Blue Book, an average car (of any category) retain 30% of its price value after 5 years. This percentage is only 11% for full electric cars. Tesla is expected to perform better than EVs and assume it retains 55% of its value after 3 years for lease calculation. If you plan to keep the Tesla 3, they are designed to have a lifetime of a commercial truck for 1,000,000 miles lifetime but the value become negligible over long term. There are also intangible trade-offs such as the peace of mind that comes from knowing each morning that the vehicle is fully charged and ready to go. No more planning to stop at the gas station, no more standing in the cold or smelling gasoline fumes. Tesla cars are categorized among the safest cars in all categories. On the other hand, planning for long trips could be more difficult with a Tesla both considering max range and availability of charging stations on the way.

Question: Conduct an economic analysis and write 1-page about your recommendation on buying a Tesla. a) First calculate the difference between purchasing and leasing a Tesla and a comparable model. b) Then calculate savings from fuel cost, and maintenance cost. c) How much difference would federal tax incentive before 2019 made in the decision? How about supercharger cap of 10% (instead of previously no cap) make in the decision?