Is the Tesla Model S Really For the Rest of Us?

What does a Tesla Model S really cost to operate? Crunch the numbers and the results may be a bit surprising.


By now we’ve all heard about the new four door, seven seater (5 adults + 2 kids), all electric eco monster from Tesla — the Model S. We’ve seen the pictures of the gorgeous beast and we’ve had our chance to let the lust settle.

But the thing that’s been bothering me, and surely many of you, is that it still feels like Tesla is making cars with a decidedly un-populist bent. Tesla has been claiming for a long time now that their business plan is to start with the high end market, make some money, learn some lessons, and subsequently release cars that the rest of us can afford — using that money and those lessons to get there.

You know what though? For a sophomore offering, the Model S is still gonna cost $50,000 to start — and that’s with the low end battery pack that can take you a scant 160 miles. Even so, Tesla claims that the Model S is a car for the rest of us after you consider the cost to operate it over its lifespan as compared to a typical $35,000 gas guzzler.

So, being the bit of a dork that I am, my immediate thought was to test Tesla’s theory myself and pop some numbers into a spreadsheet. My basic assumptions were:

  • My hypothetical average car buyer will need a loan to buy the car.
  • To get a yearly payment, I set that loan at a 5.5% interest rate for 5 years.
  • In my simplified world, after 5 years the loan payments stop and all you have left are energy costs (fuel/electricity) and service costs.
  • My hypothetical average car buyer is financing the whole price of the car.
  • Electricity costs remain constant over the life of the car and follow the current US average of 11.47 cents per kWh.
  • I’m estimating that the Model S has a 4 mile per kWh efficiency which results in about a 3 cent per mile cost given average US electricity prices.
  • Service cost for an electric vehicle will be about $50 per year over the lifespan of the vehicle. In the 10th year of ownership I’ve added a $4,000 service charge to that base level to replace the battery. Tesla claims battery replacement will cost “well under $5,000” and that the battery pack will last 10 years (this value was changed from $500 after it came to light that the autobloggreen post from which I obtained this number had a typo).
  • Service and maintenance cost for a gas vehicle will be about $600 per year over the lifespan of the vehicle (this value was changed after reader input in the comments section).
  • My hypothetical average car buyer drives about 15,000 miles per year, half on the highway and half in town.
  • My hypothetical $35,000 gas guzzler gets 20 mpg in the city and 26 mpg on the highway.

After crunching the numbers, I’ve made four graphs (below) that show the cumulative costs of owning the Model S vs. owning a hypothetical $35,000 gas guzzler. The four graphs differ based on the price of fuel: $2/gal, $3/gal, $4/gal, and $5/gal.

You can see for yourself that at $2/gallon gas it would take 15 years before the Model S made up for its initial cost. However, at $3/gallon it’s 8-9 years, at $4/gallon it’s 6-7 years, and at $5/gallon the costs are nearly identical for the first 5 years. It’s worth noting that in all cases, after you make up for the initial cost of the Model S, the savings really start to pile on.

So, the question is, how much of premium is it worth to you to reduce fossil fuel consumption and dependence on foreign oil and how long are you willing to wait for the payback?

Plus, you never know when oil prices will jump back up to $4/gallon — or go even higher. In that case, you could think of a Model S purchase as a hedge against future oil prices.


Nick Chambers

Not your traditional car guy.