Is the $399/Month Tesla Model Y Lease a Good Deal? Unpacking the Hidden Costs

Hey everyone, DennisCW here! Today, I want to dive into the much-talked-about $399 per month lease deal on the brand-new Tesla Model Y Long Range Rear-Wheel Drive (RWD). At first glance, it might seem like a steal, but I’ve crunched the numbers, and there are some critical details you need to know before signing on the dotted line. Spoiler alert: leasing a Model Y might not be the best move for most people. Let’s break it down.

Why Tesla is Pushing Leasing (Hint: $7,500 Tax Credit Loophole)

Tesla recently released the Model Y Long Range RWD, and they’re advertising lease payments as low as $399 per month. On the surface, it looks tempting, especially if you’re eyeing a low monthly payment. But here’s the catch: Tesla knows that leasing is a massive loophole for people who don’t qualify for the $7,500 federal EV tax credit. When you lease, you can often get the full credit applied, which isn’t the case if you’re purchasing and exceed the income threshold.

If you’re in that boat—making too much to qualify for the tax credit—leasing with the intent to buy out the vehicle later could make sense. It’s a way to indirectly benefit from the credit. However, if you’re just chasing that low $399 or even $499 monthly payment, there are some alarming numbers you need to be aware of.

The Biggest Red Flag: Sky-High Interest Rates (Money Factor)

One of the most critical components of any lease is the interest rate, often referred to as the “money factor” in leasing terms. For the Model Y Long Range RWD, the lease interest rate is a staggering 9.53%. Compare that to the All-Wheel Drive (AWD) version, which isn’t much better at 10.32%. These rates are outrageously high compared to traditional financing options, where you might snag something as low as 1.99% on certain Model Y trims.

To put this into perspective, I’ve compiled a detailed deal spreadsheet (linked in the description of my video) that breaks down the lease interest rates for various Tesla models. Out of all the options, only a couple make sense for leasing:

• Model Y Long Range RWD: 2.74% (the best lease rate currently available)
• Model Y Long Range AWD: 3.6% (still respectable)

Other models, like the Model 3 Performance (8.93%), Model Y Launch Edition (10%), and even the Cybertruck variants (ranging from 7.46% to 11.14%), have lease rates that are simply not worth considering. These high rates trickle down into other unfavorable lease terms, making the overall deal less attractive.

Beyond Interest Rates: Other Lease Costs to Watch Out For

Interest rates are just one piece of the puzzle. When leasing a Tesla, you also need to consider:

• Residual Value: This is the buyout price at the end of the lease. For the Model Y RWD, the buyout price after 3 years is around $31,075, while the starting purchase price (before taxes and fees) is $37,490. The math doesn’t exactly work in your favor here.
• Disposition Fee: If you don’t lease another vehicle at the end of your term, you’ll be hit with this fee.
• Acquisition Fee: A upfront cost of $695 that adds to the overall expense of leasing.

These additional costs can quickly pile up, making that “low” monthly payment far less appealing.

When Does Leasing a Tesla Make Sense?

I used to say, “Never lease a Tesla.” The deals were terrible, and Tesla didn’t even allow buyouts at the end of the lease term. But things have changed. Now that buyouts are permitted, leasing can be a low-risk way to drive a Tesla for a few years (typically 2-3) and then decide if you want to keep it. This approach works best if:

• You don’t qualify for the $7,500 tax credit and want to benefit from it via leasing.
• You’re not ready to commit to a long-term loan or outright purchase.
• The lease terms (like interest rate and residual value) are favorable.

However, in most cases—especially with the current Model Y RWD lease at 9.53%—leasing doesn’t make financial sense. If you’re set on a Model Y, consider financing at a low rate (like the 1.99% available for the AWD version) or even paying cash if you can swing it. If you’re paying cash and don’t qualify for the tax credit, a lease-to-buyout strategy could still be worth exploring, potentially followed by refinancing through a credit union at a better rate (around 4.5%, as discussed in our Patreon group).

A Better Lease Option: Model 3 RWD

If you’re dead-set on leasing a Tesla, take a look at the Model 3 RWD. With a lease interest rate of just 2.76%, zero down, and a 24-month term, the monthly payment comes out to $349. This is a far more favorable deal if you’re just looking to “test the waters” with a Tesla for a couple of years.

What’s Next for Tesla Deals?

As we approach the end of the month and quarter, I’m keeping a close eye on Tesla’s inventory. Historically, we’ve seen inventory discounts during these periods as Tesla pushes to move units. If you’re in the market for a Model Y, waiting a bit could land you a better deal—whether through a price cut or improved financing options.

Protect Your Credit Before Financing

If you’re planning to finance or lease a Tesla, there’s one crucial step you can’t skip: protecting your credit. Recently, Bank of America had a data breach and didn’t notify customers for a full month. On average, companies take 277 days (over 9 months!) to report breaches, leaving your personal info—social security number, email, phone number—vulnerable without your knowledge.

That’s why I use Aura, today’s sponsor. Aura constantly scans the dark web for any signs of my personal information and alerts me if anything pops up. Beyond breach protection, Aura offers tools to reduce spam calls, remove your data from sketchy broker sites, and even provides up to $5 million in identity theft insurance—all in one easy-to-use app. You can try Aura free for 14 days at aura.com/denniscw (link in the description). Don’t wait until it’s too late—protect your credit before applying for any financing. I’m doing it, and you should too.

Final Thoughts: Should You Lease a Model Y?

The $399/month lease on the Tesla Model Y Long Range RWD might look enticing, but the high interest rate (9.53%) and other hidden costs make it a deal worth skipping for most people. If leasing is your only path to the $7,500 tax credit, it could be a strategic move with a buyout in mind—but only if the numbers work out. Otherwise, explore financing options or wait for potential inventory discounts at the end of the month.

What are your thoughts? Are you considering leasing or financing a Tesla? Let me know in the comments below! And if you’re in the market for a Tesla, don’t forget to use a referral code (like mine in the video description) to get 3 months of Full Self-Driving added to your purchase.

Thanks for reading, and I’ll catch you in the next post!

• DennisCW