Tesla Model 3 Lease Price Slashed To Match The Toyota Corolla!

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In this article, I explain that Tesla has dropped its lease pricing so much that it costs the same to lease a Tesla Model 3 as a Toyota Corolla!

 Comparison of Buying the BMW 3 Series, Toyota Corolla, and Tesla Model 3 with a Loan

Image from fueleconomy.gov

I wanted to include this to show that the Model 3 is clearly a significantly larger car as far as passenger and luggage volume than the Toyota Corolla and slightly larger than the BMW 3 Series sedan.

In features and prestige, everyone would agree that Tesla and BMW are considered entry level premium sedans, while Toyota is considered a great mainstream brand. The Toyota Corolla was the best selling car in the world last year. In the US, GoodCarBadCar reports that the Tesla Model 3 had 57,600 sales, the Toyota Corolla had 50,660 sales, and the BMW 3 Series had 10,734 sales in Q4 2022. For many years, BMW was the sales leader in the entry level premium sedan market, so this is a dramatic difference in consumer demand and sales in this category. And it is shocking that the Tesla Model 3 at close to twice the price of the Toyota Corolla last year outsold it!

Image from BMW USA
Image from Toyota
Image from Tesla

For the first comparison, I went to all 3 manufacturer websites and picked a 60 month loan at the interest rate they defaulted to. From Tesla, you will actually be able to buy for this price. For the BMW and the Toyota, you may get a higher (recently) or lower (historically) price depending on the market conditions. The Tesla monthly payment is the highest at $858, but the main reason that is higher than the BMW at $818 is you don’t get any possible tax credit for a year, so you need to borrow the whole amount (assuming no down payment or trade-in). BMW also looks like it is offering a lower rate of 4.59% vs. Toyota’s 4.99% and Tesla’s 5.44%.

The Toyota Corolla’s payment of $427 is almost exactly half of the Tesla price.  At payments similar to this, the Tesla Model 3 slightly outsold the Corolla as buyers perceived the car’s features and fuel and maintenance savings justified the much higher price. The Tesla outsold the BMW by over 5 times since they perceived the car as both more affordable (even though the payment is similar, we have shown that the total cost of ownership can easily be about 65% lower). Perhaps buyers also considered the Model 3 more enjoyable to drive (this point is subjective and debatable, though).

Comparison of Leasing the BMW 3 Series, Toyota Corolla, and Tesla Model 3

I need to mention that current Tesla leases have a unique disadvantage. Tesla doesn’t give you the option of buying the car at the end of the lease. This means if Tesla does get Full Self Driving working (it seems to be taking forever, but Tesla might get it to work eventually) and the value of your car goes up since you can use it to make money as a robotaxi, Tesla gets that increase in value instead of you. Two and a half years ago, I speculated how a combination of 3 factors could allow Tesla to lease its vehicles for under $100 a month. Those 3 factors:

  1. Reduce manufacturing cost of the vehicle so they could sell it for $25,000.
  2. Recognize that the residual value of a 3-year-old Tesla with 30,000 miles is about 80% of the new price instead of the more common assumption of 60%.
  3. Use Tesla’s strong financial position to offer 1% financing.

So, Tesla has plans to reduce the manufacturing costs of both the Model 3 (see our article on the Highland project) and the next-generation vehicle we should hear more about in 3 weeks at Tesla’s coming investor day. That being said, the inflation caused by the pandemic (or more accurately our response to the pandemic) and the popularity of electric cars has raised material costs so much that it has countered all of the gains Tesla has made in manufacturing over the last couple of years. We are all hopeful that those price increases are behind us, and one good thing about the slowing economy is it should reduce pressure on prices.

It is unclear if Tesla has recognized the reduced depreciation of its cars in the current lease rates, but it is a possibility.

On the third point, Tesla doesn’t seem to be willing to use its strong balance sheet to borrow a lot of money at low rates to finance its leased cars. Of course, the Fed has dramatically raised interest rates over the last year or so.

A fourth point that I didn’t anticipate was the Inflation Reduction Act bringing back the $7,500 tax credit for Tesla vehicles.

Enough of the intro, what are the new prices?

Image from BMW USA
Image from Toyota
Image from Tesla

As you can see from the pictures above, the situation is totally different from the loan payments. The Tesla Model 3 and Toyota Corolla are both $477 a month, $200 less than the BMW 3 Series starting price of $677! As this is more widely publicized, this will drive a lot of Model 3 sales.

Tesla changes prices often, so this might not last long. The IRS is set to rule sometime in March on which cars get the full $7,500 tax credit, and the rear-wheel-drive Model 3 will likely lose $3,750 of its tax credit, since its lithium-iron-phosphate battery comes from China and that shouldn’t quality for that half of the credit.

I edited the Model 3 to add $3,500 in options, and that raised the monthly lease by $37 to $514 a month.


A Tesla lease may be a great option for people who want the lowest possible payment and are not interested in building equity in their cars. It also may be a good choice if you feel Tesla cars will depreciate quickly when the next-generation, more-affordable Tesla becomes available for as little as $12,500 as I explained in this article.

On the other hand, if you think Tesla will get its Full Self Driving working well enough to use the cars as robotaxis soon(ish) and the car can indeed make make money instead of costing money, you would be far better off buying rather than leasing a Tesla. Even though I have the Full Self Driving Beta and have watched the progress for over 4 years, it is very hard to know. That is something you will have to decide for yourself.

Another factor to consider is if your income is too low or high to qualify for the entire $7,500 tax credit. Leasing is a better deal if you don’t qualify for the whole credit.

Disclosure: I am a shareholder in Tesla [TSLA], BYD [BYDDY], Nio [NIO], XPeng [XPEV], and Hertz [HTZ]. But I offer no investment advice of any sort here.

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Paul Fosse

I have been a software engineer for over 30 years, first developing EDI software, then developing data warehouse systems. Along the way, I've also had the chance to help start a software consulting firm and do portfolio management. In 2010, I took an interest in electric cars because gas was getting expensive. In 2015, I started reading CleanTechnica and took an interest in solar, mainly because it was a threat to my oil and gas investments. Follow me on Twitter @atj721 Tesla investor. Tesla referral code: https://ts.la/paul92237

Paul Fosse has 237 posts and counting. See all posts by Paul Fosse