Tesla Model 3 vs Honda Accord LX: what’s the more cost-effective ride?

This sensational headline may have caught your attention this year, Tesla Model 3 Cheaper Than Honda Accord — 15 Cost Comparisons, as it appeared here on Clean Technica, one of our favorite sites.

Here’s the money slide, if you will, concluding that a Tesla Model 3 was marginally, but definitely, ahead of the Honda Accord LX CVT.  (Editor’s note, the two vehicles are basically comparable in size but not much else — nothing’s exactly like the Model 3 on the inside, it’s minimalist, has a lot of vroom, and really is more of a luxury small sedan, when you come down to it. More on that below in The Bottom Line.)

As analyses go, it’s a start. And, the tracking of relative value, to the driving consumer, of battery-electric compared to conventional internal combustion engines — that’s important to a lot of people making investments in one platform, or both.

As we do in the journey of science, let’s examine the numbers you see above critically with a goal of improving them. Our hope here is to get a tighter lock-down on the comparison — and eventually, other analyses will come along to improve on ours.

So, let’s investigate the question — has the Tesla Model 3 really pushed beyond a critical tipping point, where it represents a better deal for the dollar-conscious driver? Not just a great ride or a personal branding statement on ecology, but on the dollars?

The devil in the details

Our starting point it to re-create the chart, and here’s that work.

We want to look a little deeper into the detail, such as, what re-sale values have been used to generate the comparison. It’s important that we get as many data points as we can — also, since the Model 3 is not yet a five-year old car with an established history in the used car market, we want to flag any comparisons that rely heavily on assumptions of the type that Car A will be worth far more than Car B in the aftermarket.

As you can see, we have re-created the results. We didn’t have a source for the MSRP of each vehicle, the price you pay, so we used a popular and authoritative site, Edmunds.com. The downpayment and interest rates we have from the original comparison, and we have the cost per mile based on a $3 gas price and a 10 cent electricity price, and 13,500 miles per year, which is the authors’ mid-range scenario. (BTW, in the heavy-use scenarios, electrics get better; with lighter use, ICE engines do better – so keep that in mind). The scenario is worked out over 5 years.

So, what’s the catch? Actual prices paid for cars can vary all over the map, depending on what source you use, which is why we’ve picked Edmunds.com as a natural and conservative site. Starting from that point, what really catches us by surprise is the resale price you’d need to create this value scenario. The Model 3 is expected to hold something like 47 percent of its value, while the Honda Accord keeps only 21 percent of its value. 

Now, before anyone calls “BS” on this, there’s some evidence from the Model S that Tesla values can hold up well compared to other cars in the same class. The differential cited in that article is based on the luxury-end Model S, where we have some multi-year data, at around 7%. It’s written by a company serving the Tesla aftermarket, which may lead you to trust or discount the analysis, your call.

Nevertheless, our Digestville economists think we can tighten the comparison up to data data.

Digging deeper into the hard data: our scenario

Let’s look carefully at the assumptions in the Gen 1 comparison, and explain what we would do differently, and why.. The Gen 1 assumptions are in black, and our comments in red. 

1. $5,000 down and 5.5% interest on the auto loans. We’ve compared this to a cash purchase instead; too many deals are out there pertaining to individual incentives to buy this car or that, and we’d rather just make this a comparison of the car cost, not the attractive financing package that one make can afford over the other.

2. Kelley Blue Book estimates for resale values/depreciation after 5 years. We’ve dropped this, the Model 3 hasn’t been around 5 years yet yet and we don’t have robust data on depreciation. The 7 percent differential we have some data for is for the Model S, not the Model 3. In all, we believe a straight up comparison is going to less “guessy” if we avoid  theoreticals about residual value.

3. $3,750 US federal tax credit for the Tesla Model 3. We’ve dropped this for the purpose of the analysis. For one thing, there may be local or state incentives also available for a battery-electric vehicle. And, who knowns how long an incentive may last? So we’ve dropped this, though anyone is welcome to add it back in.

4. $0.10 average cost of electricity for charging (this could be much lower or significantly higher, depending on the individual, but I think it’s a decent guess for a median value). We’ve revised this figure to $0.137/kwh based on the latest available retail figures.

5. $3/gallon for gasoline. The average price in California is currently over $4/gallon. In New York, it’s nearly $3/gallon. In Florida it’s $2.8/gallon and in Texas it’s $2.6/gallon. The price of gas will surely fluctuate in the coming 5 years — it could go much higher or could drop lower again. I’d bet on it going higher, and thus see $3/gallon as conservative (favoring the Accord), but it’s up to you what figure you think is best to go with for this period of time. We’ve revised this figure to $2.50 per gallon. We’ve revised this figure to $2.50 per gallon, which is the US average at the moment. As far as future prices, we look to the June 2024 WTI contract is available (5 years out) for $51.63, which is 1.8 percent lower than the current (November) contract. Accordingly, we haven’t increased the price going forward.

6. $0 maintenance costs. There’s a strong case the Model 3’s maintenance costs should be much lower than the Accord’s, but there’s also an opposite argument and we simply don’t have much insight into what is in store after 5 years of ownership, so I’m leaving the figure at $0 and anyone can easily add maintenance costs as they see fit and can quickly adjust the calculations. We’ve left this alone, for the lack of a data set for long-term maintenance costs for a Model 3.

7. 4 miles per kWh efficiency for the Model 3, which is a bit lower than the official rating. We’ve sharpened this to official rating of 3.846. 

8. MPG ratings from Honda’s website for each of the trims. We”ve left this alone, and applied a 65/35 city to highway ratio.

Running the numbers: Honda wins by several lengths

We ran the numbers using the revised price of liquid energy and electricity, and we removed the subsidy (you can add it back, and any state incentives, or dealer incentives, available for either vehicle). And we’ve dropped the resale value assumptions. Pretty much, this is a straight-up comparison, eliminating any fuzzy math around tax credits, financing charges and the like.

In the end, it wasn’t as much of a horse race as the Gen 1 analysis concluded. Using the updated figures, we conclude the Honda Accord is a quite a bit cheaper than the Tesla Model 3. The Honda Accord LX beats the Tesla Model 3 by 43 percent in our “Gen 2” analysis. 

The Bottom Line

1. We’re no fossil-fuel crazies, here. And, we’re not telling you not to buy a Tesla Model 3. Tesla’s a wicked-fast, exhilarating experience, and electrics are more efficient in their work than internal combustion engines, hands down (though they do not fare so well against fuel cells on that score). But they’re not competitive, yet, if we’re comparing them to mid-market small sedans.

2. For our money, the Gen 1 analysis could have been better made using two cars that are more obviously comparable in terms of user experience. We see the Model 3 as a luxury small sedan, not directly comparable with a mainstream, mid-price vehicle like the Accord LX. Maybe something like a BMW series 2, or the Audi 5.

3. In the end, one thing you learn from running analyses like these is that virtually all of the value is in the vehicle, not the fuel, regardless of whether we are burning a liquid fuel or using a fuel to generate electrons as our energy carrier. It costs just over $6,000 in fuel charges to drive a car 75,000 miles at $2.50 a gallon. Electricity is far less, around the $1,000 mark. But both are just a small part of the overall cost, which is dominated by the vehicle price, and the finance charges.

4. For emissions, it depends by region. Coal is a big part of the electricity mix in China and still in the Eastern US, and oil is the source of electrons in the Middle East. The best way to get overall emissions down at this time is to go for carbon-negative fuels — NEV not ZEV, and for that you might look towards waste-based renewable diesel.

5. The numbers are subject to change. Fuel and energy prices are yo-yos. Vehicle prices vary over time, and also there are significant incentives available from dealers to drive revenue or government to cut emissions. Interest rates vary from promotional teaser rates all the way over to standards like 4.9 percent financing. So, a Gen 3 analysis will tighten and update these numbers, one day soon.

Until then, happy driving.