In this blog post, I am going to show you how I am going to buy a Tesla with my return on investments. I will show you:
- The exact Tesla model that I desire
- How to calculate the amount of capital needed to be set aside
- The number of investments required for this return
- The amount of gain required within the next 2-3 years to reach this goal
Our focus today will be on financial planning. I will show you my plan to achieve this Tesla, and in a later blog post I will update you on the progress of my investments.
The Dream Car
Your dream car may be something vastly different - it can be anything, but for today we will use my dream car for reference.
First we will figure out which model I want, then work backwards to figure out how much investment is needed in order to buy this with investment gains alone (without using any alternative income sources).
This is the Tesla Model 3.
The purchase price is around $52,000 CAD for rear-wheel drive, but I will opt for a dual motor all-wheel drive, which is about $65,000. I prefer this drive because it’s safer to drive in Vancouver, where it snows.
In terms of color, I opted for white since it looks more conservative.
For the interior, I opted for white again as it appears more spacious and kind of looks like the inside of a space rocket.
The real reason I wanted to buy a Tesla though, is for its autopilot feature. I want a car with self-driving capability, which adds around another $10,000 to the price.
This is the Tesla that I am looking for and it costs about $76,000 if I am using cash to invest. If I choose to lease it, it will cost around $700-800 per month. If I am loaning, then it will cost around $800 per month as well.
The goal here is to earn enough to cover the $76,000 and have that amount of cash available upfront, regardless of whether I decide to lease or buy it. However, I could also just decide to lease and invest enough only to cover the cost of leasing.
I will show a model based on both buying and leasing scenarios, but we will mostly be focusing on the $76,000 goal over the period of 2-3 years.
This cost by the way, does not include the cost of installing a charging station in my home, which I will probably need. However, the cost for that is not very significant, so we will ignore that for now and focus on the $76,000 for our calculations.
Here is a chart comparing our Buying and Leasing Options:
My first option - and this is really the topic that I want to cover because it is our goal, is to pay the full price upfront which is quite ambitious.
My second option is to lease, which is more practical and easy to achieve. So I will either have to pay $9600 per year to lease a Tesla Model 3, or $76,000 all at once.
Now, let’s think about how much capital I need to invest for myself in order to earn this car. My goal is to make around 30% a year, so let’s assume that is my return percentage.
Now with a 30% return, if I am buying I will aim to achieve $76,000 by 3 years so my investment has time to grow. If I am leasing, I will aim to cover the costs in 1 year.
Calculating Cumulative Return
So to figure out the amount that I will need to invest to get a 30% return of $76,000 in 3 years, I will be calculating the Cumulative Return. But first, let’s go over what that means.
Cumulative Return indicates the effect of price change on the value of your investment. It represents your gain (or loss) and is represented as a percentage of your original investment.
So here is my calculation for a Cumulative Return:
(1+30%) represents a 30% gain (which is my return goal)
Raise to exponent ^3 (years compounded gain):
The Cumulative Return in this scenario is 2.197, or ~ 220%. That means that I will want to double my money to be able to afford the Tesla Model 3.
Finance Plan - Buying
Now, let’s say I put $75,000 for capital…
which means that I could have bought it today, but I chose to invest it for 3 years instead. If you multiply $75,000 (capital) with 2.2 (cumulative return), that will amount to be ~ $164,000.
So if you invest and wait 3 years you will have enough to buy a Tesla with $12,000 surplus, which is sufficient to pay for a power wall and a charging station. If you want less surplus and to buy the Tesla earlier, you can get it at 2.75 years, which will leave around a $2,000 surplus.
Finance Plan - Leasing
If I decide to lease the car, my plan changes to investing just enough capital to cover the annual costs. In the example below, I calculated the capital required to generate adequate annual returns (at 30%) would be $35,000.
At the end of the year I will have a return of $10,500, which covers the cost of the lease with a $900 surplus.
As opposed to the buying scenario (requires $76,000 capital), the leasing option allows me to drive a Tesla with less capital ($35,000) while earning a surplus of $900 per year.
Essentially, I am using the returns from when I exit to pay off the lease. There are two things you need to consider in this scenario:
- You may need some kind of buffer - Your return % may not be consistent every year
- Inflation may affect your return % by about 3%. However, the effect is minimal and we can overlook this in our example.
Leasing the Tesla
Both of these are my ideal strategies as I do not have an immediate need to drive the Tesla yet.
I am a YouTuber and have a business - I am able to deduct lease costs for buying lease costs to drive it around for work, and that gives me a tax advantage.
This will delay the cashflow that I incur versus paying the full price and is ideal for my situation.
Investing to Buy Tesla
The right column represents the total return each year and the left column signifies the amount of return after deducting my initial $75,000 capital.
Because I am not in a hurry to buy the Tesla today, I use this $75,000 capital as part of my bigger portfolio, in which I have more money to invest in.
One possibility for following this route would be to split this into 3 separate investments. Let’s assume that they are equally as good and I am investing $25,000 on each.
I will be posting an update in the near future when I find the right investment at the right time. For now I will be patiently browsing different stocks until I find a suitable one meeting certain criteria.
To summarize with a little motivation booster, here is one of my favorite quotes from Elon Musk:
This quote really resonated with me because when it comes to investing, I knew it was something I would have to master. It was something so important to me that even when the odds were against me when I had no knowledge and mentor.
So I was thinking, well, why don't I set up a fund or some funds aside to buy a Tesla? And I'm going to make a rule for myself that I'll only buy a Tesla with my gains. So I'm not going to buy a Tesla with the principle balance. I'm going to buy a Tesla with just a pure game. So in this video, we're going to talk about which Tesla I'm going to buy. I would need to figure it out how much capital I need to set aside the amount of gain I need to make within the next three years or so. And how many investments I need in order to achieve that. So this video is really about financial planning, and then once I make my first investment, I'll make another video. And once I make my second investments and so on, I'll make another video and I'll keep you posted on my progress.
I start, I just want to celebrate and another successful case study within investing a celebrator where Carolyn made 36.75% synthetics in five months. So that's an amazing return. Good job, Caroline. And congratulations. Now I know 98.2% of you haven't subscribed yet. So it would really help me out. If you could just hit the subscribe button it's free and you can always change your mind in the future. Now, in terms of the Hunter likes giveaway, I'm going to be giving away the insane load. Now, this is the book I've just to show you right here. I'm actually reading it. I'm around halfway through it, uh, is written by actually a Tesla employee. So it was actually quite interesting. If you like Testa, I would suggest you to read it this one and also, and not a book from ULA Musk on how he became the iron man.
Okay. So let's get started the side on a first Tesla, uh, figure out what the dream car is, and then we'll work backwards to figure out how much investment is needed in order to get this with just the gains alone. Maybe it's a ridiculous number. I don't know. So, okay. So the purchase price here is around 52,000 Canadian includes potential savings that it's 38,000, but to be honest, if I'm buying something, then you're really should just look at the purchase price and not the savings because that's counting into the gas and so on. But then if I'm looking at a cash, outflow is going to be 52. Okay. Now, in terms of rear wheel drive versus dual motor all wheel drive, chances are, I do want the dual motor, uh, because it's actually safer to drive their snow because think Hoover is technically a cold place relative to California, but it's kind of warm compared to everywhere else. Okay. So I moved myself in the upper left corner. So then you can kind of see the purchase price and how much money I actually need to invest to get there. And I'm going to click next and well, in terms of color, I do want, let's say either black, not gray, blue looks pretty good as well.
Red, not really. So I'm either going to choose black or whites. Black looks cooler, but white is more conservative.
Hm. And for wheels,
White wheels doesn't look that good. Okay. So I want black wheels, black car. That's actually really intense. Okay. We'll go with the white one for now.
Let's do whites as well. I think that is more space looking. It looks like the space suit. Okay. Moving on. And in terms of autopilot, this is really the reason why I wanted to buy a Tesla. So I want full self-driving capability, which adds another 10 K to the price. Great. And now we're closer to 76,000 and okay, so this is the Tesla I am looking for. So if I'm using cash to invest, then it will be $76,000. Uh, if I'm leasing, then it will be around 800, 700 a month. And if I'm loan, then it's about 800 a month as well. Now, when it comes to this video series, I'm really looking to make enough to cover the $76,000. I might eventually choose the lease option when I'm buying it, but I want to have that amount of cash available upfront. So that's kind of what I'm looking for.
I mean, technically if I just do 800 a month, I can figure out probably I can just invest enough to cover the lease costs. Uh, we'll do a model based on both scenarios and then we'll decide what's better. But ideally for this video series, I really want to just cover the 76 K using gains because it was supposed to be a two year journey or whatever. Yeah. So we'll go from there. Okay. So that is enough research for today. And we'll go from there. We talked about, you know, the dream Tesla that I'm looking for, which is a model three it's around $76,000 Canadian, or it's 800 a month. So I'm going to do to financial projection and figure out how much money I need to invest and save to get there. So here I have an Excel, which is what accountants usually start with. And the cost is 76, eight, nine zero. Now, when I'm buying this Tesla, I'm really not in a rush. And I realized, I actually didn't include the cost to install a charging station in my home
Or a future home. Uh, but we'll
Ignore that for now and just go with the price of the Tesla. So my first option is really, you know, pay in full price. Now this is really what I want to cover. All in one go is kind of ambitious, or I can do the lease option. Now, if I'm doing the lease option, it's probably much easier to achieve blah, blah, blah, blah, blah. So on and so forth. And here it's actually the monthly costs. So monthly
800 now just rounded it down to make it easier for myself. No. Well, it's just $10 difference. So I think we're all good. So on an annual basis, 800 times 12. So it was $9,600 a year Canadian in order to get a Tesla model three. So I can either do it all in one, go 76 or I can do it yearly. So let's think about that. Okay. So let's think about how much capital I need to invest now for myself. My goal is really to make around 30% a year. So that's the assumption I'm going to be using. So that's my return. Okay. And then for costs, I want to use three years,
Three years. Okay.
So then my investment can grow and then I might be getting it in three years for lease is going to be a different situation, uh, because I'm going to try to achieve that in one year. Okay. So if I'm getting 30% a year for three years, then what I'm really looking for is to almost double my money. So the way it works is I'm going to calculate a cumulative return and then I'm the equals one plus 30%. And then to the power of three. So you can see that I double my money slightly. And then it's actually 2.2. So 220 minus 100%, then that's 120%. So that's, if I get exactly 30%. So that means if I want to invest capital. So capital, let's say I'm going to put $75,000 for my capital, which means I could have bought it today or whatnot. So I'm use that dollar sign because I'm anal like an accountant. And so that means at the end of three years, I'm going to have $164,000 using 75 K and then I can get a Tesla. Now, if I am using $164,000, and I take out the Tesla costs, I have $87,000, 885 bucks left. And if I minus the capital as well, then it's going to be $12,000 of surplus.
And this is probably sufficient to pay for a Powerwall. If I want one to pay for a charging station, not that's probably something I need. Well, I think let's stick with this surplus for now, if I want to have less surplus, because I want to get it earlier than as 2.75, then you'll see that the surplus goes down to around 2000. So that means, I'm thinking three years ahead to get my, which I think it's fine. I mean, ideally I want to get it tomorrow, but we'll just have to wait and invest. Now, if I'm going down to lease path, then it will be slightly different because I'm really looking at the payments over a period of time. And if that is the case, then what I really need is starting at the capital to generate a return such that it covers this cost on an annual basis. So that means I would need to calculate the annual return in dollars, which is going to be whatever capital I use times 30%. And let's say I put down down 30,000. Okay. That's about right. 40,000. All right.
Which is pretty good, 40,000. So I'm actually using less capital. I'm more efficient because I don't need to pay it all in one go. Yeah. So that's probably more than enough. I can probably go with 35,000 and this means I would have a surplus of approximately $900 each year. So that means if I invest, I get 30%, I can get a surplus of $900 after I get my Tesla. Not quite interesting, but I probably need to build in some buffer because my return is not going to be the same every year. So if you think about this scenario, right, it is really, instead of putting into money who buy a Tesla, I have some capital to invest, get some sort of cashflow while it's not really cashflow because my strategy focuses on capital gain. And then once I exit, then I'll use that to pay off the lease.
Uh, so essentially if I'm investing $35,000, then I pay off the lease with the gains. So over a period of time, I would just pay it off with the gains. Now, one thing I probably have to consider is inflation. So that means technically I would use 27%. The effect is minimal. It's only a thousand dollars difference. So I don't think it's that big of a deal. So I think we can stick with 30% for simplicity. Uh, but inflation is definitely one of the factors I need to consider as well. And also of course, the charging station, which I don't think it's that much money. So let's think about this. So you can see that's the amounts of capital I need for 35,000 for a lease. It's a lot less than full price, which is 75,000. Okay. And I'm just trying to decide which plan I want to go with because I don't have an immediate need to drive a Tesla yet.
So chances are, I probably go with plan a, which is full price. Uh, but because I am a YouTuber, I have a business or whatnot, then I can technically deduct the lease costs for buying a Tesla because I would drive it around for work. So this will give me a bit more tax advantage. And this will delay the cashflow that I incur versus the full price. The chances are, this is a better deal, and this is what I'm actually going to go with. But for the video series, I'm going to aim to make around $76,000, uh, using 75 K I think that'd be interesting. This might be a three year journey, but in terms of when I'm purchasing, I'll be going with this plan because $800 a month will ease on a cashflow. So then it just gets paid off over a period of time. So let's start with an investment capital of $75,000, and then we'll get 30% a year and we'll go from there. So this is a capital I'm really to allocate, to buying a Tesla. And if I think about this, if I need to earn 8% a year and earn enough gain for it, how many years would it cost for me to get there? So this is 8%.
So I would make around $6,000 for the first year. And then this will bring my balance up to around 81,000 and then I'll keep dragging it down, going forward. Let me just fix that formula. So this is actually quite interesting because I want to know what happens if I invest in the S and P 500 for it. So if I'm investing in S and P 500 for it, and I actually need 800 a month. So if I invest a hundred thousand dollars, that will actually get me pretty close to paying off the Tesla, just by investing in S and P 500 and not worrying about it. I guess that's the one alternative which I can pursue. But for the purpose of this video, I'm going to focus on getting 30% return. And over a course of three years, then I should be able to make enough money to pay for it.
A Tesla, since I'm not in a hurry to buy it today. So 89,000. So that means with $75,000, this is really a part of my bigger portfolio, where I have more money to invest in. Uh, but I'll put aside 75 K to grow and save up for a Tesla, which I think is fairly reasonable. So in this case, I'll split this into three investments. And you know, when, when a lot of people think, well, there's some magic in terms of portfolio allocation or whatnot. And on a portfolio level, I have around 10 stocks. So with 10 stocks is already fairly diversified. I'm happy with that allocation. So at this 75 K level, I don't feel like I need to be as diversified. So I'm just going to focus on buying three investments and assuming they are equally good. That means I'm going to invest 25 K each.
So in the next video, it'll probably take a while. It's not going to be immediate because I'm going to start looking for an investment and I'll be investing at the right time. I'll be waiting. I'll be browsing different stocks, unless it is the right time and the right criteria. I wouldn't be investing. So I'll let you know, once I made my first investments. So as we wrap up the first video, I just want to share a quote with you. It's one of my favorite quotes from Mulan is that when something is important enough, you will do it. Even if the odds are not in your favor. And that really resonated with me because when it comes to investing, I knew I had to master investing, and it is something important enough that even if the odds are stacked against me, I had no knowledge, no mentor or whatever I have to master investing.
And my vision for myself is really to make 30% a year. And when I first started, I sucked, you know, I made less than 10% a year. I was spending 20, 30, 40 hours a week on investing. I was studying alone and there was no one to teach me. And I spent eight years to master investing. And now I have a simple, profitable and proven strategy. And now I only spent around one to two hours a week and my target return it's around 30% a year. And I condense everything I know into investing accelerator, which is a four weeks coaching program. And some of the case studies from the program include Carolyn, where she made 36.7, 5% from FedEx in five months. So once again, congratulations, Carolyn Good job. And if you want to learn more, then you can go to the first link in the description and click on the free webinar, how to get 30% from the stock market in 12 months. So this will bring you to the free case study page on my website. And you can register for this four hour webinar where I explained to you how invest. And this is also how I invest when it comes to this video and for my future investments as well. So if you want to get a Tesla using your own investment money, then this may interest you. So I'll see you inside.