I bought a Tesla with bitcoin.
In this column I’ll explain how I did it, and saved money at the same time. (You can also download our new bitcoin-to-Tesla spreadsheet at the end of this article, if you want to run the numbers yourself.)
Back in February 2021, when Daddy Musk announced we’d be able to buy a Tesla with bitcoin “in the near future,” my wife and I went to our local Tesla dealer to inquire. They had no idea what we were talking about.
But this got our wheels turning. We were in the market for a new car – our Toyota Prius had over 150,000 miles and was running on compost – so while we were at the dealer, we took a Tesla for a test drive.
We had two other gasoline-powered cars we were considering, but when we got into the Tesla, we were like, This is it. By comparison, the other cars looked like horse-drawn carriages, and the Tesla was a hovercraft. It was so sleek, so advanced, so fun to drive: 33% more expensive, but 100% more satisfying.
You should know that my wife and I are thrifty about cars. We follow financial guru Dave Ramsey’s advice pretty much to the letter:
In our quest for financial freedom, here are the principles we’ve used when buying cars over the last 25 years:
- Never buy a new car, always used.
- Pay cash wherever possible, to avoid a monthly car payment.
- Buy the most reliable models according to Consumer Reports (usually Toyotas or Hondas).
- Annual service checks and an occasional wash to keep them maintained.
- Run them until they don’t run any more.
Most of the time, this meant we were driving boring cars that no one envied. But we saved a lot of money, which we were able to reinvest into other things, like bitcoin.
And this week, that bitcoin bought a Tesla. Here’s how we did it.
Step 1: Find a Used Tesla
Unlike gasoline automobiles, which depreciate in value as soon as you drive them off the lot, used Teslas hold their value remarkably well: another reason they appeal to the budget car buyer.
First, used Teslas are in incredibly high demand. Second, they are just fundamentally different from gasoline or even hybrid cars. No oil changes, no spark plugs, no emission checks. So they hold their value longer, and you save a ton of money on maintenance to boot.
We used the usual used car websites and Craigslist to watch for Teslas on sale from private sellers. Whenever we’d see a listing, we’d check the mileage against the Kelley Blue Book value to see if the asking price was fair. (Note I am using the royal “we”; my wife did all the work.)
We quickly learned that there was not much room to negotiate price: the low-mileage Teslas listed by private sellers would usually sell within a day or two, often at full asking price. Again, this is not like buying old-school gasoline cars; there’s way more demand than supply, so they sell fast.
Finally we found a model that we liked, with less than 10,000 miles: still under warranty! This thing was a find, so we acted fast. We offered to come to the owner’s house for a test drive the next day.
Step 2: Take a Test Drive
My wife and I went together (always bring a friend with private sellers). We made sure he seemed legit (he was). We did a visual inspection to make sure the Tesla looked good (it did).
Then we took a test drive: the seller rode in the back seat and pointed out the features. “Every other automaker just seems like they’re doing the same thing they’ve been doing since I was a kid,” he said. “When I got into this car, it was like I was driving the future.”
As he said this, I pulled onto the highway and experienced the whisper-quiet acceleration from 0 to 60 in 3.7 seconds: when you’ve been driving a Toyota Prius for the last ten years, this is like jumping to hyperspace. It is insanely fast.
Watch this video of people experiencing Tesla acceleration for the first time.
There is one other thing that sold me: the enormous digital display, which has all your dashboards, car controls, GPS, and autopilot. There are no dials, no knobs, no buttons. It’s all done on the screen.
And the screen WORKS.
I drive a lot of rental cars when traveling, and I cannot tell you how frustrating they are to figure out. I have deep resentment toward the auto industry about their poorly-designed user interfaces that were designed by narcoleptic monkeys. But I understand: the auto industry is a bunch of hardware guys.
Tesla is a hardware and a software company. This makes all the difference. New software updates get automatically pushed out to your car, like Windows. You want to unlock new features (like Ludicrous mode, which makes the car accelerate even faster), you just buy it and they unlock that feature in the software.
The Tesla, as Elon Musk has said, is like a laptop on wheels.
“Is there anything you don’t like about the car?” my wife asked the owner.
This one made him think. “Not really,” he responded. “I need to sell it because I’m moving, but it makes me sad to part with it. Some days I’ll sit in a meeting at work, looking forward to my commute home.”
“You fantasize about your commute,” I laughed. Tesla should hire this guy in sales.
We made an offer, which was right in the middle of the Kelley Blue Book range, and he accepted on the spot. We asked if we could bring someone out to inspect the car, and we offered to Venmo a deposit of a couple hundred dollars if he would hold it for us in the meantime.
(Note we could have offered to pay him directly in bitcoin, which would have been easier, if you can find a seller willing to do it. But he was asking cash, so I’ll walk you through how we converted bitcoin to cash.)
Step 3: Get an Inspection
It seemed silly to get an inspection on a car with less than 10,000 miles, but you never know if the car has been in an accident, and the professionals can tell. We called a mobile inspection service which specialize in this sort of thing. It’s a few hundred dollars, but worth it for the thrifty long-term car owner.
They came to the seller’s house, gave the car a workover, and 24 hours sent us a complete summary with ratings, photos, and a clean bill of health. (Note we also bought the CARFAX report, which was spotless.) All this cost about $250, which we paid out of pocket.
We had a good Tesla at a good price. Now we just had to figure out how to pay for it with bitcoin.
Step 4: Cash out Bitcoin
This was the hardest part. It’s hard logistically, because we had to transfer the bitcoin from our digital wallet to our old-school bank, which required four hops through various payment service (watch out for fees). Each step along the way, it raised a red flag because all the algorithms are on high alert for fraud, even though this is perfectly legal.
It reminded me of the self-checkout line at the grocery store. Every time I use the self-checkout, it thinks I’m stealing bananas and alerts an employee to come check on me. “WAIT FOR ASSISTANCE.” Every time. As soon as you walk up to the self-checkout screen it should just say, YOU LOOK LIKE A CRIMINAL WHO IS STEALING BANANAS.
We had the same kind of experience trying to get the bitcoin back into our banking account—perfectly legal, but the banks don’t know how to deal with it. (This was the same bank account where we had sent a wire transfer to Belarus to buy the very same bitcoin back in 2013: that funny story is in my bitcoin investing book).
Note to banks: please make it easier to get bitcoin in and out, and you will have our business.
Finally, after chunking up the bitcoin into smaller payments, and answering forty-two security questions, we got the money into the banking account. From there we were able to order a cashier’s check to give to the seller. (Again, it would have been easier to just pay the seller directly in bitcoin.)
A NOTE ABOUT TAXES: Most governments consider bitcoin an investment, so you will pay capital gains tax when you cash out — think of this like an extra tax for the “privilege” of paying with bitcoin. Most U.S. taxpayers have a capital gains tax rate of 15-20%, so a $40,000 Tesla will cost another $6,000 to $8,000 in capital gains, in addition to other taxes and fees. (Download the worksheet below.)
This wasn’t the hardest part, though. The hardest part was making the decision to sell bitcoin. If you’ve been long-term HODLers like us, it’s difficult to let it go, even for a Tesla. I’ve read so many stories of early bitcoin holders who sold hundreds of bitcoin back in 2015 to buy a cheeseburger, or drugs, and today would be multi-multi-millionaires if they had just held onto it. A fortune in bitcoin, up in smoke.
Here’s how I justified it: I need a new car, I’m lucky enough to have the resources to pay out-of-pocket, and I still have plenty of bitcoin left. Let’s live a little.
Step 5: Write an Article About How to Buy Tesla with Bitcoin
I wrestled with whether to write this article, because I want to help people achieve long-term financial freedom through smart investments in bitcoin and cryptocurrencies. A Tesla, let’s face it, is a luxury car.
I hated the “Lambo culture” of the early bitcoin billionaires, because a Lamborghini is an overpriced car with terrible gas mileage (12 city/17 highway). Buying a Lambo with bitcoin is also sending a message that you should blow your money as soon as you make it. I reject that whole scene.
Buying a Tesla, I think, is different.
Electric cars are better for the planet. They’re way cooler and more fun to drive. I can’t imagine ever owning a regular gasoline car again, unless I get one for free. Once you make the switch, it’s a no-brainer: why would you ever downgrade back to gas?
Maybe you like burning fossil fuels because of the sound they make, but remember you’re also burning money:
- Gasoline cars have lower resale value than electric cars.
- Gasoline cars have more maintenance expenses than electric cars.
- Gasoline cars require endless trips to fill up with expensive gasoline.
An electric car is like your cellphone: you just plug it into the wall at night and it’s fully charged in the morning. Your car becomes just another device.
There’s one last reason to buy a Tesla with bitcoin: this is a great experiment from the greatest auto manufacturer of our time. If enough people use bitcoin to buy Teslas, it paves the way for other automakers to do the same. From there, other industries will follow suit.
This further brings bitcoin into the mainstream, and accelerates (so to speak) the transition to digital currencies. For long-term investors, that may ultimately make your remaining bitcoin more valuable.
True, the bitcoin that I spent on this Tesla may someday be worth many millions of dollars, but I will never look back. Buying a Tesla with bitcoin was another valuable learning experience in this long, strange trip down the bitcoin rabbit hole — and now the trip is a lot more fun.
I still can’t quite believe that I own a Tesla. I have to keep touching it to make sure it’s real. Bitcoin, for so many years this invisible digital currency, is now parked in my garage.
I’m driving bitcoin.
NOTE: Our Bitcoin-To-Tesla spreadsheet can be downloaded here. Thanks to my wife for the numbers.
John Hargrave is the author of Blockchain for Everyone: How I Learned the Secrets of the New Millionaire Class, which tells the origin story of the bitcoin used to buy this Tesla.
The post How to Buy a Tesla with Bitcoin (+ Downloadable Budget Spreadsheet) appeared first on Bitcoin Market Journal.