THE TESLA MODEL 3 PERFORMANCE IS ACTUALLY CHEAPER THAN THE LONG RANGE BECAUSE TAX CREDITS

But there's the catch—leasing paints a different picture.

Now that the new 2023 Tesla Model 3 Performance has officially dropped, it's time for the buyers who put off buying a new car to decide if they want to move forward with Tesla's newest flagship Model 3 trim.

Most buyers cross-shopping the Model 3 trims are generally looking between the Long Range and Performance trims. Both are all-wheel-drive, offer decent zero-to-60 MPH times, and have the premium bits that the Standard Range doesn't. The biggest factor that many ask is if the extra few thousand dollars is worth it.

But this new revelation might make your decision even easier—the new Model 3 Performance is actually cheaper than the Long Range.

I know you're thinking that it sounds too good to be true. I mean, why would Tesla price the top-trim of the Model 3 below its mid-tiered option?

Well, the answer is simple: tax credits.

According to the revised Federal EV tax credit that went into effect earlier this year, battery material sourcing requirements will now affect if a particular vehicle qualifies for the $7,500 tax incentive. If a vehicle qualifies for the tax credit, the government now allows that credit to be applied at the time of purchase, essentially lowering the price of the vehicle.

The Model 3 Performance qualifies for this tax credit because of the 2170 battery cells packed neatly in its floor—and it's the only Model 3 that does. The Standard Range and Long Range models both use Tesla's LFP packs which do not qualify for the tax credit.

After the tax credit, this brings the effective price of the Model 3 Performance from $54,630 after destination fees to just $47,130. The Long Range sits at $49,380, or $2,250 more than the Performance.

Here comes the gotcha—the Model 3 Long Range is actually cheaper if you lease the car thanks to a loophole that permits non-qualified cars to still get the tax credit if they are leased. Should you lease, the Long Range will run $439 per month versus the Performance's $549 payment.

Now, there are some trade-offs between the two. For example, the Model 3 Performance is (arguably) going to be significantly more fun to drive than the Long Range, especially with a 2.9-second zero-to-60 time. Not to mention its lower stance and more rigid chassis. But the Long Range offers a more comfortable ride with 341 miles of range (versus the Performance's 296 miles) with a zero-to-60 sprint of 4.2 seconds.

The value is really determined by the buyer. For some, the extra 45 miles of range may make or break the value of the Performance.