Tesla introduces financing product for Model S customers; lease-sale hybrid
02 April 2013
Tesla Motors, in partnership with Wells Fargo and US Bank, has created an automotive financing product that combines elements of ownership and leasing for Model S customers. Essentially, said Tesla CEO Elon Musk in a conference call describing the product, the new approach allows one to buy a new Model S for no money down net of the tax credit and as low as about $500 net out of pocket cost per month, depending upon the model, specific state incentives, and personal parameters (e.g., driving distances, etc.). Tesla offers a calculator on its Web site to allow potential buyers to make their own calculations.
Elements of the new program include:
US Bank and Wells Fargo have agreed to provide 10% down financing for purchase of a Model S (on approved credit.)
The 10% down payment is covered or more than covered by US Federal and state tax credits ranging from $7,500 to $15,000. New Jersey, Washington and DC also have no sales tax for electric vehicles. These advantages are not available when leasing.
After 36 months, customers have the right, but not the obligation, to sell their Model S to Tesla for the same residual value percentage as the Mercedes S Class. Tesla guaranteeing that resale value, and Musk is personally standing behind the guarantee to give customers assurance about the value of the asset they are purchasing.
The product is in essence a 66-month loan with a 2.95% APR that can be collapsed at the end of year 3 with no hassle, with the car returned to Tesla or resold. Should the consumer decide to hang on to the car after the 3 years, he or she would continue to make the monthly payments.
Now THAT is going to make a lot more people eligible to buy.
But will the same deal go for the Model X?
Posted by: Engineer-Poet | 02 April 2013 at 05:47 PM
EP, be sure to read the fine print. 'Net out of pocket' assumes some cost savings for gasoline and time spent at the pump ($100/hr).
So the actual payments are above $1000/month, but because you save on gasoline and reduce trip time (HOV lane access), they come to a net cost of $ 500/month.
This is will not earn a prize for elegance, and some potential customers will be disappointed. But if it makes people pause and think for a few seconds, they may get the message across. The message being that you should compare cars on a TCO basis, not on monthly payments.
I hope the disappointment wears off and the message sticks.
Posted by: Arne | 03 April 2013 at 04:35 AM
For the least expensive Model S (the 70,000 USD version 60kwh) the calculation is roughly 500 USD per month plus 300 USD per month in saved gas over electricity costs, 100 USD in saved time at the pump (one hour per month) and 150 USD per month in tax savings because of the EV tax credit. You still need to pay 1050 per month but the marketing point of being able to say 500 USD per month and then explain people that there are lots of savings that make up for the difference to your 1050 USD per month payment is very important. EVs need to be marketed with that in mind or most people unfortunately will not really get it.
I am looking forward to see the Model S used as a Taxi in large polluted cities where they could really make a difference in air pollution as up to 10% of all traffic can be from city taxies. Hope that city municipalities will be allowed to ban the use of petrol and diesel taxies in order to accelerate the deployment of non-polluting taxies. The Model S is really the first EV that can replace the gas taxies without any inconvenience to the consumers apart perhaps for a little higher fares.
Posted by: Account Deleted | 03 April 2013 at 05:16 AM
Good point, Henrik. But it would require Tesla superchargers at lots of taxi stands.
Posted by: Engineer-Poet | 03 April 2013 at 05:53 AM
1st Ford on their C-Max mpg
now Tesla on the price,
where will it all end?
Posted by: ToppaTom | 03 April 2013 at 10:26 PM
TT, not even close.
The big difference is transparency. Your are only 1 click away from the complete explanation as to why Tesla advertises this as a '$ 500/mo' car, and whether it is applicable for you or not. You can easily change the parameters according to your personal situation.
Ford otoh chose to deny, obfuscate and blame customers for higher than expected fuel consumption.
Posted by: Arne | 03 April 2013 at 11:03 PM