Tesla Announces New Lease-Buy Financing Scheme That Elon Musk Calls 'Revolutionary'
We thought it could be the reveal of a new car or an expansion of the company's supercharger network; it turned out to be a new financing scheme that is a hybrid of owning and leasing a Tesla Model S.
The allure of the program, CEO Elon Musk says, is that if you factor in savings at the pump, it will work like a car lease that costs just $500 per month — or even "quite a bit less than that," Musk said on a press call. However, for most folks, it will be significantly more.
On Sunday, Tesla Motors seemed farther than ever from hitting the mass market, after announcing it will cancel production of the cheapest version of its Model S sedan. Now, the cheapest Model S starts at $62,400.
But the new lease-buy scheme "really makes this affordable to a much broader audience than people currently think is the case," Musk argued.
The combination of leasing and owning the car means that the buyer can either keep the Model S, or return it after 36 months, for the same residual value percentage as a Mercedes S Class. The goal, according to Musk, "is to give customers complete peace of mind."
What's particularly interesting about the news is that Musk is personally backing every purchase made under the financing program — even if Tesla is unable to do so in the future.
Unfortunately for the many people who have already ordered a Model S, the deal is only available to new customers.
Here's the full press release. A video of Musk explaining the financing program is below.
-------
Tesla Unveils Revolutionary New Finance Product Combines Best Aspects of Car Leasing and Ownership
PALO ALTO, Calif. – April 2, 2013 – Tesla Motors announced today that, in partnership with Wells Fargo and US Bank, it has created a revolutionary automotive financing product that provides the best elements of ownership and leasing to Model S customers.
Most people throughout the world prefer to own their belongings, rather than rent what is essentially someone else’s property via a lease. However, leases do provide some key benefits, particularly a low initial payment, tax deductions, lower risk on resale value and the convenience of returning a car without the hassle of reselling it personally.
Working with some of the largest and most respected banks in the country, Tesla has been able to create a new kind of financing product that combines the surety and comfort of ownership with all the advantages of a traditional lease. Like the Model S, this product was created from the ground up to provide maximum benefit to consumers, rather than simply duplicating other financing programs that tend to favor companies at the expense of the individual.
How does it work?
- 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.
- When considering the savings from using electricity instead of gasoline, depreciation benefits and other factors, the true net out of pocket cost to own a mid-range Model S drops to less than $500 per month.
- After 36 months, you have the right, but not the obligation to sell your Model S to Tesla for the same residual value percentage as the iconic Mercedes S Class, one of the finest premium sedans in the world, made by Daimler (also a Tesla partner and investor).
- Not only is Tesla guaranteeing that resale value, but Tesla CEO Elon Musk is personally standing behind that guarantee to give customers absolute peace of mind about the value of the asset they are purchasing.
------
Musk also released a video explaining the financing program.
--
Before the announcement, we came up with a few theories on what the news would be:
-
An update on the Model X, the SUV that will follow the Model S as Tesla's next car. The vehicle is scheduled for production in 2014; that could move up.
-
The announcement of a car Tesla has not revealed yet: The long-awaited "affordable" electric car — something for around $30,000. The cheapest Model S starts at $62,400.
-
An expansion of the company's supercharger network, which provides free charging for life to Tesla owners. So far, it's being built on the East and West coasts.
-
A big sale, similar to Zappos CEO Tony Hsieh's purchase of 100 Model S cars for his Downtown Project in Las Vegas.
And here are some suggestions from Twitter: