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Elon Musk: No Leasing program from Tesla in the first 12 Months (Q3 Financial Call)

Discussion in 'Model S' started by de704, Nov 2, 2011.

  1. de704

    de704 XP268

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    I just listened to the "Tesla Motors, Inc. Third Quarter 2011 Financial Results Q&A Conference Call". Elon musk said there will be no Leasing program from Tesla in the first 12 Months of Model S & the 160 mile version of the call wont be offered for the first 5 months. I think that sucks. :crying:

    Your Thoughts?....
     
  2. Mycroft

    Mycroft Life happens

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    In this financial market, it would be VERY difficult to find an institution willing to loan money for a fleece on a brand new line. As for the 160 mile version, we've known all along that they would held off a while.
     
  3. jimbakker666

    jimbakker666 Member

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    Since I'm already back at #5370 for a 160-miler, maybe I'll have the option to lease before the option to take delivery? ;) I wouldn't mind leasing at first. In fact, since the cars seem to be fixed price, if I could lease first and stay under mileage, I could buy the car after the lease and not be any worse for wear.

    At least, this is from my limited understanding of leasing.
     
  4. AnOutsider

    AnOutsider S532 # XS27

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    Not surprising on either points. Good points regarding the cars being mile limited. Should work well for leases
     
  5. Mycroft

    Mycroft Life happens

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    A lease is simply borrowing the depreciation during the time you use the car. Since this is an entirely new category (battery electric), with lots of unknowns, in addition to the normal excess mileage and wear & tear fees, I'm thinking there will be quite a bit of buffer built into the amount of depreciation by the lending company. So the lease may be even more expensive than a lease normally is.
     
  6. WhiteKnight

    WhiteKnight _____ P85 #549 _____ Sig Red / Sig White

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    I think it sucks too. I think Tesla Motors is making a big miscalculation on this. For some reason they keep conflating "we've got 6,500 reservations" with "the first 6,500 don't want or need financing or leasing options." Elon Musk said it again today "we don't need a leasing program for 12 months because we've sold out the first 12 months of production." WRONG! There is a reason why 80%+ of BMWs and Mercedes are leased!

    If I can lease at attractive terms I am much more likely to "purchase" the Model S. Solar City LEASES solar equipment to people so they don't have to buy WHY does Elon Musk not get this concept?
     
  7. AnOutsider

    AnOutsider S532 # XS27

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    I don't see anything about financing, just leasing. As others have said, there are logistical issues with leasing (calculating value is a huge one), so I can see them not wanting to tackle that off the bat. I don't see it as a miscalculation at all. They didn't say EVER, they said not in the first year.
     
  8. Lloyd

    Lloyd Active Member

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    #8 Lloyd, Nov 2, 2011
    Last edited: Nov 2, 2011
    The reason that BMW and Mercedes leases so many cars is that they "buy down" the cost of the lease, in reality giving a lower rate to move the cars off their lot. There is no advantage for Tesla to discount their sales to a pre-sold condition. You can always finance your purchase through an outside leasing company. The rates are higher, but fair, than the subsidized ones from BMW etc. I used to work for one years ago. If you would like their number send me a PM. They would be happy to put a package together for you.
     
  9. Tommy

    Tommy Member

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    Hopefully Tesla clarifies their leasing program; as of today, the facts page on their web site still lists leasing as an option without any disclaimer as to when the leasing program will begin.
     
  10. Joel

    Joel Active Member

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    To be fair, Elon did say "we could get a leasing deal done, but we don't feel it will be necessary to meet our production goal in the first 6 to 12 months."

    I interpret it as: if leasing will help meet the 6 to 12 month production goal, Tesla could revisit it.

    We'll see...
     
  11. Adm

    Adm Active Member

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  12. gg_got_a_tesla

    gg_got_a_tesla Model S: VIN P65513, Model 3 Res Holder

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    SolarCity did NOT have a lease option till early 2008 - about a couple of years in. And, fixed panels on a roof are very different from an automobile, of course. Agree that leasing - to appeal to a big chunk of the mainstream auto 'buyers' - is needed but, can understand why Tesla is not gung-ho about it rightaway.
     
  13. Lloyd

    Lloyd Active Member

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    #13 Lloyd, Nov 3, 2011
    Last edited: Nov 3, 2011
    Exactly, Leasing is a financing scheme which does not necessarily have to come from the manufacturer.

    Having worked for a leasing complany it is a paperwork nightmare. Each lease has to be maintained for insurance, proper payments late fees, etc.Repossesing someones car due to non payment or lack of insurance is not fun! Then when they come to the end of the lease the lease company has to evaluate: Mileage, wear and tear, mainenance etc, to determine if there is an additional amount owing at the end of the lease. You cannot alway just walk away from the vehicle at the end of a lease, contrary to what many think. If you get a new vehicle at the end of your lease many times any amount owing is included in your new lease to avoid any conflict.
     
  14. robaross

    robaross P4550

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    I think it is imperative that Tesla establish a relationship with at least one leasing company if they don't want to do in house leasing. An $80K car may be affordable for some but may put it out of the ballpark for others who are used to leasing BMW, M-B or Lexus, and have no equity for a down payment. It would force me to consider downgarding to a 160 or 230 mile battery pack to save the $10 to $20K.
     
  15. WhiteKnight

    WhiteKnight _____ P85 #549 _____ Sig Red / Sig White

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    There is a huge positive to leasing for people that are brand new to electric cars and really like the option of driving it for 3 years and being able to return it at the end of the lease if it did not turn out to be all they hoped it would be.

    I am one of the people they expect to "purchase" a Model S in the first 6 months. The probability that I actually do that goes up substantially if they offer leasing.

    The idea that someone put down $5,000 so therefore they don't want or need a lease is wrong. Elon specifically said "we don't have to offer a leasing program because 2012 production is sold out." It might be "sold out" but it is far from SOLD yet.
     
  16. ckessel

    ckessel Active Member

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    #16 ckessel, Nov 3, 2011
    Last edited: Nov 3, 2011
    There are external lease companies, so you might be able to arrange the lease that way. Unfortunately, leases have a built in assumption of depreciation, which is fairly predictable on well known cars. With a new Tesla, it may be hard to find a company willing to risk the lease on a car with unknown depreciation history without being charged through the nose for that risk.

    I'm not personally a fan of leasing unless the company has a killer interest rate on the lease, because generally your favorite credit union can do better on a real loan. You can get most of the benefits of a lease by buying the car with a 72 month loan (or longer if you can swing it), then selling it at the end of 3 years.
     
  17. WhiteKnight

    WhiteKnight _____ P85 #549 _____ Sig Red / Sig White

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    The thing I like most about leasing is the embedded put option. I agree with the leasing company on the residual value, 3 years hence, in the leasing contract. If the value of the car is significantly less than the residual value (like $20K instead of $25K) then I can just hand the keys to the leasing company and walk away and I've avoided a $5K loss. [If it's $30K instead of $25K, I just buy the car at $25K]. As others have pointed out the very reason I like leasing is the same reason that the leasing companies are hesitant to set a 3 year residual value for the Model S. There is a lot more risk in buying the Model S because the residual value could be very low if (1) the battery technology turns out to not be as good as advertised (2) Tesla the company encounters significant financial headwinds, (3) etc.
     
  18. Lloyd

    Lloyd Active Member

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    #18 Lloyd, Nov 3, 2011
    Last edited: Nov 3, 2011
    What you have described is a closed ended lease. (vs Open Ended) In an closed ended lease the lease company has accepted the risk for market conditions for the car. These leases as a result usually have a lower residual value to help protect them, and as such a higher payment. In this case yes you can turn the car back in at the end of the lease period IF: 1. mileage is equal to or less than the amount allowed in the lease. 2. The car was properly maintained 3. No damage other than normal wear and tear has ocurred.

    In an open ended lease the owner accepts the market fluctuations, and there is more flexibility to setting the residual value higher, thus knowing that there may be an amount owing at the end of the lease. The advantage is that your payments can be structured lower. Credit requirements are usually greater for this kind of lease.

    With interest rates as low as they are today, I believe that anyone considering leasing would be better off with a conventional loan 5 years. Your payments will likely be about the same or less, and you will likely build more equity for when it comes time to sell, and more flexibility for paying it off.
     
  19. ChargeIt!

    ChargeIt! Member

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    That "Dutch bank" you mention ... is ... <drum-roll> ... Rabobank !!! (To those in the know ... that's where many of the 101 corridor from NorCal to SoCal Tesla HPC 1.0s were initially installed.)

    From your link:
     
  20. strider

    strider Active Member

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    I can tell you that when buying my Roadster I had them run the lease numbers and it would have cost $90k over 3 years. So that would assume a residual value of only $37k which I found laughable. So just because they offer it doesn't make it a good deal.
     

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