July Lease Terms

[XLR8OR]

For those contemplating leasing, here are the terms I just got from Tesla for a 36 month, 15K annual mile lease: money factor of .0018 (4.32% APR) and a residual value of 62% of the list price. In my experience the residual value is high and is directly the result of a strong secondary market for Teslas: on my BMW 6 series lease expiring next month the residual is 54%, which is typical for BMWs, Mercedes, etc.

Incidentally, when I was notified last week that my 90D was going into production it was time to apply for the lease. They didn't waste any time:

Friday, July 1 - lease application submitted
Saturday, July 2 - credit report pulled
Monday, July 4 - notified that the application was approved

In the exchange of emails with the Tesla finance rep yesterday, I asked why he was working on the 4th of July. Answer - big backlog and they were working longer shifts over the holiday.

 

[brkaus]

I believe the residual also reflects the $7500 fed tax credit.

 

[XLR8OR]

Well, not explicitly. The residual value in dollars is 62% of the cash price of the car, which is $103,950. Nowhere on the itemized detail of the lease terms does the $7500 tax credit appear. As owner/lessor USBank gets the tax credit, and grinds that into their rate of return on the lease terms, so the tax credit can show up as either a higher residual, a lower money factor, or a combination of the two. But you'll never know, nor does it really matter.

 

[MP3Mike]

Well, not explicitly. The residual value in dollars is 62% of the cash price of the car, which is $103,950. Nowhere on the itemized detail of the lease terms does the $7500 tax credit appear. As owner/lessor USBank gets the tax credit, and grinds that into their rate of return on the lease terms, so the tax credit can show up as either a higher residual, a lower money factor, or a combination of the two. But you'll never know, nor does it really matter.

Tesla has previously stated, very clearly, that the $7,500 tax credit was added directly to the residual. I , also, seem to recall that the rest of the residual calculation was ~54% of the base price of the car + ~47% of the options. (Not positive on those numbers.)

 

[XLR8OR]

Maybe so but, truly, it doesn't matter. There are only 4 moving parts to a lease: cap cost, implicit interest rate, term and residual. They define the rate of return to the lessor and the cost to the lessee; if you cut some value, something(s) else must increase to achieve the same return. And since the lessor takes 100% of the residual value risk (and thus gets 100% of the gain or loss due to the difference between the residual and the then-market value of the car), you don't care what the residual is, except that it is one of the factors that defines the cost to you.

 

[whitex]

And since the lessor takes 100% of the residual value risk (and thus gets 100% of the gain or loss due to the difference between the residual and the then-market value of the car)...

Small correction - the lessor doesn't get the gain unless lesee returns the car to the lessor. If the car is worth more at lease termination, the lesee can but it out, then sell it for profit, or trade it in at higher price and the dealer that takes the trade-in will do the payoff.

 

[XLR8OR]

Yes, but the lessee needs to buy it for the full residual value. That's not often done because: a) that's a lot of cash when the lessee is typically rolling over into a new lease and will need to fund the first month & security deposit, and b) the payment, title exchange, and re-registration of the car for resale can take time (and thus market value risk) that the lessee may not want to hassle with. But, as always, YMMV...

 

[CapeOne]

For those contemplating leasing, here are the terms I just got from Tesla for a 36 month, 15K annual mile lease: money factor of .0018 (4.32% APR) and a residual value of 62% of the list price. In my experience the residual value is high and is directly the result of a strong secondary market for Teslas

Tesla uses a residual of 54% for the Model S 90D on a 36 month lease at 15K miles/year. The $7,500 federal tax credit is applied to the residual to get a higher LEV to help lower the monthly payment. 62% is a reflection of the federal tax credit being applied and not anything to do with the secondary market for Teslas.

 

[whitex]

Yes, but the lessee needs to buy it for the full residual value. That's not often done because: a) that's a lot of cash when the lessee is typically rolling over into a new lease and will need to fund the first month & security deposit, and b) the payment, title exchange, and re-registration of the car for resale can take time (and thus market value risk) that the lessee may not want to hassle with. But, as always, YMMV...

It doesn't take any cash at all to trade your car in somewhere else. I've don't it many times - say your car is worth $55K as a trade-in and your residual is 50K. Take your car to the dealer of choice, sign over authorization for them to pay it off, they take the car and give you $5K (minus a couple of hundred fees if you want a check, usually the whole $5K plus sales tax credit in some states if you're buying another car from them). I even sold a Tesla that way, through a used car dealer. I gave them the car, signed a couple of papers, and they gave me a check for the difference the next day - less than 24hrs later. There is no risk in the time it takes for them to actually get the title - the new owner got a temporary registration to start, paperwork can take a few weeks while the new owner is already enjoying the car.

The process is identical as if you were trading in a car that you still have a loan on (or nobody would ever upgrade cars before paying them off).