Lease vs. Finance in "Tesla goes bankrupt" worst case scenario

[rog]

Apologies if this has already been discussed, but there is one question that my pessimistic ego is pondering: what happens if Tesla goes bankrupt during the 3 years lease/finance period? My take: in the leasing case, my maximal loss would be the remaining lease payments (risk is with the bank). In the financing case, the maximal loss would be remaining loan balance (assuming that the car would not have any value any more, since it would be an unsupported vehicle).

Thoughts?

 

[scottybrittas]

I thought about this before placing my order this week. I went with finance, on the basis that it's the finance company who owns the car until the last payment is made, so it's more their risk than mine. In the UK, there is a guaranteed future value hand back too, so even if the car is worth nothing, the finance company must write off any losses if you just hand the car back after 3 years.

or the alternative scenario, if the car is worth more than the guaranteed buy back value in 3 years, sell it privately, pay off the finance and use the extra to put a deposit down for a new one. All contract plans in the UK are structured this way, as the manufacturer wants you to order another one in 3 years and stay sort of 'locked in' to the brand.

 

[labfm]

why would the cars have no value if TM goes bankrupt?

 

[ztodd]

Seems you're also assuming that there would be no value if Tesla goes bankrupt. I think there's a good argument to be made that the value of the car would remain, or possibly increase, as classic cars can. This isn't just some run of the mill sedan that will plummet in value when the automaker goes bust (like a Pontiac Grand Am).

 

[rog]

Well, that's where probably the most uncertainety comes in. While I agree that "Classic Cars" might gain in value, that holds true for the old car world, where ICE mechanics can handle the majority of cars, regardless of brand. With a Tesla, things are very different - there is no other manufacturer out there that could continue maintaining a Tesla (unless someone buys that knowledge from Tesla in the bankruptcy case).
Who would want to buy a used car which needs very specific, rare know how?

 

[supersnoop]

Look at the Fisker cars on the market now. While they sell at a discount, they're nowhere near "worthless." And, with so many Tesla's produced, there will be a much bigger market to support.

 

[ohmman]

There are enough Teslas on the road now that there's a business case for aftermarket third party support, especially in the event that Tesla went under. I don't think there's any question they'll be supported in some way (though it'll be fee-based). The car will maintain value.

 

[jaguar36]

Well, that's where probably the most uncertainety comes in. While I agree that "Classic Cars" might gain in value, that holds true for the old car world, where ICE mechanics can handle the majority of cars, regardless of brand. With a Tesla, things are very different - there is no other manufacturer out there that could continue maintaining a Tesla (unless someone buys that knowledge from Tesla in the bankruptcy case).
Who would want to buy a used car which needs very specific, rare know how?

Someone would certainly buy the assets from Tesla.
In addition Teslas are becoming far from rare and most of the tools required to work on them are sufficiently released that if there was no Tesla to get pissed off if they were widely distributed they quickly would be.

They would take a value hit for sure, but they'd still be far from worthless.

 

[techmaven]

As someone that though a few times about picking up a cheap Fisker for the hell of it, the resale value of the Fiskers have been quite high. Annoyingly high for that idea, but in hindsight, that's probably a good thing I didn't go down that route.

 

[Super_Popular]

I would assume that Elon would sell Tesla before he would let it go under.

 

[sandpiper]

Apologies if this has already been discussed, but there is one question that my pessimistic ego is pondering: what happens if Tesla goes bankrupt during the 3 years lease/finance period? My take: in the leasing case, my maximal loss would be the remaining lease payments (risk is with the bank). In the financing case, the maximal loss would be remaining loan balance (assuming that the car would not have any value any more, since it would be an unsupported vehicle).

Thoughts?

With over 100K cars out there, I think Tesla is well beyond that point. If Tesla starts to get into trouble they will be bought out by somebody - another OEM, maybe Google. The brand, the charging network, the IP all have significant value. I have very little doubt Tesla will survive. The question is more about who will own it.

 

[Electric700]

Rather than debating worse-case scenarios, let's focus our attention on what's important, like helping Tesla succeed!

 

[rog]

Rather than debating worse-case scenarios, let's focus our attention on what's important, like helping Tesla succeed!

Oh, absolutely, don't get me wrong (otherwise I wouldn't have ordered a Model S :smile: ). But I think it is fair to think/talk about such things - after all, Tesla is still a (young) business, subject to reality.

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With over 100K cars out there, I think Tesla is well beyond that point. If Tesla starts to get into trouble they will be bought out by somebody - another OEM, maybe Google. The brand, the charging network, the IP all have significant value. I have very little doubt Tesla will survive. The question is more about who will own it.

Agreed, things don't look bad at the moment. However, compared to a traditional car maker, Tesla still has hardly any product diversification, and therefore is clearly more exposed to market saturation, has more single person risk with Elon Musk than any other car manufacturer, etc.

 

[jerry33]

Agreed, things don't look bad at the moment. However, compared to a traditional car maker, Tesla still has hardly any product diversification, and therefore is clearly more exposed to market saturation, has more single person risk with Elon Musk than any other car manufacturer, etc.

It's true that with traditional automakers there is a replaceable bean counter running the company. I'd suggest that they are more at risk, albeit in a different way, than Tesla because each year they become less relevant.

 

[sandpiper]

Agreed, things don't look bad at the moment. However, compared to a traditional car maker, Tesla still has hardly any product diversification, and therefore is clearly more exposed to market saturation, has more single person risk with Elon Musk than any other car manufacturer, etc.

I thought about this a fair bit before I bought the car.... after all, it's not a great car to have without the Supercharger, service centers, warranty, etc.

I concluded, to my own satisfaction, that the risk isn't there anymore. If TSLA the company ran into trouble, it would become one letter in the ALPHABET, or possibly a division of Daimler. In the worst case, we may end up paying for our supercharges and maybe lose warranty coverage. I can live with those risks.

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Rather than debating worse-case scenarios, let's focus our attention on what's important, like helping Tesla succeed!

Yep... but that said, people do worry about these things - and reasonably so. This car is a big leap for a lot of people. So discussing it probably makes some folks more comfortable. And that will ultimately help Tesla succeed.

 

[ChrisPDX]

As a DeLorean owner, these questions went through my mind as well back when I put a deposit down in early 2013. Ultimately I'm not worried now. I can get parts and service for my DeLorean made 35 years ago from a company that's been gone for 34 of those years. And that's with about 6,000 DeLoreans left! But back in early 2013 when Tesla only had a few thousand cars made, I was concerned that I could pick mine up and a few days later they would go belly up. At that point with so few cars, there would be minimal demand for parts/service that it might not have been a good investment for somebody to purchase any repair inventory to provide aftermarket service. But with all the cars made now, I'm sure there would be many companies that would jump at the chance to take over the service centers and start charging the owners for service (since no warranties would be valid anymore).

With every day, I worry less and less about this. Both from the idea of Tesla going bankrupt to getting service should they somehow become bankrupt.

 

[cpa]

I would assume that if Tesla files for Chapter 7, then game over. Company is liquidated, and the assets are distributed to the creditors. Some of the assets would have some serious value, like the real property, patents, software and what have you. Other assets, not so much (I am thinking the Supercharger network would be essentially worthless and the materials sold for scrap or salvage.) I would believe that a company like Google would snatch up whatever they felt had value and then decide how to go forward.

Chapter 11 is probably a more likely scenario if Tesla ever goes BK. Tesla survives with creditor assistance, perhaps selling off the Gigafactory to pay down debt (for example) and focusing on manufacturing 50-75K cars per year with some belt-tightening. Maybe ceasing new Supercharger locations to conserve cash as well.

But I am neither lawyer nor creditor.

 

[bswn1]

This is a question you should have been asking 2 years ago.

Now, this is like asking what would happen if GM went bankrupt.

 

[Ulmo]

With over 100K cars out there, I think Tesla is well beyond that point. If Tesla starts to get into trouble they will be bought out by somebody - another OEM, maybe Google. The brand, the charging network, the IP all have significant value. I have very little doubt Tesla will survive. The question is more about who will own it.

Koch Bros ... ?

 

[sandpiper]

Chapter 11 is probably a more likely scenario if Tesla ever goes BK. Tesla survives with creditor assistance, perhaps selling off the Gigafactory to pay down debt (for example) and focusing on manufacturing 50-75K cars per year with some belt-tightening. Maybe ceasing new Supercharger locations to conserve cash as well.

But I am neither lawyer nor creditor.

I see this as being almost zero possibility. If Tesla started declining, the stock would will drop substantially. At that point the company/brand/assets will become attractive for buyers. Right now there are no offers because the stock price is high.

The charging stations definitely have value. The bulk of the costs for these things is in the high voltage/current switch gear and in the installation itself. Some other EV builder, or perhaps a utility would buy these out, convert them to more typical DC charging standard and then start selling charges.