Well, the baseline scenario is a 36-month term and 12k miles per year. The buyout price is something we are working on, but it will likely be in the 60% of MSRP range. (e.g., $32k for a $54k MSRP M3)
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Model 3 Subscriptions & Priority Deliveries
- Thread starter kilocar
- Start date
Well, the baseline scenario is a 36-month term and 12k miles per year. The buyout price is something we are working on, but it will likely be in the 60% of MSRP range. (e.g., $32k for a $54k MSRP M3)
We ordered a bunch of Model 3s last week and hope to get them delivered in the next 3 weeks. We are ordering as many Model 3s as we are able based on Tesla's supply constraints. Our thinking initially, is to utilize the initial ones in our rental pools here locally to give potential customers an extended test drive to decide if they want to commit to doing a subscription. Once we get a few more delivered, we'll start shipping them to interested and qualified customers. Sorry to have to be a bit vague on the timeline. It is what it is I suppose...
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barjohn
Member
The way that Tesla does it is not favorable to the buyer. In fact it is horrible when combined with the money factor. When the $7,500 gets added back to the residual it ups the buyout price and is only useful to reduce the depreciation. If it is treated as a cap reduction instead (the more favorable approach that some companies use), it reduces the amount the money factor is applies to without negatively impacting the residual and thus making buying at the end of the lease more attractive and feasible. Also, beating Tesla's leasing shouldn't be too hard as the APR on their money factor is over 5%. You haven't stated what your MF is on your leases. Assuming the M3 holds its value as well as the MS vehicles, the residual should be around 60% plus or minus a few points after 36 months. Here is a thread on redit: Lease costs • r/teslamotors discussing this issue. The better bet with Tesla is to purchase the car or find your own leasing company that provides a more favorable rate and structure. If you are a business writing off the lease and have no intention of purchasing it, then Tesla's lease will probably work ok for you.
Well, I don't disagree with you at all. That's part of the reason why I'm doing this business. I believe it's possible to offer customers a better financial deal and still drive an awesome new Tesla. In our case, we actually reduce the purchase price by $5k from what we paid right from the start and then apply a monthly depreciation factor, so our customers can buyout the lease/subscription at any time and benefit from the EV tax credit too. They don't have to wait until the end of the term like a normal lease.
If you look at a $7,500 cap reduction at Tesla's MF of 5%, it equates to $375 a year in interest savings by doing it your ideal way or $31 a month. We give our customers $100 a month off of Tesla's payment or $1,200 a year, so that works out to be a much better deal. We also beat Teslas residual by $1,000 at the end (again, which already factors in the $7,500 tax credit). We don't go off of a fixed percentage like 60%, we use the actual residual value that Tesla would use on a specific VIN to determine the monthly depreciation factor and then beat it by $1k at the end. We've looked at this from all angles and tried to come up with a deal that is better (e.g., more flexible and more affordable) for our customers but still allows us to be financially viable. Check out this spreadsheet for how we calculate this depreciation and monthly buyout price for a specific Tesla, to get a better sense for our process.
If you can find a financial company who is willing to take $7,500 off the price of a Tesla right from the start as you suggest with a lower MF than Tesla, please send me their info. I'd love to do business with them! I haven't found one yet. It's a challenge for banks to think this way because it's not a typical cash-to-cash return model and they often can't or don't think of the credit like a cash payment. On Model 3s, Tesla doesn't lease them right now, so there's not a clear residual value baseline to go off of yet . We're using the MS 75D residual value (% of MSRP) as our baseline on M3s until that changes. Hope that helps.
barjohn
Member
Looks very interesting and novel. Could you do a sheet on the M3 using the same % depreciation that Tesla uses on the MS 75D? I would like to see how the numbers look and for comparison do an MS 75D too.
barjohn
Member
I read through your contract and one concern that I have is that it appears to be more of a rental agreement than a lease agreement since the car is never registered in the lessee's name. It is more like renting a car from Hertz but with a longer term and some purchase rights. Tesla never sees you as an owner as it would with a standard lease. It creates numerous complications with registration of the vehicle in other states as only the title holder or registered owner can register a vehicle in many states. Your contract states that Kilocar is the registered owner and title holder. Additionally, you have a lot of restrictions that go way beyond a standard lease. For example, while I don't own any pets, my grown up children do. I could envision a situation where I am babysitting my grand kids and something happens to their pet while in my care and I need to rush it to a vet. If I put the pet in my Kilocar vehicle I am in violation of the agreement (breach of contract) and subject to its penalties. My legal rights as a renter are substantially different and reduced compared to those of a lessee and registered owner. The law in this area varies in different states, but it is akin to the way short term home renters, i.e. vacation rentals, have no legal ownership rights but a long term lessee does. A few other observations:
In paragraph the preamble and in paragraph 1 you call this a rental and make it synonymous to a subscription and limit usage to personal, family, commuting, and household use. Yet in paragraph 17 you state that the renter is agreeing to not allow any other person to drive the vehicle.
In paragraph 10 you use the term Lease to describe this agreement (legally they mean different things).
In paragraph 18 you require the renter to obtain insurance on the vehicle, which would probably have to be different than a leased vehicle because it would be more like insurance on a rental vehicle. As the renter you are not the registered owner or title holder which could create problems in obtaining this insurance.
Paragraph 22 seems to contradict paragraph 17 on who can drive the vehicle. Paragraph 22© could be an impossible action and burden placed on the subscriber.
Paragraph 23 is both confusing and contradictory for anyone registering in their home state. Normally, a rental company handles all registration in whatever state it operates and deals with the issue of out of state vehicles rented in a different state. The renter has no ability to do this.
Unlike a normal rental, in the event of the death of the renter their is nothing binding on heirs where there is in this contract.
Will Tesla allow a renter access via smartphone, etc. as the renter is not the registered owner.
I would like to hear your views on this.
In paragraph the preamble and in paragraph 1 you call this a rental and make it synonymous to a subscription and limit usage to personal, family, commuting, and household use. Yet in paragraph 17 you state that the renter is agreeing to not allow any other person to drive the vehicle.
In paragraph 10 you use the term Lease to describe this agreement (legally they mean different things).
In paragraph 18 you require the renter to obtain insurance on the vehicle, which would probably have to be different than a leased vehicle because it would be more like insurance on a rental vehicle. As the renter you are not the registered owner or title holder which could create problems in obtaining this insurance.
Paragraph 22 seems to contradict paragraph 17 on who can drive the vehicle. Paragraph 22© could be an impossible action and burden placed on the subscriber.
Paragraph 23 is both confusing and contradictory for anyone registering in their home state. Normally, a rental company handles all registration in whatever state it operates and deals with the issue of out of state vehicles rented in a different state. The renter has no ability to do this.
Unlike a normal rental, in the event of the death of the renter their is nothing binding on heirs where there is in this contract.
Will Tesla allow a renter access via smartphone, etc. as the renter is not the registered owner.
I would like to hear your views on this.
Hi BarJohn.
It would look something like the attached on a Model 3 Long Range with PUP & EAP ($55k MSRP). Hope that helps.
Thx, JD
Good observation on the difference between our rental vs. a lease. This is an accurate assessment and part of the way we are able to offer the deal we offer to our clients. In practical terms, however, it doesn't feel much different for our customers.
Obtaining insurance hasn't been a problem for us or any of our clients. We offer insurance on all our Teslas if that were ever to be the case.
Yes, Tesla does allow our client's mobile access to our cars once we authorize them in writing. Same thing goes for service/warranty & roadside assistance type issues. On the other more legal items, I would point out that most leases (especially Tesla) have very similar clauses and restrictions (for example, how can drive the car during the lease and having pets in the car).
Our goal is to provide an excellent service to our customers and also cover ourselves. We recognize that our model may not work for everyone, but we are confident it works great for those who plan to lease a newer Tesla and also plan to upgrade regularly to newer models. Our subscription agreement accommodates this scenario quite well. We are more just trying to cover ourselves and make sure our customers know what to expect when working with Kilocar. If you are interested in moving forward, there's likely a way to massage some of these terms you mentioned to make sure your concerns are addressed or to make the verbiage more consistent.
Thanks for taking the time to do a deep dive on this.
Not sure I understand where you are coming from on this. Like I mentioned, we go off of Tesla's actual residual values for a specific make/model. Ours are actually off of their Q4 special pricing, which is quite a bit higher now in 2018. We don't expect our subscription model or leasing to be ideal for everyone, but we are confident it's a great fit and deal for many others, especially those who plan to lease a newer Tesla. Check out this recent article noting that over 80% of Teslas and electric cars are leased: Electric Car Drivers Are Too Smart to Own Electric Cars
Significant depreciation is one of the biggest drivers.
Going used and getting a 2-3 year old Tesla is also a great way to go if you want a flatter depreciation curve and want to own it for a longer time frame. I say go for it one way or another!
ccutrer
Active Member
Yes, we are still planning offering subscriptions on Model 3s this year. Right now, we are focused on getting as many here into our inventory as possible. Then, we'll start placing them with qualified customers. We don't want to get too far out ahead of ourselves, so we aren't actively promoting this option right now. We'll plan to post again here once we have a decent amount of M3 inventory to work with.
branden
Member
