Prepay Model 3

[cpa]

Most people might diss this, but such plans have been around for a long time, especially with direct-ordered large purchases, like airplanes and industrial equipment. Progress payments are not really rare. I recall their use only for seriously custom-builts cars though. Tesla certainly could generate earlier cash from some of us by allowing us to pre-configure our cars as an inducement. Such an approach might help with production planning too.

It's probably a bit premature, but I still think the idea is interesting.

If I were the controller for Tesla, I would be none to happy about this proposal. It makes perfect sense for the large purchases that you mentioned. Any given company at any given time might only have 10-15 projects like this. This method is no different from long-term construction contracts where cash flow is necessary to keep the job progressing and the subcontractors, suppliers, and employees paid timely. However, this proposal more closely resembles buying merchandise on layaway from department stores. Those retail establishments have personnel and accounting systems in place to handle the $20 weekly payments the customer makes. The items purchased are physically removed from inventory awaiting payment in full. Most layaway plans assess a small non-refundable fee to the customer.

With the Model 3, there could be thousands of people who want to make periodic advance payments. Cash? Check? Credit card? On line? At the sales center? The bookkeeping would be a nightmare. Bookkeepers make mistakes. Customers make mistakes.
I do not know how much rub the credit card company charges Tesla to process credit card transactions. That fee in an of itself might be more costly than the incremental borrowing cost, not to mention the additional staffing and systems needed to track these intermittent $100 payments. Moreover, we just do not know how popular this feature would be. It would be a costly mistake to have all the controls and procedures in place only to find out only 82 people have signed on to make quarterly $1,000 payments.

Accounting departments have enough problems just doing the run-of-the-mill daily drills of processing vendor invoices, payroll, booking sales, writing checks, adjusting the books for errors and omissions, reconciling all the sub ledgers to the general ledger, making special arrangements for preferred vendors, employees or customers, and a whole lot more.