Tesla to make "exciting announcement on Thursday" (correction Tuesday)

[Norbert]

So my understanding is that this has an advantage over a loan due to the guaranteed resale value, and an advantage over a lease since you can keep the car, if you want, without having to pay the remaining 50%, or so, at once (you just continue the monthly payments).

In principle, giving you the best of both worlds.

 

[aznt1217]

So my understanding is that this has an advantage over a loan due to the guaranteed resale value, and an advantage over a lease since you can keep the car, if you want, without having to pay the remaining 50%, or so, at once (you just continue the monthly payments).

In principle, giving you the best of both worlds.

The key benefits are exactly what you describe.
1. The target buyers (at least the mass) are people who want an E/S class. Typically these cars are leased because this demographic likes to change cars every so often. I'm not sure what the conversion rates are for full buying on the vehicles but when they convert it's based on a capitalized cost you negotiate. So there's a huge hassle and uncertainty in that segment of the lease. It also avoids the risk of market uncertainty for the car once it is used.

2. You build potential equity. With a typical lease you are just throwing money out the window like rent and you never see your downpayment again unless you get some "deal" like a sign and drive event. At least with this, you have the option to keep the car with a no nonsense policy. It puts the power in your hands.

3. Tax benefits. It's treated like owning a car instead of leasing which can get you tax benefits and write offs on two ends, the tax credit for going green and a new car sales tax deduction. This is huge because it turns the down into a non-sunk cost.

 

[EVNow]

1. The target buyers (at least the mass) are people who want an E/S class. Typically these cars are leased because this demographic likes to change cars every so often. I'm not sure what the conversion rates are for full buying on the vehicles but when they convert it's based on a capitalized cost you negotiate. So there's a huge hassle and uncertainty in that segment of the lease. It also avoids the risk of market uncertainty for the car once it is used.

Most common leases have fixed residual. Nothing to negotiate if you are buying the car.

2. You build potential equity. With a typical lease you are just throwing money out the window like rent and you never see your downpayment again unless you get some "deal" like a sign and drive event. At least with this, you have the option to keep the car with a no nonsense policy. It puts the power in your hands.

Same thing. If you buy the leased car at the end of lease, it is exactly like "building equity".

3. Tax benefits. It's treated like owning a car instead of leasing which can get you tax benefits and write offs on two ends, the tax credit for going green and a new car sales tax deduction. This is huge because it turns the down into a non-sunk cost.

For individuals, no such benefit. Infact there are questions about tax benefits of financing the car vs leasing it. With lease the whole lease is a business expense, with financing, it isn't clear to me you can deduct the whole monthly payment.

 

[joefee]

By the way, let's give a round of applause for the 27 people who correctly guessed the nature of today's announcement. We'll all be counting on you to correctly guess the next announcements that evidently are going to be coming "every week or two."

"Tesla/Elon to set up financing/leasing program. 27 10.55%"

Yes, my hat is off to them!

 

[EarlyAdopter]

Help me out here ... I buy 60kWh at GRV program at ~$1000/month. After 3 years I've payed $36k in total for a car and Tesla buys it back paying me 62k*0,43 = ~$25k.

Those 3 years of owning and driving a new Model S had cost me $36 - $25k = $11k in total? Effectively only ~$300/month?

This cannot be?!??

It's a 66 month loan. You still owe money on the principal to the bank at 36 months.

 

[Russell]

It's a 66 month loan. You still owe money on the principal to the bank at 36 months.

That's what I thought too, but no one said that nor did the press release.


It's a loan with the option to sell back at a predetermined price. That's the revolutionary part. But you are still on the hook for the remaining loan balance.

 

[anticitizen13.7]

I can see why Elon is excited about this... it expands the potential customer base by a lot. Wealthier customers who lease in order to get a new car every few years will find this appealing.

I follow Tesla for the technology, and have never leased a car (I pay 100% cold, hard cash upfront for my cheap cars), so this is not as exciting for me personally, but I see why it matters in the long run.

 

[ebwb]

With $7,500 down and 2.95% financing over 66 months, the principal balance after 36 months is about the same as the buy-back price after 36 months. So you could "turn in" your car after 36 months, as you would with a lease, without penalty. In this sense, the effective "lease" price for a base Model S with "$0 effective down payment" is $1,044/month + tax over 36 months, 36,000 miles.

$71,070 base Model S
$7,500 down ($0 "effective" down after tax credit)
$1,044.61/month

After 36 months:
$30,175 principal balance
$30,560 buy-back

Of course, the math changes when you factor in sales tax. In Los Angeles, the monthly payment would rise to $1,149, the principal balance would be $33,210, so you would be underwater by $2,650 after 36 months and pay that amount at turn-in.

 

[Norbert]

Bloomberg interview: Elon Musk on Tesla Model S Financing: Video - Bloomberg

- - - Updated - - -

"One of those announcements is going to be a very exciting Supercharger announcement. We have a made a lot more progress on that front than most people realize."

Another one is going to be about re-engineering Tesla service.

A third one he doesn't want to say yet, "except to say that if you are driving Model S, it is right under your nose".

He got SEC approval for "tweeting" such things.

 

[vfx]

I can see why Elon is excited about this... it expands the potential customer base by a lot. Wealthier customers who lease in order to get a new car every few years will find this appealing. ..

cnn.com says half of luxury cars are leased. Add in the fears of what a battery will do over time this is aimed at first timers. No one here falls into that category.

 

[Norbert]

cnn.com say half of luxury cars are leased. add in the fears of what a battery will do over time this is aimed at first timers. No one here falls into that category.

There were quite a few articles casting doubt about the resale value of EVs.

 

[apacheguy]

Bloomberg interview: Elon Musk on Tesla Model S Financing: Video - Bloomberg
"One of those announcements is going to be a very exciting Supercharger announcement. We have a made a lot more progress on that front than most people realize."

My money's on the "step" change in SC technology that Elon has been referencing. Plus, sounds like they will be unveiling new stations on the order of every week. That's exciting.

 

[Right_Said_Fred]

I think the website is fine; the TCO calculator is very clear, letting you alter the assumptions. Where I think there's an issue is:

• The headlines will all read "$500/month to lease a Model S", and that ain't so (and Elon and Tesla did qualify the $500 as a net cost after considering other savings);
• The optimistic assumptions needed to generate the $500/month. When I plug in my numbers, I get $810/month. For example, if whatever vehicle I get is going to be used for business, then there's no net ​savings from this program.

There are already a lot of headlines (in Google News) saying thing like 'Leasing a Model S for $ 500? Not really'. Tesla created a great offer but took it one step too far by emphasizing all the possible cost abd time savings, and that is now blurring the message.

 

[Robert.Boston]

It's a 66 month loan. You still owe money on the principal to the bank at 36 months.

Yes, and the bank has first claim on the buy-back $$. I think, though, that you'll be okay. Here's an interesting coincidence: if you have a 10%-down, 2.95%, 66-month loan, the outstanding balance after 36 monthly payments is 43%. That number sound familiar to anyone?

 

[vfx]

There were quite a few articles casting doubt about the resale value of EVs.

What I'm seeing is a forced devaluation. They are basing EV resales on the limitations of ICEs.

Who are "they"? Appraisers and the public. When Roadsters first started coming on the market they just sat. And sat. Used Tesla buyers were just not going for the concept of a higher price for a car that has much less drivetrain wear for similar miles. It may take a decade for that to change. If it ever does.

 

[Norbert]

Yes, and the bank has first claim on the buy-back $$. I think, though, that you'll be okay. Here's an interesting coincidence: if you have a 10%-down, 2.95%, 66-month loan, the outstanding balance after 36 monthly payments is 43%. That number sound familiar to anyone?

I wonder if making those numbers more or less equal (43% for resale value, and for the loan pay off), came before using the S-class as a reference.

BTW, they changed it to 63 months (on the calculator page).

- - - Updated - - -

Today, Elon gave a timeline/order of the upcoming announcements:

Elon Musk: Hitchhiking The Galaxy As Tesla Comes Of Age - Forbes

EM: The next one will be sometime next week. It could be as soon as Monday, but we haven’t decided on a firm date. Did I mention we’ll be focusing on service? The Monday announcement is going to be focused on service. And in the following week or two after that we’re going to have a big announcement on the supercharger network, and then following that we’re going to have a mystery announcement or two if people aren’t completely sick of hearing about us. Ha ha.

 

[gg_got_a_tesla]

These "announcements about upcoming announcements" shtick from Elon is getting tiresome; can't keep up with all the speculation and the stock gyrations in the interim followed by the eventual letdown. Need to find a nice cave to live in for the next few weeks till this is all done with

 

[Norbert]

These "announcements about upcoming announcements" shtick from Elon is getting tiresome; can't keep up with all the speculation and the stock gyrations in the interim followed by the eventual letdown. Need to find a nice cave to live in for the next few weeks till this is all done with

It does get media attention. That's important in itself.

 

[Curt Renz]

It does get media attention. That's important in itself.

Indeed, with no marketing department or advertising budget, Musk is creatively enticing the media to provide free coverage. That's good for the long-term growth of the business, despite the attendant short-term share price volatility.

 

[Clprenz]

Hold up, wasn't this a 66 month agreement yesterday? "Based on a 2.95% APR, 10% down payment, and 63-month term loan, excluding sales tax and registration."