
Tesla’s Model S Lease and Financing Program Expensive, Misleading - astaire
http://blog.caranddriver.com/teslas-model-s-lease-and-financing-program-expensive-misleading/
======
jusben1369
When this first came out a few days back I said this had the chance to be a
much bigger problem than the NY Times piece:
<https://news.ycombinator.com/item?id=5482963>

Ok, now I got "how smart am I" out of the way. Tesla can have stumbles as a
product and we can forgive them because they're blazing a trail and early
adopters understand that comes with the territory. I for one did not care too
much about the NY Times article. It was such an extreme use case (traveling
all that distance in freezing cold) that would solve itself within 18 - 36
months. It would not have impacted my buying decision. The response from Elon
gave me more pause. "Wow, there's such a defensive attack response from this
company. What happens to me if I buy one and it's a lemon? It can happen. Do I
feel like they'd be supportive or blame me for everything that went wrong?"
More troubling than it needed to be.

This now takes them into entirely new territory. This goes to the one feature
that's critical to the success: credibility and trust. Carandriver says it
best when they basically say "Why are they pulling these shenanigans? They
don't need to. It's an awesome car"

What really matters is if I were in the market for a new car in the next 12
months up until pre NYTimes Tesla would have been my top choice. Post NYTimes
I would have asked a lot more questions if I was going through the buying
process. Now I would not buy a Tesla for at least 12 months as I want more
proof points around what exactly is the culture of this company.

Elon will publicly apologize for this within 30 days is my best guess.

~~~
larrys
"Elon will publicly apologize for this within 30 days"

If we can assume he knows nothing about this ad then we can assume he will
fire the people (and/or agency) involved in this advertising black eye.

~~~
jusben1369
Well with Elon's personality type you know nothing would go out like this
without his knowledge. But we don't have to guess - he was in the video
personally announcing the $500 lease plan.

------
dancesdrunk
The only thing that irks me here is how the cost of fuel is deducted from the
cost of the lease:-

If I'm paying $1200/mo for a lease, and any fuel / maintenance costs are on
top of that amount. If I get an S-Class for $1200/mo, the fuel would be (for
example) $200/mo on top, the total being $1400/mo. Increment accordingly for
maintenance.

Tesla S is $1200/mo. I don't need fuel, hence I don't pay anything on top. It
doesn't magically become $1200 - $200 = $1000/mo. You're still paying
$1200/mo. Plus the cost of maintenance and electricity.

Talk about manipulating numbers.

~~~
kamaal
How is the fuel for an electric car free?

I mean is electricity free in the US?

~~~
nknighthb
> I mean is electricity free in the US?

No, but it's a lot cheaper than gasoline.

The average cost of a kilowatt-hour is something like $0.11-$0.12 in the US
(some places are much higher, some are lower).

The highest-capacity model with an estimated 300-mile range holds 85kWh. Tesla
claims >90% charging efficiency, but let's just say 95kWh to charge.

95kwh * $0.12 = ~$11.40 per 300 miles.

Right now, a gallon of regular gasoline in the US averages $3.601.

300 / 50mpg = 6 * 3.6 = $21.60

300 / 40mpg = 7.5 * 3.6 = $27.00

300 / 30mpg = 10 * 3.6 = $36.00

300 / 20mpg = 15 * 3.6 = $54.00

300 / 10mpg = 30 * 3.6 = $108.00

As a point of troubling comparison, the Model S gets compared to a BMW M5 a
lot, which apparently has a 16mpg/24mpg city/highway rating.

Another useful comparison is to a basic Prius, which has a 51/48 rating, but
is substantially smaller, lighter, and less performant than the Model S and
M5, but the Model S still beats it by a large margin.

When Tesla gets around to a Prius-like EV, the numbers are going to be even
more ridiculous. The "fuel cost" of commuter EVs will simply be noise in the
typical family budget.

~~~
cube13
>When Tesla gets around to a Prius-like EV, the numbers are going to be even
more ridiculous. The "fuel cost" of commuter EVs will simply be noise in the
typical family budget.

Or some of the European diesels, some of which are pushing 100 MPG.

~~~
fancyketchup
>Or some of the European diesels, some of which are pushing 100 MPG.

Unless I'm terribly mistaken, you are thinking of vehicles that were tested on
a different driving cycle with a larger gallon (imperial vs US). If compared
on an EPA cycle with US gallons, those cars get closer to 50 mpg.

~~~
nknighthb
> _If compared on an EPA cycle with US gallons, those cars get closer to 50
> mpg._

It's worse than that. Diesel fuel has a higher energy density than gasoline,
and is more expensive. Anyone trying to directly compare the two in terms of
miles per gallon and cost without the appropriate adjustments is simply
speaking nonsense.

------
spullara
I even own a Tesla S and think the advertising of this program is terrible. I
can't side with Elon on this. They definitely need to add some kind of
qualifier like "$500 / month with savings." or "TCO equivalent to a $500 /
month lease on a normal car."

15k/year assumption in the fuel savings calculator vs the 12k/year buyback
program rate is hopefully an oversite rather than on purpose...

~~~
Yhippa
As an owner what do you think of the car? Do you regret being an early adopter
and would you recommend waiting?

I'm gambling that they're eventually going to release one within my price
range in the next five years. This financing program would make getting into a
Tesla doable but I am not a big fan of leasing.

~~~
spullara
I love it. Doesn't feel like a 1.0 to me. The guaranteed buyback of this lease
is a good deal I think. That said, they will release less expensive models
within your time frame.

------
CountHackulus
Went to a Tesla "dealership" today, this article is entirely true. I was
horribly disappointed that I couldn't actually afford the car.

------
olympus
When someone who truly revolutionized online money with PayPal says they have
a revolutionary new deal, they had better not come at me with smoke and
mirrors like this. When Elon Musk sat in front of a camera and talked about a
revolutionary new financing opportunity where I could get an $80k car for $500
a month I was stoked. I was a lot less stoked when I found out that the "$500
a month" payment was actually as large as my mortgage payment. I've always
been enthusiastic about what Elon Musk has done _, but this irks me. It's
pretty shady when you subtract the value of the Model S at three years in your
calculations, but you don't subtract the resale value of any other cars in the
comparison. Just because other cars don't have "guaranteed" resale values
doesn't mean they have zero resale value.

_ including PayPal, although they seem to have lost their direction since he
left.

------
ricardobeat
While the $500/month and milage figures can be misleading, they failed to
acknowledge the upside:

\- the savings from fuel/maintenance/etc are very real, not wishful thinking.
The math is true for total cost of ownership

\- no downpayment due to the tax refunds

\- guaranteed buyback, not something you'll find anywhere else

In the absolute worst case it's a standard lease + buyback guarantee, so how
can it be "expensive"?

~~~
vacri
No fuel costs? What about the eventual battery pack replacement? That's not
cheap.

Similarly the buyback is only for a very short window of ownership. It'll be
interesting to see how they remind owners of this window - will it be months
in advance, or will it be "Hello, as of today..."?

~~~
gregpilling
Some cost information about Prius battery packs (not a Tesla, but relevant)
[http://www.tirebusiness.com/article/20121120/NEWS/121129994/...](http://www.tirebusiness.com/article/20121120/NEWS/121129994/replacing-
hybrids-battery-not-as-costly-as-you-think)

~~~
vacri
The Tesla batteries are more expensive - at around $10k a pop, it's not so
trivial [http://green.autoblog.com/2012/11/30/tesla-adds-
replacement-...](http://green.autoblog.com/2012/11/30/tesla-adds-replacement-
battery-pack-costs-to-price-increase-deta/)

------
spc476
Here's something I can't figure out. I saw a list price of the Model S 60Kw as
$62,400. The article says you pay $1,097 for 63 months for that model, and you
can sell it back at 43% of the original price. Okay, at 36 months, you've paid
$39,492 in payments. Assuming Tesla buys back at 43% of the $62,400 price, or
$26,832 and you get that money, then all you are out at the end of 36 months
is $12,660 or an effective $351/month (but only realized after three years).

Am I missing something here? Is my math off?

~~~
majormajor
After making $39,492 in payments, you still owe $22,908 on the car (well, not
exactly, because I'm not accounting for the down payment or for interest on
the loan, here—but you don't own the car free and clear). So that $26,832
doesn't all go straight into your pocket if you sell the car back.

That's why, in order to get to the $346 figure I'm seeing on loading up the
page with the default options for the 60kWh model, most of the "savings" comes
from stuff other than the buyback (primarily the business tax benefit and fuel
costs). The guaranteed resale value portion is only credited a $40/month
benefit.

~~~
spc476
Oh, that's right---I'm not the full owner and most (if not all) of the money
goes to the bank. Lovely.

------
Lightbody
I'm a huge fan of the Model S and will be putting in an order for one as soon
as I can decide which version to get. But I too think their whole financing
announcement was really lame. Seems very beneath them for having such an
amazing product to offer.

~~~
vl
>as soon as I can decide which version to get

Is there a question though?

Max battery + all options including wheels and leather, except "pain armor"
and probably "rear facing child seats".

Roof is tricky, don't know it it's a good idea or not.

------
ck2
Not to dismiss this but have you EVER seen an honest financial product or
advertisement for such?

I mean to get that result you'd have to throw bankers and marketeers in jail
for bad behavior and that's never going to happen, so what exactly is their
downside?

~~~
anigbrowl
TIn several European countries that I've lived in, you would not be allowed to
make claims of this kind in your advertising - it's regarded as abusive of the
consumer. The first amendment gives advertisers wide latitude with the kind of
claims they make, and even fairly blatant exaggeration is OK as sales talk is
expected to involve a degree of 'puffery'. I like the first amendment but as a
consumer I sometimes find the almost universal use of bait-and-swtich tactics
in American advertising extremely tedious.

In this case I think Tesla went too far with their claims and the market (both
on Main and Wall street) is punishing them accordingly. The buyback guarantee
was a good idea, as is the lease scheme. Of course they want to make the price
seem attractive, but I think they could have been frank about a $1000/month
lease cost and got the same amount of business or even more. A surprising
misstep.

~~~
arethuza
I presume you didn't live in the UK?

We seem to have a particularly slippery financial services sector (with some
notable exceptions) - the latest one being interest rate swaps being sold to
relatively small and unsophisticated borrowers as "interest rate protection".

~~~
anigbrowl
Not any more, but then financial products have always been regulated rather
loosely, given the FSA's vague guidelines. That _does_ sound pretty strange,
but I was thinking more of regular consumer goods.

I do frequently miss the media landscape in the UK _grabs lapels_ you don't
know what the TV here is _like!!_

~~~
stcredzero
_> grabs lapels you don't know what the TV here is like!!_

Let me know if I should send you that karma for TVTorrents.com. They're based
in the UK.

------
smackfu
The other missing factor here is who is paying the sales tax on this $80,000
car. That's $6000 at a 7.5% rate, due on "purchase".

~~~
matwood
Depends on the state. Some states cap the sales tax on an auto purchase. IIRC,
in SC it's capped at $350. Then of course you get the property tax bill about
a month later assuming you didn't transfer tags.

~~~
smackfu
True. I think people just need to be wary that no matter how Tesla works the
numbers, you are still buying an $80k vehicle at the end of the day.

------
dpe82
> The sad part of this price comparison quagmire is that Tesla doesn’t need to
> do it. Its Model S is, flatly stated, very cool.

Totally agreed. I'm really disappointing that this BS is coming from what (up
to this point) many of us have perceived as a trustworthy company. We all know
Teslas are expensive but that they'll get more affordable with future models.
There's no reason to pull this kind of stunt. Elon, you're better than this.

~~~
davidiach
But it should also be noted that they don't advertise it as the price of a
Tesla but the cost, or "the true cost of owning a Tesla". Cost and price are 2
different things. My problem though is that I don't think that they got the
math right.

It's like saying: you spend 3000$ every month. A trip to Las Vegas would cost
you an additional 1000$. But if you don't go to Las Vegas you are saving 1000$
and now your "true" spending is only 2000$ this month.

What they should have said is: non EV - car X has a monthly price of 1200$ and
Tesla Model S also has a monthly price 1200$. For car X you have some
additional monthly costs of 1000$ but for the Tesla, the additional costs are
only 300$. So the total cost for you would be 2200$ for having car X and only
1500$ for Tesla. Or something like that.

~~~
yesplorer
> Cost and price are 2 different things

this may be true but _contextually_ it is not acceptable. If a salesman emails
me that the cost of their car is $500 (mind you, without asterisk or even
something like 'terms and conditions apply/see (blank) for details) all am
thinking about is the price of their car.

but if you start asking questions like how much is my time worth, because it
counts towards the _true cost of ownership_ it starts getting ridiculous.

and which time are you referring to? the trip to the corporate meeting or the
trip to my son's baseball game? seriously

------
marcamillion
Huge fan of Tesla....but this advertising is misleading and very
disappointing.

Come on Musk, you set the high bar for yourself. We expect better.

------
tocomment
I wonder if anyone at Tesla considered the idea of guaranteeing the gas
savings? At it's simplest the buyer just gets some money back if the cost of
gas goes way down.

Tesla could use futures to fund the guarantee at possibly a low cost?

------
OGinparadise
The also valued an hour of stuck in traffic at $100. Imagine if we didn't
sleep that much, or we ate while working, several hundred $ more a day.
Because that's just how it works :)

The biggest opportunity to screw you is this [http://blog.caranddriver.com/wp-
content/uploads/2013/04/Tesl...](http://blog.caranddriver.com/wp-
content/uploads/2013/04/TeslaMileageTerms-626x381.jpg)

"Excessive wear and use" gives them a license to renege on their promise to
buy your car for 43% of the value after 3 years. Considering the truth
stretching Tesla did with this advertisement, I'd trust them to take advantage
of any miniscule opp to screw you.

------
nwzpaperman
Fisker is toast, what's the over-under on HN's favorite electric car
boondoggle getting pinched? What greenism acolytes don't appreciate is that
deflation lowers the price of goods and services--including car and fuel
prices!

Value is conserved and deflation will burn the green industry in a bright
white light like ice cold water on lithium. Green energy's only hope is that
Bernanke's replacement starts handing out trillion dollar tokens on street
corners.

All these bright minds and no one takes the time to model assumptions of
perpetual compounding growth of the economy! It's not linear, duh!

~~~
stcredzero
_> All these bright minds and no one takes the time to model assumptions of
perpetual compounding growth of the economy! It's not linear, duh!_

Planetary Resources. Colonization of Mars.

~~~
nwzpaperman
Pass the pipe, yo! Who would want to live on Mars? Why not build a colony in
the middle of a desert with no one but moneyed acquaintances and imported
indentured slaves?

Oh wait, we already did over in Dubai! Bwahaha

Mars colonization is just a novelty to obscure reality and distract people
from the bankruptcy of the debt-asset based financial-political system. Aka
asset-based lending

The Tesla financing gimmick is nothing more than a retail level tax credit
securitization scheme of the TIF pedigree that municipalities use.

~~~
stcredzero
> Who would want to live on Mars?

The number one historical driver of wealth and geopolitical power: proximity
to resources. On Mars, you're several times closer than Earth to the majority
of the resources in the Solar System, on a planet that has terrestrial mineral
resources and the ability to support agriculture. Also, not being at the
bottom of such a deep gravity well, you're also at a strategic advantage.

~~~
nwzpaperman
Mars colonization is a PR boondoggle and there is no resource constraint on
earth. Flying indentured servants and aristocrats to Mars to live in a
manufactured community, in a manufactured environment to be closer to far-away
minerals, sir, is idiotic when considered for what it is.

There is absolutely nothing scalable or sustainable about it. When people can
build a sustainable community in our own deserts maybe we can talk about a
sustainable desert community millions of miles away from our homeland.

Next!

~~~
stcredzero
_> there is no resource constraint on earth_

Again, you reveal your ignorance. _Constraint_ isn't required for geopolitical
advantage.

 _> closer to far-away minerals_

And you are revealing an ignorance of orbital mechanics and their
implications. The shift of geopolitical power away from Europe wasn't because
resource constraints were starving certain powers. It was because even more
favorable conditions elsewhere manifested even larger economic potentials.

------
vincefutr23
the media seems intent on sinking Tesla. While I agree with the conclusion
that they should stick to car instead of loan technology, the tagline under
the 500$ seems enough to me to indicate it is a cost of ownership figure.
These practices are certainly not more deceptive than what is seen elsewhere
in the auto industry

~~~
potatolicious
This is silly and borders on conspiracy theory. It would be suspicious if
Tesla is being attacked over technicalities or falsehoods, but all of the
criticism in this article is true, representative, and on the money.

It's not just Car & Driver, there have been recently discussions on HN also
where it's been shown many times over that the $500 figure is straight out to
lunch and grossly misleading.

Why is it that some of us here feel the need to constantly worship at the feet
of demigod Musk, He Who Does No Wrong, and anything negative said about him is
dismissed as slanderous propaganda by Big Automobile? What is this, the USSR?

I appreciate what Elon Musk is doing to advance electric cars and wean us off
of oil, but he is a shrewd businessman subject to the fallibilities of all
shrewd businessmen. He is neither a messiah nor a saint.

~~~
pg
"he is a shrewd businessman subject to the fallibilities of all shrewd
businessmen."

Rather a broad generalization, don't you think? Like most fields, business
turns out to have more variation than outsiders think. "Businessmen" range
from pure money grubbers who will do whatever makes the most, to people who
are in business simply because the thing they want to build can only be
embodied as a business. I don't know for sure, but it seems to me that Elon
Musk is toward the latter end of the spectrum.

~~~
jcr
> _"the thing they want to build can only be embodied as a business."_

I agree completely. It's easy to see how improving the state of electric
vehicles requires significant capital, so without a business, there's no
viable way to make the desired advancements.

Some of the backlash against Elon Musk seems to be caused by some people
having extremely high expectations for everything he does. Those expectations
are occasionally unrealistic, and blaming him personally for every misgiving
of the entire Tesla company is entirely unfair.

Most car sales/lease terms are horribly and intentionally confusing and
complicated, but someone in marketing at Tesla made a serious mistake. The
mistake wasn't using industry norm of difficult to comprehend claims and
terms, instead, the mistake was failing to live up to expectations of
something better, namely, clear and direct terms with fair and easy
comparisons.

As a business, Tesla must compete with all of the entrenched businesses but by
using the "best practices" of the industry in terms of marketing, they missed
an opportunity and failed to meet expectations. There are few people on the
planet who have set expectations so high as to get blamed personally for
failing to innovate absolutely everywhere, but it seems Elon Musk is one of
them.

The world would be a better place if more people had his problems. ;-)

~~~
throwaway1979
I'm a big Elon fan and want him to succeed. I think people like me are
disappointed because we expected better from him and the companies he runs.

