
Tesla Unveils New Finance Product - antr
http://www.teslamotors.com/about/press/releases/tesla-unveils-revolutionary-new-finance-product
======
therealarmen
This product is designed to take advantage of the federal tax credit for
electric vehicles (I work in the EV industry) while still maintaining all of
the benefits of a lease.

You aren't qualified for the $7,500 federal tax credit if you lease a vehicle,
only if you buy. For many first-time EV owners, buying is a big leap of faith.
It's a new technology and no one knows for sure where battery tech will be in
10 years. Many drivers would prefer to lease but don't get the tax benefits of
purchasing, so instead they decide to stay on the fence.

Tesla just pushed them off the fence.

~~~
gfunk911
Exactly. This is no different than what Aereo did. Go through some contorsions
to fit the law, while still giving the customer what they want. Make a lease
look like a purchase to get tax credits.

~~~
vinhboy
Someone told me Nissan is doing the same thing with the Leaf right now. They
are offering dirt cheap leases because the dealership is taking the tax-credit
to subsidize the cost. Tesla is just branding it differently.

Coloring shades of grey into our tax laws...

~~~
MichaelApproved
I think this is still well within the spirit of the tax laws. The point of the
tax credit is to get people to use green technology and this is doing just
that.

~~~
sanderjd
What is the spirit of not providing the tax credit to leases as well as
purchases? (Actual curiosity, not trying to imply anything.)

~~~
sparky
I'm guessing one of the main concerns is avoiding the scenario where a bunch
of people pass around a single car, and each claims a huge tax credit while
not helping the environment (as much).

The current rule is that only the first sale or lease of a car generates a tax
credit; in the case of a lease, the leasing company takes the credit (see
<http://www.fueleconomy.gov/feg/taxevb.shtml> , under "Requirements").

Somewhere between tax fraud and the current rule are some legitimate scenarios
we probably _do_ want to encourage (like buying a few-year-old electric
vehicle instead of a new one, or the same electric vehicle getting leased out
multiple times), but these scenarios are:

    
    
      1) Harder to monitor
      2) Too long-term to be compatible with the short-term nature of these tax cuts, and government budgeting in general.

~~~
jessriedel
What's wrong with giving the tax credit to the leasing company? That just
allows them to price it lower. (Similarly, it ideally doesn't make a
difference whether you apply sales tax to consumers or sellers. The
equilibrium will adjust so that the net money paid/acquired by each will be
the same.)

~~~
MichaelApproved
I'd prefer the money go directly to the consumer.

1) It shows consumers that their gov't is supporting this. That's good for
citizens to be aware of, regardless of whether you think this credit is a good
or bad thing.

2) Ideally, it shouldn't matter but I don't trust car salesman to give
consumers the best part of any deal. Consumers are generally not equal
negotiators and I suspect sales people will pocket more of the tax incentive.

They can say the car is discounted to include the incentive but they may not
apply the entire incentive to the discount. The more complicated a deal is,
the less likely a consumer is going to get the better end of that deal.

That may be fine if you're favoring a completely free market but I prefer to
side with consumers and favor protection when possible.

------
tc
They're bundling an ordinary car loan with a put option, and Musk is
personally guaranteeing the put.

Elon Musk is great. He's always all-in.

~~~
Shivetya
Last I checked the residuals on S class Mercendes were in the low forty
percent. Throw in the funny math needed to get your drive costs down to the
five hundred dollar amount and I get less impressed by the minute.

Then to top it off, all with my money too boot! So for everyone who can afford
a one thousand dollar monthly lease; before taxes; they get my help to pay for
it.

Sorry, he is all in with our help. That isn't exactly courageous. He wants to
capitalize on that tax credit before the money ends up elsewhere.

Look, I am all for having an electric car do well, but I would much rather
finance the world of Leafs and similar affordable cars than a luxury vehicle
to people who could make the payment regardless. People on sites like this
bitch up a storm all the time about subsidies to various businesses but
somehow this one gets a pass.

~~~
MRSallee
> Look, I am all for having an electric car do well, but I would much rather
> finance the world of Leafs and similar affordable cars than a luxury vehicle
> to people who could make the payment regardless.

Nissan Leaf, average owner income: $125,000
[http://www.greencarreports.com/news/1049202_just-who-is-a-
ty...](http://www.greencarreports.com/news/1049202_just-who-is-a-
typical-2011-nissan-leaf-buyer-we-find-out)

Chevy Volt, average owner income: $175,000 [http://autos.aol.com/article/why-
the-chevy-volt-is-attractin...](http://autos.aol.com/article/why-the-chevy-
volt-is-attracting-wealthy-buyers/)

~~~
anigbrowl
So what? The Leaf is still about 1/3 the price of the Tesla car, so it's
inarguably more affordable. Pointing out that the average buyer is reasonably
well off is beside the point.

From an environmental standpoint it's going to lead to a greater reduction in
fossil fuel use in the aggregate, assuming it sees the same pattern of takeup
as the Prius did.

~~~
podperson
The simplest way to make electric cars more successful is to increase the
artificially low price of gasoline, e.g. By factoring in the costs of our mid-
east foreign policy and a good deal of our navy since both are driven in large
part by our need for oil.

~~~
eru
I agree. But don't expect any magic.

Europe has much higher costs of gasoline than the USA. They still don't have
roads full of electric cars.

~~~
cantankerous
Americans drive a lot more than Europeans. I'm not sure if it's a totally fair
comparison, but still a good point.

~~~
eru
Yes. And driving less is one of the predictable reactions to higher petrol
prices.

~~~
Ntrails
It's also a space thing. As a Brit the thing I didn't get so well before going
there is how sodding big the US is, and how normal it's citizens think it is
to drive to the next town over which just happens to be an hour or so away.

~~~
cantankerous
I was doing just this with a German foreign exchange student in Missouri once.
He commented about halfway there that, if he were at home, we'd be in Poland
already.

------
SandersAK
This is a high risk high reward gamble by Tesla. If people take this offer,
they are basically getting to lease to own.

Musk is betting that the car will be so good that people will want to keep it.

If it's true, then buyers are getting a great deal and Tesla wins with a lot
of cars on the market, and in turn, a lot of leverage to get their charging
stations all over the place.

If it's not true, then it all goes to hell over a year period where people are
returning them and Tesla is buying them back.

Musk is basically saying "there is nothing better than a Tesla, and I am
willing to bet the farm on it."

~~~
2arrs2ells
"Musk is betting that the car will be so good that people will want to keep
it."

Or that Tesla can sell "certified pre-owned" models for > the cost of the
buyback.

~~~
notahacker
True, but if owners are looking to return their Teslas _en masse_ after 36
months the residual value will be a little less than the 43% they're
apparently guaranteeing here.

It's not just a hedge against you ending up with a dud car either: you're also
protected from _a perfectly adequate '13 model's value being driven down by a
new generation of Teslas which are drastically better (or better value)_.
That's a worthwhile guarantee for the early-adopter of a physical product in a
rapidly evolving market

Expect the most dramatic innovations from Tesla to come in 2017 and beyond
then... :-)

------
josephpmay
The way they present this gives me a really bad taste. I think it's ridiculous
that the quoted monthly payment includes a business deduction (which, if
you're one of the few people it actually applies to, you'd get no matter what
car you owned), California tax credits (lower in the rest of the US), savings
vs. a 19mpg car figuring $5 a gallon gas (gas isn't that expensive, and my
sports coup gets 21 mpg), and the monetary value of the time saved from not
gassing up your car! This is just misleading and will turn people away from
Tesla. The only thing "new" here is the guaranteed residual value, and other
automakers (such as Hyundai) have offered that in the past. I usually have
great admiration for Elon Musk and what Tesla is doing, but this is ridiculous
and basically false advertising.

~~~
manacit
At the very lease, they do provide a tool to determine your TCO:
<http://www.teslamotors.com/true-cost-of-ownership>

Admittedly, it ends up being a lot more if you don't live in California, drive
a car that gets a more reasonable MPG, etc. Whether it will turn people away
or lead people to doing the research themselves remains to be seen.

------
cbr

        the same residual value percentage as the iconic
        Mercedes S Class, one of the finest premium sedans
        in the world
    

They make this sound good, but it's not: fancier cars depreciate faster than
regular cars. Now, if they offered to match the residual value percentage of a
Toyota Corolla, ...

~~~
crapshoot101
This. A 1000x this. Musk has a laudable goal, but this is consumer marketing
101 - they're not guaranteeing the value equivalent to that, but the same
price degradation curve as a luxury good. That's not a favor, that's a
negative.

~~~
Evbn
They are matching their class of competition (luxury cars) not enticing people
to upgrade from Volt.

~~~
fnordfnordfnord
You're not paying attention, he's pointing out that S-Class resale is crap.
Compare it to a Lexus if it makes you feel better. The point probably won't be
missed by S-Class owners (first owners) who are arguably more likely to buy a
Tesla S than you or I.

------
sinak
A quick search shows that residual values of S-Class's vary based on model and
mileage per year, the numbers I'm seeing are in the 49% to 54% rate. The base
price of the 60kWh model is $73,070, so assuming they don't include the
federal incentive when calculating the residual value, they'd buy the vehicle
back from you at ~$36.5k.

Edit: Based on DanielStraight/Tesla's numbers below (43% RV) that'd be a
residual value of $31420 on the base model, with a penalty of $0.25 on each
mile over 36k.

Tesla's True Cost of Ownership page has more:

<http://www.teslamotors.com/true-cost-of-ownership>

~~~
DanielStraight
Tesla has a PDF with more precise information:

[http://www.teslamotors.com/sites/default/files/pdfs/tesla-
re...](http://www.teslamotors.com/sites/default/files/pdfs/tesla-resale-value-
guarantee.pdf)

The guaranteed resale value is 43% and there's a penalty of $0.25 per mile for
each mile over 36000 (58000 km).

~~~
MarkSweep
It is interesting that these terms define a penalty for driving more the 12k
miles a year while their TOC calculator defaults to 15k miles per year.

------
codex
This product kind of sucks for the consumer, but it's great for Tesla--and
it's is the best that Tesla can do due to their shortage of cash and the risky
nature of electrics.

The main advantage of a traditional lease is an extremely low monthly payment:
the lessee only pays for the depreciation on the car plus interest on the
entire purchase price.

Tesla's product does not offer this, because it's simply a five year loan.
Rather than for paying for 40% of the car over three years, you pay 100% over
five, so the monthly payment will be roughly 50% more than with a real lease.

Why can't Tesla offer a real lease? Because no bank wants the risk on
fundamentally new type of car. Normal leases are financed by banks with the
car as collateral at the end of three years; this allows the bank to take the
risk of much lower principal repayments over the first 36 months. Usually the
car's residual is struck low enough to make this a good deal for the bank.
However, banks balked at taking the Tesla Model S as collateral, because
there's extreme uncertainty about how valuable these cars will be in three
years--for example, if there's a breakthrough in battery technology, or if the
batteries themselves don't last very long, or the car proves unreliable for
other reasons, the final collateral could be worth much less than estimated.

Ideally Tesla would sell the cars to themselves, claim the $7500 tax credit
themselves, and pass the savings onto the lessees via lower lease rates,
essentially acting as their own bank (many car companies do this, like Nissan
with their LEAF and Ford with the Focus Electric). However, Tesla doesn't have
the cash or assets to do that. They need to put all of their cash into
operations and can't loan it out, and they don't have enough profit for them
to take advantage of the tax credit.

So who takes the risk? The customers. They must make 1.5x higher monthly
payments even if they plan to sell the car back, and they're taking a risk
that Tesla (or Elon) will be around in three years to honor the buyback price.
Furthermore, customers cannot sell the car or the guarantee is lost; it's not
transferable to a new owner. Tesla is gambling that they'll have the cash to
honor the buyback prices even if the car turns out to have massively
depreciated. If the car depreciates massively, Tesla may not be around anyway,
so it's a good risk for the company. Likely the residual value is struck low
enough (~45%) that they can probably resell the cars without a loss in the
expected case, even though that number is still too risky for banks to go for.

Kudos to Elon for personally guaranteeing the resale value; that takes some
cojones.

~~~
jcampbell1
> Normal leases are financed by banks

Last time I check, no banks did leases. Only the captive finance companies do
leases. e.g. Ford Credit / Toyota Credit / GMAC / etc.

This type of financing has been done many times before, but for a different
reason. New York and New Jersey have vicarious liability laws which means if
the car damages your property, you can sue the owner of the vehicle. In a
lease, the credit company has title of the vehicle, thus for a period, no
leases were done in certain states, and they just did this same "guaranteed
resale/baloon payment" loan.

~~~
codex
My last lease was through US Bank.

------
phillco
Here's a page on their website that lets you figure out what goes into the
$500/month figure: <http://www.teslamotors.com/true-cost-of-ownership>

Parts are a little surprising (e.g. it assumes your time is worth $100/hour).

~~~
tptacek
Yeah, that topline number is very sketchy. My billable time is worth much,
much more than $100, but it's not fungible so that I could earn more if I
never stopped at the gas station, or drove in a (nonexistent here) carpool
lane. Similarly, I actually (co-)operate a business with significant cash
flows with tax obligations in multiple states and there is probably no way I'd
mess around with a "business tax deduction" for a luxury car. The starting
points for average MPG look low. The average gas price looks high.

Even with the extremely optimistic numbers Tesla comes up with, this was still
a luxury; without them, it's a luxury I'd be embarrassed about.

~~~
ivankirigin
If you drive the estimated yearly amount (15K miles) for the term of this
~lease you'll be over their 36K limit.

Kinda funky numbers for sure, but it is basically marketing. This is as honest
as any car commercial.

------
tokenadult
The more you see funny financial manipulation associated with a product, the
more you can infer that the product is doomed as a product. It's not clear
that Tesla can genuinely manufacture its cars at a profit.

<http://247wallst.com/2013/04/01/teslas-awful-sales-news/>

That results in "ridiculous numbers"

[http://www.businessinsider.com/can-you-really-get-a-tesla-
mo...](http://www.businessinsider.com/can-you-really-get-a-tesla-model-s-for-
under-500-dollars-per-month-2013-4)

in Tesla's latest financial claims.

~~~
revelation
That article is opinion mixed in with misinterpretations mixed in with citing
from SEC filings. Pick any random company and read their SEC filing, and you
will surely think they will crash and burn in short order.

 _[..] a number of components are currently obtained from single or limited
sources, which subjects the Company to significant supply and pricing risks._

 _Many components [..] are at times subject to industry-wide shortages and
significant commodity pricing fluctuations_

 _A significant concentration of this manufacturing is currently performed by
a small number of outsourcing partners, often in single locations. Certain of
these outsourcing partners are the sole-sourced suppliers of components and
manufacturers for many of the Company’s products._

 _[..] the Company must make significant investments in research and
development. [..] In contrast, many of the Company’s competitors seek to
compete primarily through aggressive pricing and very low cost structures_

 _Due to the highly volatile and competitive nature of the industries in which
the Company competes, the Company must continually introduce new products,
services and technologies, enhance existing products and services, and
effectively stimulate customer demand for new and upgraded products._

 _Substantially all of the Company’s manufacturing is performed in whole or in
part by a few outsourcing partners located primarily in Asia._

 _Many of the Company’s products include third-party intellectual property,
which requires licenses from those third parties. [..] There is, however, no
assurance that the necessary licenses can be obtained on acceptable terms or
at all._

Thats Apple. There are a bunch more of these, too.

------
JumpCrisscross
I love Tesla, I love Elon Musk, but this unsettles me. It is unusual for a
company so young to start pushing sales via financing. More so when the
package includes a 3y repurchase obligation.

Start with Elon Musk personally backing the repurchase agreement. Was the bank
unwilling to to take this risk? Why could they believe they can't securitise
the risk? Granted this is U.S. Bancorp and Wells Fargo we're talking about.
Will the risk live on Tesla's balance sheet? The silver lining would be the
clarity investors will get into the assumptions that went into pricing the
put.

Why we are already talking about financing? Wasn't the plan to improve
accessibility by driving down prices through increasingly mass market models?
Who is the marginal customer who balked at the cash price but is shifted by
this? The one who doesn't have the cash? Or couldn't get a bank loan? These
customers are probably less credit-worthy than Tesla's cash customers. The
repurchase agreement is a callable loan to borrowers willing to fund a large
discretionary purchase with debt. This will come home to roost if U.S. growth
and thus incomes tank and erstwhile enthusiastic greenies start seeing their
vroom vrooms as piggie banks.

We know that part of what pushed Tesla into profitability was its re-working
of its DoE loan. Is this a way to pull forward sales? How are these "leases"
accounted for when they're made? I'm keeping an eye open for if they recognise
the full value of the sale, less an ignomiously small loss reserve, upon
signing.

Comparatively minor but still irking me: why is Elon Musk implying his credit
is better than Tesla's? Tesla has more loss-absorbing capital. Given the
amount of Musk's net worth tied up in Tesla, his credit has a high correlation
with Tesla's. I get that this is more a marketing stunt, but the emptiness is
disappointing. Then again, I would have probably railed at Steve Jobs in 1998,
too.

~~~
johnrgrace
The bank is going to charge Tesla for a repurchase option, but if Elon makes
it himself no charge to the company. If Elon really believes in his product
then that option is one that will never get taken up, thus costing him
nothing.

~~~
JumpCrisscross
The repurchase option insures you against your reality diverging from Elon
Musk's expectations.

Put it this way: Portugese Insurance Group (PIG) sells you an annuity that it
promises to repurchase should the market crash. You find out PIG would go
broke if it had to repurchase even 1% of outstanding annuities. "No worries,"
the broker assures you, "we really believe in this product. You will never
have to take up the option."

------
bradleyjg
The press release is rather odd. Under the section "How it works" there are
five bullet points, but only two of them (arguably three) actually describe
how it works.

The guaranteed buyback is the special sauce here. So I'd want to see exactly
what's involved. Are there lease type conditions on miles driven? Exorbitant
charges for minor damage? The small print is rather important.

As for lining up banks to agree to financing subject to approved credit, it's
fairly meaningless. Someone will always lend you money subject to approved
credit.

------
encoderer
I love Mercedes and am loyal to the brand, but those familiar know that the S
and similar autos in its segment have pretty low residuals. This is due to
many things, like the fact that the cutting-edge tech on those cars can be
very expensive to replace or maintain as the car ages

~~~
jusben1369
Yes Mercedes S class has pretty poor residuals for a number of reasons.
Firstly, most are leased so there's a flood of 3 year old S series always
hitting the market. Secondly, Mercedes is just not that good at tech. My last
BMW lease was 61% residual after 3 years.

------
manav
This is what I call some creative marketing manipulation - there's really
nothing new or amazing here.

The loan is a normal car loan with 10% down (in fact you may be able to get a
better rate with a CU instead of US Bank / Wells Fargo at around 3%).

The residual on a S Class is actually on the lower end for luxury cars (~40%
ish). So the risk in the buy-back option is minimal for Tesla.

Since the Model S is still relatively small in production numbers, it will
likely have a much higher residual value (I'm guessing over 60% after 3 years)
unless something goes horribly wrong.

It also doesn't combine the "best aspects" of leasing and buying. They show a
$284 deduction for business use, which probably assumes 100% business usage.

If I were to do the same with a lease, I could write off 100% of my lease
payments... but the lease vs. buy benefit certainly depends on your business
situation and usage.

What I would like to see is a real lease that could compete with BMW/Audi.
Good lease offers are typically a result of cars with high residuals (like
reliable Hondas or brands like BMW/Audi). You wouldn't get the $7500 tax
credit with the lease, but I believe the manufacturer might get it themselves
and I've seen these incentives passed down to the consumer even in leases.

Maybe we'll see it in after the car has been on the market for a few years,
but by that time those big tax credits will probably be gone.

------
archon
So you own it technically, but they're obligated to buy it back after 36
months. Since you own it technically, you get the federal/state tax benefits.

Seems like this whole scheme will unravel as soon as those tax credits die
out, which they will.

~~~
zefhous
I'm not saying the tax credits won't die out, but it's unfortunate that they
will.

I've seen some people saying that these subsidies are unfair, but the US
government heavily subsidizes gas too.

Some very rough calculations put the average gas subsidies paid by the US
government around $4350 per driver per year.

I dislike subsidies in general, but it's too bad the credit will phase out
sooner rather than later. Getting plug-in electrics on the road will save the
US tons of money on gas subsidies.

\--------------

1.49 gallons/driver/day * 365 days * $8/gallon subsidy = $4350.8/driver/year

Gallons/day:
[http://en.wikipedia.org/wiki/Gasoline_and_diesel_usage_and_p...](http://en.wikipedia.org/wiki/Gasoline_and_diesel_usage_and_pricing#Fuel_prices_in_the_United_States)

Using an $8 subsidy based on some quick googling, which places the true cost
of gas in the US from $12-$15/gallon. Assuming an average price of $4/gallon,
that puts a conservative estimate of the subsidy per gallon around $8.

Federal credit phase out info: [http://www.irs.gov/Businesses/Plug-In-
Electric-Vehicle-Credi...](http://www.irs.gov/Businesses/Plug-In-Electric-
Vehicle-Credit-\(IRC-30-and-IRC-30D\))

~~~
smackfu
By that same logic, most of the plastics you buy are heavily subsidized, since
the raw materials are from the subsidized oil industry, the oil industry is
protected by the military, and their production causes pollution.

~~~
khafra
Is that supposed to be a modus tollens or a modus ponens?

------
rdl
The Model S actually seems fairly future-proof. I don't see battery tech
getting much better in the next 5 years, and even if it does, it shouldn't be
too difficult to replace the battery, controller, etc. with new technology in
that timeframe. If they can move the industry away from "My 2006 Audi is still
a mechanically nice car, but the nav system is horribly dated, so I'd consider
replacing the whole car to get a better nav system in a few years", to one
where you can more readily upgrade components (vs. just replace with identical
parts, or go into the aftermarket world which only really exists for high
volume models), that would be a big improvement.

Especially if the battery pack needs replacing after 8-10 years, it seems like
it would be worth upgrading it at 6+ years with a 30% better-than-new pack,
assuming technology has improved by then.

~~~
r00fus
Agreed - the Model S looks like the first Macbook/Pro unibody from 2008. What
would later become an iconic style, and that model is still supported through
OS upgrades 4 years later. Still resells for ~40% of original price after all
this time.

A wise investment considering the alternative products. A 43% resale value
buyback isn't too shabby, but my guess is the model S would be worth more than
that in 5 years.

------
josh2600
Cool. This coupled with Tony's order in Vegas means a lot of good news. When
you add in profitability; that's nuts.

Quite the start to April for Tesla.

~~~
sounds
More info if you don't know Tony :-)

[http://techcrunch.com/2013/04/02/downtown-project-
buys-100-t...](http://techcrunch.com/2013/04/02/downtown-project-
buys-100-tesla-model-ss-to-launch-project-100-a-car-sharing-service-in-las-
vegas/)

~~~
medell
Thanks for that. Nice find.

------
richardjordan
This is a slight spin on leasing, but it's a good one. I love the boldness of
Musk's leadership with Tesla. Ready to go out on a limb and try new things.
Clever way to ensure that tax breaks still happen, but gives confidence to the
customer over things like battery life. It also allows Tesla to control the
resale market for their product, as I am fairly sure folks buying a second-
hand Tesla will want one where the battery has been fully refurbished by the
Tesla factory team.

If you look at Tesla's ambitions - to start at the high end, experiment there
then bring the innovations to the broader market - this could prove to be a
much bigger change than it appears. Plus, lease-type mechanisms like this can
lead to a significant greening of the auto industry over time if such
arrangements take hold.

------
hojoff79
Here is a pretty good approximation of what a normal person would be able to
claim (to themselves) about the actual cost of owning the 85kWh. Comes to $940
a month of actual cost. This type of advertising is obviously very misleading.

[http://blogs.wsj.com/corporate-
intelligence/2013/04/02/the-s...](http://blogs.wsj.com/corporate-
intelligence/2013/04/02/the-strange-maths-of-teslas-500month-model-s/)

------
gcb0
In plain English:

"We changed the name of a lease, so people leasing a 1500/month car can get a
free $7000"

Also "we can say a $1500 lease only costs $500, because marketing and stuff"

------
mark212
this ought to be called the "Screw the Government" financing plan. It's
advantageous to the purchaser, yes, but only incidentally to it's real purpose
which seems to be the maximize the tax advantage / subsidy provided by local,
state, and federal governments in the US.

They are trying very hard to position Tesla away from the Rich and Famous
market segment. This new financing program isn't so much intended to increase
sales of the Model S (which is oversubscribed IIRC) as it is to work out the
kinks for the lower-end cars coming in a couple of years. And expand the
market of people who can and should be considering Tesla vehicles.

~~~
hcal
I think the purpose of the tax credit was to invigorate the electric car
industry. I would imagine any way that Tesla can use the tax incentive to move
more cars is in line with the government's intent.

Increasing sales makes the company better able to produce electric cars for
the market, which I argue is the ultimate reason the government created the
program. I don't see this financing option as screwing anyone any more so than
a normal purchase that takes advantage of the tax.

~~~
tlholaday
The tax credit is a fractional refund of the car owner's share of the military
budget allocable to petroleum defense.

------
jusben1369
I think the point is "We have this huge economic advantage (credits) that are
only available to those who buy the car. Yet nearly 50% of all expensive cars
are now leases. We're trying to convince new car owners to switch brands AND
switch payment methods. That's two mountains to climb. Let's go solve one of
those problems"

------
jusben1369
Kind of a "Yikes" on them pushing this $500 per month rate. It includes
assumptions like time saved at gas stations and driving in carpool lands and
states that have a rebate. I think they'll get more blowback on this than the
NYTimes piece in terms of their credibility.

------
xoail
I like the tool they built here: <http://www.teslamotors.com/true-cost-of-
ownership>, To be real, it looks like the 60kWh lease comes down to $859/m +
taxes for most of us.

------
sobbybutter
I think this is really foolish. Yes, there is a benefit to the consumer but it
brings with it a very large liability risk for Tesla. I would much rather
purchase a large-ticket item such as an automobile from a company that is
robust enough to service the thing 10 years down the road than get a better
upfront deal with the possibility that the company will go bust. I hope and
believe that Tesla will succeed, but what if there are unforeseen problems
with the cars later on? In that case, I'd want Tesla to be financially healthy
enough to take large, unpredictable blows.

~~~
ghaff
I suppose you could cynically say that if things evolve in such a way that
this creates a huge liability (batteries don't last, reliability is bad,
etc.), then Tesla doesn't really care because they're toast anyway.

~~~
sobbybutter
Just because there is risk in the current state doesn't make it okay to add
more risk. This gives small upside to the customer with potentially large
downside. And the effect of these risks may not be linear. For instance,
imagine two events: 1) There is a major recall that puts a strain on the
Tesla's finances, but Tesla remains solvent. 2) Residual value is less than
anticipated (for whatever reason), costing Tesla a lot of money, but Tesla
remains solvent. Now imagine a situation where #1 correlates to #2, say that
there is a major recall that also negatively affects residual value. That blow
could be much worse than each of these events occurring independently. I'm not
trying to predict the future here, all I'm saying is that being less fragile
is inherently better than being more fragile.

------
kvanderd
My husband and I traded in our old car two months ago for a Model S. We love
it.

That said, the first month before the charge station was installed we could
only charge 5 miles per hour with a regular wall outlet(we hardly drove the
car). Finding someone to intall a charger and getting the approval of the HOA
was a huge hassel (and we're in San Francisco). The cost of the charger /
installation was 2500!

------
OldSchool
Matching the resale characteristics of a new Mercedes isn't really something
to brag about.

The right side of that trade is to be the -buyer- of a 3-4 y/o MBZ. If you
appreciate great cars but don't care about the vanity of having the very
newest model to show off, that age is a sweet spot where the first owner has
already paid for about 2/3 of the car yet used only about 1/4 of its lifetime
utility.

------
zwass
This ~sounds~ really great. Is it actually?

I've never bought or leased a car, and I'm wondering how this compares to the
terms normally offered.

~~~
dripton
Residual value on luxury cars is typically poor, because part of the
justification for the price premium on a luxury car is being seen in something
impressive, and a 3-year-old car is no longer so impressive.

So saying "for the same residual value percentage as the iconic Mercedes S
Class, one of the finest premium sedans in the world" is honest but kind of
deceptive. You'd much rather have the same residual value percentage as the
much less expensive Jeep Wrangler.

This is basically a lease, phrased as a sale with the option to sell back, to
take advantage of incentives that governments give to buyers but not lessees
of electric cars. A nice option, but hardly worthy of the breathless marketing
hype.

~~~
hkarthik
Residual value on luxury cars is mainly bad because the maintenance costs on a
luxury brand cars quickly go into the stratosphere after the factory warranty
runs out. When the warranty is running out, you're hitting time for new tires,
brakes, etc. It all raises the cost of a second hand BMW to be almost as high
as a brand new one.

The way to "hack" this is to either stop going to the dealer after your luxury
car goes out of warranty and find an independent mechanic or work on your car
yourself. Both have their own drawbacks, but it's generally what you see most
long term luxury car owners doing.

------
dfischer
Wow I may actually want to buy a Tesla S now... however the real numbers would
be $700/mo instead of $500/mo

------
auctiontheory
My takeaway from all this is that if you need a loan to afford a Tesla S, you
probably shouldn't buy one.

------
MikeCapone
Mercedes has taken decades to build a reputation as a brand that holds value
relatively well in the used car market, and in one day, Tesla has latched on
to that and told everybody "we hold our value just as much". Brilliant move
for a small startup, in my opinion.

------
johnward
I think you would be better off with a straight lease, but to set that up you
need to calculate depreciation correctly. In this case it seems like tesla is
protected from having to eat it if the depreciation of these vehicles is
insanely high. The cost is passed on to the customer. Although tesla will be
on the line for the difference between the Model S and the S-class should the
Model S depreciate faster.

The other thing is that I thought they couldn't make these fast enough as is?
Why do they need a financing product like this to get people into the cars?

------
rdl
Generally top-end luxury cars like the S-Class have horrible residual values,
so I can't imagine anyone actually letting Tesla take the car back -- private
buyers would probably always pay more. I don't think the Model S is going to
depreciate much, unless there is some huge change in technology or some huge
flaw discovered in the Model S.

I think the Tesla's value is more likely to follow a 911 Turbo or another
sports car like that vs. a luxury car.

Being able to refinance at 36months with a 5 year used car loan at ~5% would
be pretty nice, though.

------
senthilnayagam
Currently they are doing roughly about 5000 units per quarter. if they can
ramp up to 10-15K units per quarter with this sales strategy the need another
model launched pretty soon

------
Wistar
I'm not sure when it happened but my getting ribbed by friends and family
about my having bought TSLA the day it went public has finally ebbed.

------
akandiah
There's an interview with Elon on Bloomberg which answers some of the
questions that people have raised here:
[http://www.bloomberg.com/news/2013-04-02/tesla-to-begin-
mode...](http://www.bloomberg.com/news/2013-04-02/tesla-to-begin-model-s-
financing-with-u-s-bancorp-wells-fargo.html)

------
bishnu
Guaranteeing the residual value of a Mercedes S Class seems like a huge, huge
gamble to me. Given the relative technological rate of change for electric
cars vs internal combustion engines, doesn't this have the potential to be a
huge financial hit for Tesla?

~~~
fnordfnordfnord
Mercedes S-Class have terrible resale value vs purchase price. Should be an
easy mark to hit.

~~~
joncooper
This is the most salient point here. It seems like a ballsy move but is in
fact much less so given you're benchmarked to a car with what is probably
bottom-10% residual.

------
state
Somewhat unrelated, but that page looks surprisingly dated. For a company
that's thinking so much about design it's unfortunate that it's so difficult
to read their press releases.

I think that might be the first time I have actually used in-browser zoom for
something.

------
jcfrei
interesting move by tesla (and elon musk) but not quite appreciated by the
shareholders in the aftermarket. it sounds like a good offer for consumers,
however it looks like the kind of move a company would do that is worried
about declining sales.

------
johnward
If I adjust the numbers to something more reasonable I would end up with about
$700 a month. Which really isn't that bad for a car in this class, but more
than I would pay. I'd love to own one someday though.

------
miles_matthias
This is really awesome. Every aspect of the car industry should be challenged
and awesome entrepreneurs like Elon Musk who give their all are an
inspiration.

------
wellboy
Tesla could do the same as DriveNow so that you can find a Tesla car any place
and pay 29c/minute. That's what I'd call innovation. :)

------
jkahn
Please, please, please bring this to Australia for the Model S launch. I'm
buying one on launch day if we have this option.

------
alimoeeny
I really thought it is an Aprile fool's joke,

------
phreanix
Please correct me if I'm wrong, but a quick google tells me residual value is
about 60%?

~~~
superchink
Looks like it's 43%, according to their document here:
[http://www.teslamotors.com/sites/default/files/pdfs/tesla-
re...](http://www.teslamotors.com/sites/default/files/pdfs/tesla-resale-value-
guarantee.pdf)

------
mzuvella
Numbers might be a little deceiving but a huge move for Tesla.

------
benburleson
What does this mean for the Tesla market 3 years from now?

------
grandalf
This is just the kind of creativity Detroit is lacking.

------
dinhhoainam
i think you have good price

------
Evbn
How is driving a luxury car a legitimate business expense? The IRS should be
cracking down on that fraud, and only allow deductions for the value of a
basic functional vehicle.

~~~
PeterisP
As the running costs (electricity vs gas) are noticeably better, it makes much
more sense to run Teslas as a business vehicles rather than consumer goods,
since a business car is "on the run" much more - in essence, electric cars
will be the cost-effective option in the long run rather than a luctury.

------
OGinparadise
_This is a high risk high reward gamble by Tesla. If people take this offer,
they are basically getting to lease to own. Musk is betting that the car will
be so good that people will want to keep it._

This is tricky. Isn't the battery technology always getting improved? That
should make car owners more likely to upgrade, if they decide to keep getting
electric cars, IMO. The battery is arguably the most important part of the
car.

~~~
toomuchtodo
And in the Tesla Model S, can be swapped in about an hour.

Why would you replace the whole car vs swapping in a newer, better battery?

~~~
OGinparadise
Just like replacing the remote control batteries, right? Wrong, Tesla
batteries cost a fortune, so while you can replace them, it will hit your
wallet <http://en.wikipedia.org/wiki/Tesla_Model_S>

~~~
toomuchtodo
You would be a fool to think they're going to cost the same in 3-5 years what
they cost now.

------
nwzpaperman
Securitizing tax credits...nothing like going down in maximum Li-flames.
Trying to prime the order pipeline.

Popcorn plsthx

