Tesla Motors announced, in partnership with Wells Fargo and US Bank, it will offer leases for the first time on its Model S electric sedan and a buyback program for owners after three years.
Most people throughout the world prefer to own their belongings, rather than rent what is essentially someone else’s property via a lease. However, leases do provide some key benefits, particularly a low initial payment, tax deductions, lower risk on resale value and the convenience of returning a car without the hassle of reselling it personally.
“We wanted to address the question of residual value and piece of mind when buying an electric car,” said CEO Elon Musk in a conference call on Tuesday. “We thought the best way to eliminate that … is to guarantee the residual value.”
In what Tesla calls a “revolutionary automotive financing product,” after three years, customers will be able to sell their Model S back to Tesla for the same residual value as the Mercedes S Class sedan. The Mercedes sells for nearly $100,000 and loses 53% of its value after 36 months, according to Kelley Blue Book.
Tesla announced on Monday that the entry-level Model S sedan, priced at $52,400 (after a $7,500 Federal tax credit) wouldn’t enter production because of lack of demand. Those buyers will instead be given a 60 kWh model fitted with software limiting the car’s range. Tesla says that it will be willing to upgrade those cars by removing the range limit at any time.
At $62,400 (after a $7,500 tax credit), the entry-level 60 kWh Model S is now over $10,000 more expensive than the original base model.
How does it work?
– US Bank and Wells Fargo have agreed to provide 10% down financing for purchase of a Model S (on approved credit.)
– The 10% down payment is covered or more than covered by US Federal and state tax credits ranging from $7,500 to $15,000. New Jersey, Washington and DC also have no sales tax for electric vehicles. These advantages are not available when leasing.
– When considering the savings from using electricity instead of gasoline, depreciation benefits and other factors, the true net out of pocket cost to own a mid-range Model S drops to less than $500 per month.
– After 36 months, you have the right, but not the obligation to sell your Model S to Tesla for the same residual value percentage as the iconic Mercedes S Class, one of the finest premium sedans in the world, made by Daimler (also a Tesla partner and investor).
– Not only is Tesla guaranteeing that resale value, but Tesla CEO Elon Musk is personally standing behind that guarantee to give customers absolute peace of mind about the value of the asset they are purchasing.