Can any body explain to me how the new financing works in the Model S?
Not much to get. It's just a 5 year loan with option to buy back after 3 years
@David - option to SELL back. TM will have to pry it from my cold, dead hands. :)
Ya, as David said, it is basically just a normal loan. You put 10% down (which Tesla loves to tell you will be recouped with your tax credit) and the term of the loan is 66 months. Then after 36 months (between 36 and 39, to be exact) you can sell the car back to Tesla for a guaranteed residual value of 43%.
So it is nice to have that option to sell back, but the car will probably be worth more than that then, so it isn't huge. Their financing is also very limited by states (check for the thread posted recently about this) and you have to qualify for it based on credit worthiness.
In the end you aren't paying less than you would for a "normal" loan.
is it possible to put more than 10% downpayment
I was told yes and that the rates could vary by amount put down. Lower with more down of course.
I was thinking 40K downpayment for the 85 with tech,sound,air suspension, shelf, and the charger
Yes, you can always put more down. It is very unlikely you'll get a better APR though (90% loan to value is usually the best apr) and they'll probably shorten your term if you put that much down.
You can always pay your loan off faster, so get the best apr and monthly payment you can...just incase.
the 43% is a minimum. If the market is 55%, then TM will pay 55%. But never less than 43%.
Do you guys think 40K downpayment is to much. I want to pay at max $850 monthly
The APR that Tesla is offering is higher than I would have hoped for, not a huge deal though.
At the 36 month point on a 66 month loan, with 10% down, you will have made cumulative payments equal to 57.3% of the price of the Model S under the new financing program. The amount of remaining payments is almost exactly equal (42.7%) to the 43.0% promised residual value.
If a person was to put more than 10% down, Tesla would need to write them a check for the overage amount with no interest earned. So, if you are considering the thought of potentially giving Elon the keys to your Model S at the three year point, just make a 10% down payment, otherwise, you are just giving Tesla free money for three years. Pay down your mortgage instead or find an investment returning > 3% interest.
@djm12-Except the loan now has a 63 month term.
Brian H | April 5, 2013 new
the 43% is a minimum. If the market is 55%, then TM will pay 55%. But never less than 43%
Where's the documentation for this? I see it as highly unlikely.
My reasoning is that TM is doing the buyback to make a profit, not lose money or break even. IMO they're going to certify the cars (which costs them money), store them (which costs them money) and resell them (which costs them money). Additionally, the "market value" depends on the condition and mileage on the vehicle. Lease residuals are based on average condition vehicles, and that's what the 43% represents.
I apologize I didn't get all my thoughts into one post.
IMO, there are going to be "gotchas" on the buyback just like there are on closed-end leases. To get the 43%, the car is going to have to be in average condition and there will be a mileage limit. Damage, poor tires, and excess wear and/or miles are all going to be deducted from what the buyback is.
I could be wrong, but it would be VERY poor business strategy to buy back cars at 43% of purchase regardless of mileage and condition, and I don't think Elon is a poor businessman (quite the opposite).
I afraid this is going to be like "300 mile range" and "lease for $500" - the devil will be in the details.
I would suggest that you just get the best financing deal you can. There will be a secondary market for these cars; Elon is pretty much guaranteeing that. Any advantage in this program is for business purchases where they can deduct the interest and compute depreciation on a fixed residual value.
@Got Amped Tesla has already stated that there are specific limitations to the buy back (like condition the car is in).
Tesla Web Page says:
US Bank and Wells Fargo will provide 10% down financing on approved credit, and the down payment is covered or more than covered by US Federal and state tax credits ranging from $7,500 to $15,000, advantages not available when leasing. New Jersey, Washington and DC also have sales tax credits for electric vehicles.
When leasing, is the $7,500 tax credit passed on to the lessee? It says here "not available when leasing". How can the 10% down financing is "covered or more than covered by US Fed and State tax credits."
Would appreciate if someone can enlighten the above. Thank you.
It isn't a lease!!!
You are buying the car like normal, Tesla is just guaranteeing to buy it back, if you want.
The EV tax credit is available only to individuals who purchase (not lease).
That's the unique puzzle to solve when building a lease product for an EV.
That's why they worked hard to innovate on the financial product. A 66 month purchase with a 36 month walk away right is novel hybrid that is unprecedented.
Under their construct, buyers get about 10K in tax credits that reduce the effective cost.
This plan is not for people who tend to buy and keep cars more than 36 months. There are cheaper interest rates if you want to do that.
But if you are accustomed to leasing and flipping cars every 3 years, it's a clever new way to get there, and still get the tax credit.
The big news here IMO is the LTV. Previously, Wells Fargo would only finance 65% LTV. A lot of posts of early buyers looking for finance deals. The low rate and low down payment make the ability for more people to buy. The guaranteed buy back is just icing (for current purchasers....sucks for the early supporters that we are not extended the same from Tesla!)
It is a lease. In fact it is a 36 month open end lease. Because it is a lease the lessor will deduct the federal tax credit from the base price and claim it on their taxes, so the buyer gets the credit without doing anything. I got a similar deal when I leased my Leaf.
Also, the banks are willing to take only 10% down, essentially 0 down since 7500 FTC is applied to the down payment. I had to put down 40000 to borrow the 70000 max from Penfed. Because it is a loan dressed up as a lease, Tesla is opening up sales to people with very good cash flow but poor savings. I'm sure we all know people in that situation.
It is a great opportunity for a lot of people who would not be able to afford a big down payment. The only downside is the 2.95% rate is is about twice my rate with Penfed.
The other upside for businesses is that it is much easier to expense a lease payment than depreciating an asset.
Point of clarification: Does the bank pay the 10% down or does the customer? I am confused about the various interpretations of this.
The way I read it, the bank pays the 10% down out of the tax credit, so that the customer pays nothing down and simply starts in with monthly payments.
I don't understand how it is possible, however, to transfer the tax credit from the car purchaser to the bank unless the bank is the actual owner, like in a true lease.
Would appreciate intelligent clarification of this from accountant types. Thanks.
Elon stated this in a couple of places in the announcement. YCLIU
I heard it, but they just refer to the average of the previous 12 mo % for the S550. I'll try and get it clarified.
BrianH - Ok I understand and stand corrected, but I still think he's talking about the dealer trade-in market, not dealer retail (which is what TM sells the car for). All that means is that 43% represents the floor, not the ceiling, which us good for all buyers. And it might even be higher that that (that's your point I think). My bad.
The contract seems a little ambiguous to me. The 3rd sentence, in reference to the residual value percent (RVP) as published by ALG for a MBZ S550, seems like a parenthetical remark describing where they got the 43%. This sentence can be removed w/o effecting the contract terms. There is no language saying the 43% floor will be recalculated in the future in the event either the MS or MBZ S550 has a higher RVP than 43%.
My reading is Tesla will only provide 43% and the "Guaranteed Resale Value" is hard coded into your individual sales contract. If the market supports a higher price, great. You are free to sell on the market, but all Tesla will pay is the amount written in your individual contract.
Whoops, I meant the 4th sentence; starting "The resale value...".
I think the key thing that seems to be being missed here is that Tesla/Elon is standing behind the residual value of the car in 3 years. Even if no customers take them up on it it is still a win for all Tesla owners past and future (except maybe those of us who may not ever be able to part with their part of changing the world :-).
Other financial institutions can see this and, potentially have the courage to provide leasing or financing deals themselves. Businesses can now determine Total Cost of Ownership and purchase or lease as well.
Its all good.
The way I read it, the number is pegged at exactly 43%.
It does not float. The MBZ number is simply a point of reference.
Most folks won't want to walk away for that number, but it is essential to enable the financing product.
Overall net, it is very a positive thing for both buyers and owners. Intelligent and standup of Elon to do this.
Thiere are some good points here...but who is really planning to turn the car back in after 3 years?