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Car lease option not avaliable until Spring/Summer 2013

Car lease option not avaliable until Spring/Summer 2013

Hi,

I just got off a phone conversation with a very nice customer service Tesla employee that explained to me that the lease option I was promised when I reserved the car will not be available until Spring or Summer of 2013 (a year from now). They offered me an option to do a deferral on my reservation and wait for additional 9 months past my "car due" date or just to refund my money and cancel my reservation.

I wanted to send a message to the Tesla upper management, in case they follow the forum messages:

1. If Tesla would like to become a high-end car company and not a hyped start-up company they need to fix their act a follow their commitment for a lease option like every other company that sells cars for this price range.

2. I personally will not buy the car and only lease it since financially I do not see a reason to purchase the $50-80K with unknown technology, I am sure there will be a few financing groups out there that will be willing to run a financing option for leasing the S-Model, and it's a matter of Tesla making the effort to make it available for the customers.

Thoughts?

Volker.Berlin | August 28, 2012

Leasing makes huge sense for the Model S, even more so than for an ICE vehicle, since the upfront investment is larger and the running cost are lower. At the same time, leasing does not make sense for Tesla as long as there is more demand by customers willing to pay cash than supply of cars. That's how Elon explained it in some interview, and the time frame you were told reflects that. It's a reasonable time frame IMO. Tesla is currently busy getting their act together with production ramp up and initial deliveries. It doesn't hurt that leasing options are still a few months out. (Of course it hurts you personally, but it does not hurt Tesla's business case, and I cannot see how it would hurt their reputation as a premium car brand.)

CebVa | August 28, 2012

Leasing is simply a method of financing. It is not controlled by the manufacturer but the manufacturer may offer financing from a particular lender. You can always get a loan from someone else (your credit union for example)and probably get a lease elsewhere as well.

I see a problem in that it appears Tesla has aligned with the thugs at BofA. Only BofA shows up on the financing page. BofA paid for that privilege to freeze out the competition and discourage competitive shopping. It is BofA who is calling the shots and deciding what type of financing Tesla will highlight. But no one says you have to accept Tesla's financing or lease terms.

archibaldcrane | August 28, 2012

I have a hard time believing that you were promised, in writing, a lease option that would be available at the same time as a purchase option when you put down your deposit.

If I'm wrong, and such a thing exists, then by all means be upset.

Volker.Berlin | August 28, 2012

archibaldcrane, at the time the website stated that a full range of financing and leasing options would be available, and it was put in a way that you would assume it meant "from day one". This information is long gone, for good reason. Maybe in the beginning they thought they'd need it to attract a significant number of reservation holders, and later found out that they didn't.

archibaldcrane | August 28, 2012

Then he has a right to be upset.

(to a point of course, it's not like they removed the option to lease, let's not get carried away)

Jgdixon | August 28, 2012

CebVa,
You are wrong. Leasing is controlled by the manufacturer.
Look at Toyota/Lexus, Acura/Honda/ BMW, Mercedes, Ford etc.
They all have their own finance and leasing divisions.
Tesla is missing the boat here because moat people who buy a luxury high end vehicle lease. It is also a great loyalty program because the customer has to come back to do soemthing in 36-48 months.

archibaldcrane | August 28, 2012

Well, considering they are going to have a leasing program early-to-mid next year, and every car they produce until then already has a lined up buyer...I think the proverbial boat is still at the dock.

Sudre_ | August 28, 2012

They are missing the boat on more fronts than one. While I will not get too upset by the lack of lease options I will purchase the absolute cheapest vehicle I find useful to me. If they had offered a lease option I would have gone full tilt for the performance version fully loaded. Their loss of revenue not mine. I have a funny feeling they would have made more money leasing a performance than selling a 60kw with air suspension and leather seats.

I get Elon's points about not needing to lease because demand is so high but I think they could have sold 5000 85kw cars, many of them performance, if they offered a lease for them. That's a lot more revenue than what they are getting now.

I don't know how leasing prices out but what do your think the monthly payment on a 3 year lease for a 100K car is?
What is the monthly payment of a $70k car is over 5 years?

Sudre_ | August 28, 2012

Correction:

What is the monthly payment on a loan for a $70k car over 5 years?

Beaker | August 28, 2012

~ $1,500

jkirkebo | August 28, 2012

A little high I think. Around $1300 is my best guess.

Electric Machete | August 28, 2012

I looked into a loan from USAA for $70k. For 5 years, the rate was 3.29% and the monthly payment was $1267.

Four years was 2.59%, and $1537/month.

olanmills | August 29, 2012

"Their loss of revenue not mine."

To be more precise, it's their loss of future revenue.

Plus, in terms of launching a new product, it's simpler if there are less variables to handle until they hit their stride with everything.

ViewAskew | August 29, 2012

Volker didn't we discuss the pros/cons of leasing a while back? I know I made a statement in regards to it being a bad idea for Tesla. (finacially) Not having an option to lease this first run of vehicles simply shouldn't shock ANYONE.

jat | August 29, 2012

I have only purchased cars before, so it is possible leasing may be different -- however, since their are third-party lease companies I don't see how.

I have never financed a car using the manufacturer -- I have always negotiated a cash price and then compared their financing to banks and credit unions, and the others have always been a better deal.

I'm not sure how Tesla would prevent you from arranging your own financing outside of them anyway.

I can see why lease companies would be scared, since they don't know what the resale value is, so personally I would expect you to get screwed with a lease unless you buy it (in which case, you get the cheaper resale price they are pricing into the lease), in which case it isn't clear you aren't just better off buying it to start with in most cases.

Teoatawki | August 29, 2012

Tesla cannot do anything to stop you from financing your car anywhere you like, but neither can any other car dealer. I assume all Tesla wants is a check (probably certified) for the balance due at delivery.

Larry Chanin | August 29, 2012

I understand the original poster's point of view. However, I also understand Tesla's position as stated by Elon in the last earnings call.

It gets back to demand versus production. Currently Tesla has more demand than they have production capacity. They don't need to implement a leasing program yet to generate more demand that they can't satisfy at this time.

This current point in time is Tesla's most vunerable regarding limited income versus big expenses. They can't risk extending themselves fiancially by implementing a leasing program when most of their 10,000 reservation holders are prepared to purchase their cars outright by writing checks or using conventional financing.

Here's an excerpt from the earning call:

Carter Driscoll - Capstone Investments
That kind of leads to my next question. It’s the relationship you have with Wells. And because of what you just stated, you believe the battery pack’s going to last twice what it’s currently warrantied for, I’m assuming that the residual value of that price point, given there just aren’t a whole lot of comparable vehicles to be able to set what the residual value is going to be, and therefore the leasing terms. But you feel comfortable that’s not a sticking point, as you suddenly saw people wanting to lease the vehicle, even though you don’t expect that to be the case for probably 12-18 months at the minimum.

Elon Musk - Chairman, Product Architect, and CEO
Right. We don’t need to lease a single car until maybe the second half of next year at the soonest. We could just be all sales.

Unfortunately this is merely a prudent business decision on Tesla's part at this critical point in their company's short life.

Larry

ybachar | August 30, 2012

Hi,

For me lease does not represent a means to finance purchase of a car, I like to drive cars that are from the last 3-4 years and rotate them every 3-4 years.
I see in a lease a long term dual sided commitment of the car manufacturer that after 3-4 years that will take the car back and enable me to get a new one with new terms at the market value. I am highly concerned that a company producing cars (specialty cars) doe snot have enough financial breath to offer a lease option.
Although I can pay for a purchase of the car in cash, like stated above if that would be the case I will go for the lowest end one. If will have a lease option which will address a monthly payment I will probably go for a higher end car.
Just to correct some of the comments above. Lease is not a financing option to purchase the car at the end of the lease period, lease is an option to pay for a car value in it xx months of it's use with a significant residual at the end. For example if the car cost is $70K on the purchase day and term is 36 months the car value is assume after 36 months and your monthly payments are just for depreciation of the car value with yy% interest on it.

They way I look at a lease decision, I evaluate the value at the end of period, evaluate the cost of cash at the end of the period and see if the monthly payment makes sense or not for the depreciation of the car. e.g. $70K today is not the same $70K in 4 years. If you monthly payment will be around $1000/month with 0 down you assume the car will depreciate about $12K/year that make sense to get a lease.

Brian H | August 30, 2012

Leasing co. is not necessarily the mfr. The majors set up a sub that handles that stuff, the smaller players sub it out.

Volker.Berlin | August 31, 2012

Sorry for cross-posting, but I think it belongs here:

A Bank of America associate informed me that Leasing is supposed to be available for the Model S now. This was a simple in browser chat session with I'm sure a call center rep, so take it with a grain of salt. It sounds to me like the lease option is available NOW though.
(mikeschuld | August 31, 2012)
http://www.teslamotors.com/forum/forums/i-wonder-leasing-options-anyone

Brian H | August 31, 2012

A bank etc. always has the option of buying the car and leasing it to you. Mfr. sees full price up front, either way.

Steve_W | September 1, 2012

In wonder what percentage of reservation holders have canceled or deferred because there is no lease option. I personally canceled my signature reservation, one of the reasons being a lack of leasing. I also deferred my production reservation, again one reason being the lack of leasing. I like getting a new car when the warranty on the current car expires, so as not to have to worry about the cost of repairs, and also to get the latest technology that becomes available.

I know other people that have also canceled or deferred because leasing is not available. Anyone know whether there are any statistics on cancellations and the reason(s) why?

jerry3 | September 1, 2012

In my opinion, there are two valid reasons to lease a car:

1. If you can use the car for business there is never any question about how much you can write off.

2. If you don't think the car will last or will have major problems, you are only out the lease payments.

Other than that a lease is a big risk because if your job changes or moves their office requiring you to drive further, there will be a whopping big mileage charge at the end. Or you might have a few dings and get a large repair bill.

Steve_W | September 1, 2012

Jerry3, I think what you say depends on the relationship you have with the dealer. My father-in-law always leased Lexus cars. His wife was not gentle with them, and the cars would get lots of dings, dents, etc. The dealer never charged for these when they would turn the car in for a new Lexus.

My wife also has had a few Lexus cars (diffrent dealer from her father's). The dealer told us that if she went over the mileage allotment there would be no penalty if she leased another Lexus. She went over the mileage and was not charged. In another case, she drove a Lexus GS thru the garage door (the plug for the door opener fell out when the door was about halfway open and she did not see that via the rearview mirror). The roof had a crease in it and the XM antenna was ripped off. The car was 11 months old. The dealer took the car back, and gave us another car, continuing the same lease agreement. We were not charged for the repair to the roof, and the cost was not added to the new car.

In summary, if you are a repeat customer, the dealer can make allowances.

With respect to the Model S, I am concerned about how long the battery will last and what the replacement cost will be. I also believe longer range batteries will become available. I would rather drive the Model S for 2 or 3 years and then get another one with a fresh battery (and possibly a longer range battery), than paying the $20,000 cost for a new battery that has been thrown around on this site after 5-8 years. The battery degrades over time, and even with a fresh battery, you will only get the rated range at 55mph. In a discussion I had with the factory, I was informed that at 85 mph (a reasonable speed on roads that have a 75/80 mph posted speed), the range with a new battery and no a/c is only about 200 miles; after several years this range will be even less, and that concerns me.

petero | September 1, 2012

jerry3. I disagree. Leasing offers several advantages over buying provided you keep the car in good physical condition and annually drive 15K or less. Generally speaking, you put less down payment and have a lower monthly payment. Virtually everything is covered by the 36/36 warranty and often service is too. Also, you do not need to spend $1500-$2500 for extended warranty. If you go crazy on the mileage, you can buy the car back at an agreed upon price.

Bottom line, if you lease or buy you generally pay off the first half of the car in 3 years. The question is, do you want to buy the “troublesome half.” When I sold/leased new cars, I used the “trophy wife analogy.” You can’t afford a new 22 year old wife every 3 years but you can lease a new car every 3 years and enjoy its’ best 3 years! Then again, maybe you can.

jerry3 | September 2, 2012

petero - Leasing offers several advantages over buying provided you keep the car in good physical condition and annually drive 15K or less

That's the rub. If your job changes or they move the office and you drive 20K instead of 15K, you're kind of screwed.

I drove a Land-Rover Series III for almost twenty years and the last three years weren't any different than the first three. I might still be driving it today if the clutch hadn't caused a repetitive stress injury.

The 2001 Prius that Denise drives is still running fine (100,000 miles). So is my 2004 Prius (140,000 miles).

Now the VW TDI was a different story--horrible car, something was always broken. I don't think it ever had a service that was under $1000 and most were far higher. So no VWs, Audis, or Bentleys for me. (Not that there's much risk of me ever purchasing a Bentley :-)

So for 25% of the cars I purchased I would have been better off with a lease--maybe.

petero | September 2, 2012

jerry3. Driving 5K extra miles equates to approximately $1,000 more a year, most leases charge 20 cent per mile over the agreed mileage. Hopefully, the new job pays more.

The people who benefit the most in buying are those who drive a great deal, keep their cars forever and give them away at the end because they are all used up. ! An extreme example. I befriended a couple while working at an auto dealership who bought two new cars, paid them off, and traded them in for newer cars every 2 years. They lost approx. $7.5K+ per car doing that. Leasing was ideal for them. Leasing isn’t for everyone, but it will work better for many people if they do the research.

You were lucky with your Land Rover. We called ours “Princess.” Nothing but the best for our girl … and she ate like a pig.

jerry3 | September 2, 2012

petero,

Mine was a Series III back when they built them better. I wouldn't buy one of the wimpy ones they make these days.

Honestly, if it wasn't for the Tesla coming out and my desire to not be in the ICE business, I'd likely keep my 2004 Prius for another ten years because it does everything I want in a car except for not being all electric.

MatB | September 3, 2012

It's a shame about the poor customer service you've received. If you go to a Broker then you're options are much wider. Check out this vehicle leasingbroker, who actually give you good service.

Larry Chanin | September 3, 2012

Here are a more in depth remarks from Elon describing his thoughts on leasing and its timing.

Ben Kallo - Robert W. Baird
[laughter] Can you give us an update on the leasing program here in the United States?

Deepak Ahuja - Chief Financial Officer
I think as Elon alluded to, that’s something we’ll look into next year. We’re continuing to evaluate that, and I think at this point our focus is on the key priorities of production.

Elon Musk - Chairman, Product Architect, and CEO
But I can maybe just give my views on leasing long term, which is I’m a huge proponent of leasing, particularly for electric vehicles. As is the case with solar, with SolarCity, leasing has proven to be extremely effective as a way to encourage solar adoption. And it sort of seems like it shouldn’t be that effective, because if you told someone, hey, this system is going to pay you back in five years, and they said, oh, five years, that sounds like a long time. Like, do you know how long your savings account’s going to take to pay you back? You’ll be dead. [laughter]

And so people seem able to do the math on that. It’s like, excluding compounding, a 20% return if it pays back in five years, and with certainty. Where do you get something like that? And yet amazingly, SolarCity had trouble getting people to act. So we’re basically going to go to people that understand, people who are sophisticated in finance, and are looking for yield, and say, okay, let’s go talk to people who really understand yield and take that problem away from the consumers so they don’t have to think about it, and they can just look at it like their electricity cost went down.

Why is that relevant to Tesla? Because the cost of operation on the Model S is much less than the cost of operation of any other premium sedan, by far. It’s going to feel like you have a car for free. And particularly in places like Europe. It’s, like, $9-10 a gallon in Europe. You can spend a couple hundred dollars filling up your gas tank. Or you can spend some negligible amount recharging your car.

So it really amounts to a huge effective discount on the cost of operation of the car relative to other premium sedans. But the best way to make that apparent is through a lease. So we’re going to be very big on leasing in the future. We just haven’t needed to do that because there’s enough demand for the car where we just tell people you’ve got to buy the whole thing. You can’t have leasing. [laughter] If we have sufficient demand to do that, then we should turn our attention to the key thing, which is production, and then next year we’ll get to leasing.

And we do have data from the Roadster that I think is helpful to leasing companies. And by the way, the Roadster’s got really good residual value. I think it’s significantly better than a Porsche, actually. Maybe it depends on which Porsche you consider, but it’s certainly got much better residual value than the Porsche I bought about five years ago. [laughter] Thing’s worth like a peanut.

Larry

jerry3 | September 3, 2012

-- And yet amazingly, SolarCity had trouble getting people to act.

Well, I had Solar City out and they wanted $8,000 up front to cover about 40% of my current electric bill. I calculated it would be a ten year payback not counting any potential income from the $8000.

So I'd still have a $95 electric bill (not counting the Model S which hasn't arrived).

Had it been $3000, 100% of the electric bill and some payments over a few years that would have been different. As it is, the up front cost is currently too high.

Cindy.holland | September 3, 2012

Jerry3 - that is strange because I had Solar City out and for $2600 up front, they will guarantee my usage will be at least 60% from the panels and at a rate almost half of what I pay the electric company. Plus my rate for solar will not change in 20 years. This was via their PPA agreement. I could have done it with no money up front but then the solar rate would not be locked over the life of the lease.

jerry3 | September 3, 2012

Cindy,

It apparently depends on what state you are in, what they can offer. Here in Texas the utility companies seem to have put in legislation to prevent those kind of flexible terms.

I would have gone for it for $2600 up front.

Michael23 | September 3, 2012

Sorry if I'm misunderstanding, but what's wrong with financing through b of a? Don't they offer special rates for tesla? If you wanted to get rid of it in a few years couldn't you sell and pay off the loan? I've never leased a car before because I like to own it for a long time and then give to a family member or donate.

jerry3 | September 3, 2012

Michael,

BofA had a deal with Tesla for financing Roadsters, Wells Fargo has the deal for financing the Model S. Nothing wrong with using BofA if they recognize the Model S as a car they will finance. (Well, other than maybe the rates).

Sudre_ | September 3, 2012

@Michael23
I think, I've never leased before either, you can get more car for the same monthly payment as buying with a lease.

Can anyone who has leased before confirm that?

TikiMan | September 3, 2012

For my situation (avaraging 16k to 18k miles per year), it makes more sense for myself to buy the Model S. But then again, if I only drove a short amount of miles a year (common with most leases) the Model S wouldn't make financial sense anymore.

rrdenney | September 4, 2012

Elon,

I would like to get a Model S sometime in my future, however purchasing a EV is a challenge for me as the battery technology will be improving year-by-year. The residual value of any EV may dramatically change if a newer battery technology like Lit-Air arrives at price parity within the useful life of the vehicle.

While Moore's Law will always be a factor, I would like Tesla to consider the value of a well structured lease option. It would open the door for thousands of additional customers that would like to drive a Tesla but don't have the budget for a $1000/month payment. Plus, lease customers can schedule the delivery of their new Model S the same month that their existing lease is due which will provide Tesla with a solid MONTHLY delivery forecast which provides for improved supply chain and production scheduling benefits to Telsa.

I really like the concept of leasing the car and battery packs separately so that in 3 years I can upgrade to the next generation battery packs like Lit-Air. Example: Model S at $450/60 Months and Battery Pack at $300/36 Months. This would enable customers like me to lease a Telsa Model S sooner.

This unique battery pack lease would require that the Battery OEMs to adapt their go to market strategy to lease the battery packs to Tesla so that Telsa is not solely financing the battery packs changing technologies.

The battery suppliers may be very excited by this option as it is also in their interest to get customers migrated from gas vehicles to EV and they may find that leasing provides them with an annuity stream of payments that improves their cash flow and volume.

I am so impressed with Telsa's innovation and attention to detail. The only remaining challenge left is how to get more Teslas in more garages....

Rob

Brian H | September 4, 2012

rrdenney;
No, it's how to make enough S's to fill the garages already yearning for them. ;)

Getting Amped Again | September 4, 2012

If the residual values of the Roadster were indeed higher than a Porsche or other premium brand like BMW or MB, then leasing a Model S could be a really good deal. As another poster pointed out - a really nice lease deal (high residual and low interest rate) would make me order a more expensive Model S than I would if no leasing option were available.

It's possible that many of the very early purchasers paid cash for their SIG (likely), but I don't think that's going to be the case for the non early adopters a year from now.

I agree with Rob, it greatly behooves TM to announce a solid lease deal ASAP. I think the average person will buy a more expensive Model S - I know I would.

Brian H | September 5, 2012

Write TM and tell them you'll upgrade on condition they offer a lease.

Volker.Berlin | September 5, 2012

Getting Amped Soon, no need to argue. A year from now, Tesla will offer leasing, according to Elon.

Brian H | September 5, 2012

VB;
GAS is arguing that existing reservers would upgrade (e.g. to a bigger battery, or Performance) if a lease co. paid the up-front.

Volker.Berlin | September 5, 2012

Brian H, I was referring to this line:

It's possible that many of the very early purchasers paid cash for their SIG (likely), but I don't think that's going to be the case for the non early adopters a year from now. (Getting Amped Soon)

I assumed that any attentive reader would figure that much, but I'll include the quote for you next time.

Volker.Berlin | September 5, 2012

(I hate it when a third party explains to a second party what a first party presumable meant or intended.)

Christine B | September 5, 2012

The real issue with leasing is that someone has to take the used vehicle at the end of the lease if the leasee doesn't wish to purchase the vehicle at the end of the period. The car doesn't simply vanish. Tesla would then have to re-sell, or re-lease those cars reducing the interest in the new cars available.

Easy alternative... just buy the car, and if after 3 or 5 years you no longer want it - then sell it for what you owe. If you treat your car well and you meet up with the right buyer (as it is a niche market) you could get more than you owe.

I am of the opinion that people who are willing to pay for the car out right, should take possession first.

Getting Amped Again | September 5, 2012

This is just general information for this discussion:

36 month lease, 36,000 miles allowed
Purchase Price: $70,000
Residual: $42,000 (60%, which is typical for a BMW for example)
Money Factor: 0.00208 (about a 5% interest rate)
Monthly Payment: $1098 (doesn't include taxes)

Traditional financing of $70,000 at 5%
36 months: $2098/month
48 months: $1612/month
60 months: $1321/month

With a 1.9% interest rate
36 months: $2002/month
48 months: $1516/month
60 months: $1224/month

Most loans would require money down of course, and many leases do also. There are fees and taxes also that are not shown for clarity, and they vary by state and lender.

My delivery is probably going to happen in April, so leasing through TM probably won't be an option for me. Hopefully other lenders offer them at that time. If not I guess I'll finance through a credit union for 60 months (mine is offering 2.74%) and test the resale market after about 36. My ideal Model S would have all wheel drive so hopefully that would be my purchase after that.

Brian H | September 6, 2012

VB;
Hate it or lump it, you still misunderstood his point. The "very early" adopters does not encompass the vast majority of existing reservations. Many of those would perhaps upgrade if leasing were available, perhaps more than compensating TM for the unit reduction in margin or cash flow normally experienced with leasing vs. selling.

Some of the upgrades, according to remarks made here and there, would be drastic; e.g., from bare bones 60kWh to loaded Performance.

Brian H | September 6, 2012

P.S.; I would wager a number of cancellations would turn into lease-sales, too.

Volker.Berlin | September 6, 2012

It's up to Tesla to make the wager. Elon has made it very clear that leasing is on his radar and he is weighing the pros and cons in general as well as specifically for the Model S and specifically for Tesla at the current point in time. Statements like

Many of those would perhaps upgrade if leasing were available, perhaps more than compensating TM for the unit reduction in margin or cash flow normally experienced with leasing vs. selling.

or

I would wager a number of cancellations would turn into lease-sales, too.

make it look like an obvious oversight on Tesla's part. It's not an oversight, it's the result of careful consideration. I trust Tesla more to make that call than I trust you or anybody on this forum.

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