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Why the cheap leases extended?

Why the cheap leases extended?

Can they not sell them, are they in runout mode, or taking pressure of the Model 3?

http://www.greencarreports.com/news/1105307_cheaper-leases-on-tesla-elec...

millsdmb | 04. august 2016

"We anticipate that direct leasing will rise from 8% of deliveries in Q2 to about 15% of deliveries in Q3, as we have reached our funding limit with a banking partner. We anticipate adding new partners that will allow us to fund our planned growth in the future. We recognize revenue on directly leased deliveries as cash is received over the lease term of typically three years, on both a GAAP and non-GAAP basis."

Bighorn | 04. august 2016

It's all about converting M3 reservations into S sales.

codyb12889 | 04. august 2016

Exactly what Bighorn said.

They have a list of roughly 400k people that all had enough money to lock away $1000 for a couple of years waiting for the M3 and were interested enough in it to do so. Not taking advantage of that would be sickening.

By financing the Model S to some of those people they turn a $1000 liability into whatever profit they actually make per car on these new MS deals.

millsdmb | 04. august 2016

so it has nothing to do with the fact that they hit their limits with their lender and people can't get financing to buy one?

Bighorn | 04. august 2016

@millls
If that were so, I think they'd extend the terms to more than just the entry level 60kWh versions--if they were considering where they grow the margins.

millsdmb | 04. august 2016

I only ask because, that quote I pasted was directly from the earnings call. So that's what Tesla is saying the reason for increased leases is.

Bighorn | 04. august 2016

@mills
I saw it in the Q2 report as well--it explains why the percentage of direct leases is going up, not why they're discounting the rate. It may well revert when they sign on some new partners--the increased load that is.

codyb12889 | 04. august 2016

People can and do secure their own financing from their own banks and credit unions. This probably turns into a bit of a hassle thanks to the banks not really knowing how to apply depreciation on the vehicle like they do with ICEs. The worst case scenario for anyone with good credit is the bank knocks the interest rate up a couple of points to bring their perceived risk to within their tolerances.

If Tesla needed to add financing power to their in house program it would probably only take 1 phone call as there are plenty of banks that would be happy to underwrite the loans in exchange for some easy interest accrual.