One month after rolling out a lease-to-own financing program that generated plenty of attention and bad reviews, Tesla is amending the program.
"When we did our first finance announcement about a month ago, we didn't get it quite right," said CEO Elon Musk during a conference call announcing the revisions. "We listened to a lot of valid criticism from journalists and customers so we have tried to take corrective action and make it a lot better."
These are the two primary changes to Tesla's financing program:
Higher Guaranteed Residual Value
Tesla is guaranteeing those who lease a Model S will be able to return the car after three years with a residual value of at least 50% of its sticker price, versus the 43% the company announced last month.
And it could go higher than 50%: Tesla said the Model S residual value will be greater than the three-year average of BMW, Audi, Mercedes and Jaguar. So if those brands' average residual value climbs above 50%, Tesla will match it.
"What we are saying to people is you are going to get 20% more cash for your car in three years than our prior guarantee, so that is a pretty big jump," Musk said.
Longer Financing Terms
Tesla is extending the length of the lease-to-own contracts to 72 months from 63. This move is not surprising, as the average length of all auto loans is now 65 months, and six-year loans are no longer considered unusual.
As a result of the extended terms, the out-of-pocket cost for a Model S buyer will drop to $580, according to Tesla. That estimate is based on the amount of money Tesla projects owners will save by not buying gas.