Tesla Motors Unveils Revolutionary Financing Plan to Make Electric Cars Affordable
Tesla has taken the automotive world by storm. The Silicon Valley-based company was founded in 2003 by Elon Musk amidst much skepticism. A decade later, Tesla has proven that electric vehicles can be beautifully designed, have impressive performance and be affordable for the consumer. Tesla’s new Model S was recently awarded the prestigious Motor Trend “Car of the Year” for 2013.
Perhaps even more innovative than Tesla’s technology is the company’s recently unveiled financing plan. By working with US banks, the company has been able to create a new kind of financing product that combines the security and comfort of ownership with all the advantages of a traditional lease.
One disadvantage of electric vehicles often cited by critics is the higher price compared to traditional cars. Depending on the model, customers can expect to pay from $70,000 up to $100,000 for a new Model S. To overcome this obstacle, US Bank and Wells Fargo have agreed to provide 10 percent down financing on the purchase of a Model S. This 10% down payment is covered by federal and state tax credits ranging from $7,500 to $15,000. After 3 years, Tesla customers can sell their Model S back to the company at a guaranteed minimum resale value, the same residual value as a Mercedes S Class car. If that’s not enough to win customers’ trust, Musk has even guaranteed the deal by wagering his personal multi-billion dollar fortune.
“Our goal is to make the best financing product,” Musk said in an interview with Bloomberg News. “It’s not like a lease per se, it’s financing a car over three years and a loan you can collapse and be done with it.”
It’s a smart move by the company. The low monthly payment eliminates the barrier of entry for people who couldn’t buy a Model S upfront but can afford one through financing. The high sticker price of electric vehicles can scare off many potential customers before they really look at the math. Government tax credits, a high resale value, and never paying to fill up with gas (it’s free to recharge at Tesla Supercharger stations) reduces the price of Tesla cars to nearly the same amount as competing vehicles. By lowering the cost of the vehicle over time through a creative financing plan, Tesla can win over a new market of price-sensitive consumers and help drive the adoption of electric vehicles over the long term.
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