Tesla just dropped the barrier to entry for Model S ownership with a leasing program that will let those who don't have a broker on speed dial get behind the wheel of the all-electric sports sedan.
Tesla says the program combines the best aspects of leasing and ownership, providing a lower cost to entry and freedom from the hassle of selling your S when you upgrade, and no concern about being left behind if and when battery technology takes the next leap forward. Another innovative aspect of the lease deal is the ability to continue making payments after the lease period ends, allowing you to purchase the Model S outright over time, rather than dealing with a balloon payment at the end of three years.
"It's not a lease per se," CEO Elon Musk said. "But a financing plan. You could fully own the car after five years."
So what about numbers? That's a bit more tricky, but you could be driving the car of tomorrow today for as little as $1,199 a month -- a screaming deal for a $100,000 car.
Depending on where you live, the initial payment could be as low as ... nothing. Tesla's financial partners in the program, Wells Fargo and U.S. Bank, take the $7,500 federal tax credit offered to anyone who buys an electric vehicle, roll that into the state rebates and include it all as your down payment. In California, for example, that comes to $10,000.
According to a new "True Cost to Own" calculator on Tesla's website, payments would be $1,199 a month based on a 2.95 percent APR with 10 percent down and a 66-month lease. That doesn't include the sales tax and registration. Oddly, the calculator accounts for your time, estimating that the time you spend holding a gas nozzle to fill your car comes to $100 a month.
Yeah, we're not sure about that one either.
Musk, who firmly believes internal combustion is doomed, is playing up the "net out-of-pocket cost" over time.
"This is where electric vehicles really shine," Musk said during a conference call announcing the lease program. "The cost of electricity is around 10 to 20 percent less per mile compared to a [traditional internal combustion car]."
Basically, it's about amortizing the cost of the Model S over the lease term using savings on gas, guaranteed resale value, business tax credit and the lack of traditional maintenance.
"This is going to fundamentally improve the affordability of the car," Musk said. "There's huge savings with a vehicle that doesn't require the maintenance of a traditional car."
But what if you want to end the lease at the end of the three-year term? Musk is putting his money where his mouth is and will "personally guarantee" that the residual value will be on par with a range-topping Mercedes after the 36-month lease runs out.
It's a smart move by Tesla, which is actively courting a luxury market that's largely dominated by leases. Most people dropping $100,000 on a sedan are more likely to take a two- or three-year lease and trade it in for another six-figure ride in a few years. It's no wonder that Tesla's release states that you can "sell your Model S to Tesla for the same residual value percentage as the iconic Mercedes S Class."
However, current reservation holders may be out of luck.
"This is on a go-forward basis," Musk said, so it's likely that Model S reservation holders won't be able to take advantage of the new leasing program.
But for those who are eligible, this could be incredibly tempting -- so much so that Musk estimates "at least half or maybe more" Model S buyers will take the lease option.
