By on April 8, 2014

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After setting up a retail lease program, Tesla is now moving closer towards a full-fledged captive financing arm, by launching a financing unit for corporate leases.

According to a statement released by Tesla,

The Tesla business lease is available through Tesla Finance, a subsidiary we’ve set up especially to offer this new product to business customers. The lease program completes a suite of products, including the Resale Value Guarantee and loans from our banking partners, that covers a comprehensive range of financing needs for Model S customers.

While Tesla touts the simplicity of the lease, which contains a simple agreement that can be completed electronically, the real news is the establishment of Tesla Finance. The business lease program could very well be a stepping stone to a full-blown captive financing arm for Tesla, which would enable them to expand sales of their future products to a wider customer base, as well as providing a new revenue channel for their auto manufacturing business.

 

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19 Comments on “Tesla Follows The Money, Launches Financing Arm...”


  • avatar
    CoreyDL

    It must be very easy to set up your own captive financing arm. Otherwise all these companies would end up partnering with banks to do it. They need a credit branch – I want a cool black TeslaCard(R).

  • avatar
    gtrslngr

    What TESLAs financing [ lease and purchase ] in house strategy is really all about is the simple fact that no one in the banking industry with half a brain or a modicum of common sense is willing to write up a loan/lease on a car they …. unlike the few TESLA deluded out there [ TESLAs reported sales numbers being grossly exaggerated ] … know for a fact is a TechnoGarbageWagon and an Automotive Dinosaur [ just ask several of the \" rose colored glasses done broke \" TESLA S owners ... I have ... its quite revealing ]

    TESLA and Elon Musk . The 21st century equivalents of DeLorean Automotive and John Z DeLorean himself … in more ways than I’m free to mention here I might add . wink wink !

    • 0 avatar
      SCE to AUX

      Everything you have said is false (again) and perilously close to libelous. Watch it.

      • 0 avatar
        Kaosaur

        If you even mention “Tesla” on this site, you’re guaranteed to get a lot of people frothing at the mouth. If you took any of them seriously, you’d get the impression that the Model S was the worst car since the Chevy Vega.

  • avatar

    Isn’t Tesla’s current program set up with a couple of banks, of which Wells Fargo is one? I understood that the guaranteed value program can apply to either a lease or a purchase.

    I recently had to opportunity to ask the major players in residual value setting AND residual value insurance about the opinion of where Tesla has set its guaranteed value. Let’s just say there is a reason those values aren’t insured.

    RE: “as well as providing a new revenue channel for their auto manufacturing business.”

    Or a chance of loss. The entire Tesla endeavor is predicated on Tesla maintaining the confidence of its investors, partners, consumers, etc. The slightest hiccup could create a cascade effect. I hope it doesn’t happen. Tesla has a ways to go before they can feel at all “secure.” Tesla needs to keep that production line running. Maintaining the impression that there is more demand than supply is critical to its business plan. The most critical point in Tesla history will be what happens when they have to shut down assembly for a spell to balance production against demand. IMHO.

    • 0 avatar
      CoreyDL

      I have seen comments RE: your automotive insider experience before – have you shared what it is/was? I’m curious now!

      • 0 avatar

        It seems my life is an open book here but there are many here who hide behind anonymity while making wild assertions about things they just don’t understand.

        I’m a semi retired guy who has spent over 40 years in the auto business and auto finance. I’ve spent the last twenty years doing consulting and training in the U.S. and Japan. These days I moderate panels at industry conferences, write columns for trade pubs, lecture on economics for a friends university, try to get pre-owned vehicle leasing started up again, and a variety of other projects that suit my fancy. I haven’t had a job working for someone for a LONG time, so I don’t have to worry about reprisal for writing the truth.

        After so many years in the business and being a member of the press I have been fortunate to have access to a few people in the industry.

    • 0 avatar
      05lgt

      I’m not sure that a sufficient percentage of Tesla investors are following any kind of rational plan. If enough of them are fanatics buying the image, the stocks (the current income source) will not respond to anything short of Bankruptcy procedings. If it is significantly held by more tradional investors I agree, one hiccup.

    • 0 avatar
      JalopNick

      “I understood that the guaranteed value program can apply to either a lease or a purchase. ”

      By its very nature an automotive lease includes a value guarantee, i.e. a fixed residual value (closed-end leases). I don’t know of any manufacturer finance co or bank that does open-ended leases for automobiles (I understand they do that with industrial vehicles etc but not automobiles). So the net net is that everyone out there actually has such a value guarantee.

      Oh, and I wish they would cut the bullcrap with the “business savings” and the other junk that is factored in so they show a lease cost of $500 a month. When for instance a 5-series lease is advertised for $500 a month, that’s actually $500 business-dollars, i.e. pre-tax dollars. The industry and regulators would drag BMW’s butt to court in no time if they started prominently advertising that lease as “$300 a month after business savings” … yet Tesla does that with impunity and no one seems to care.

      IMO, their business is very faith-driven at this point, I’m afraid they will have to adapt (become a drivetrain and IP company?) or die soon after the competition brings something compelling to market.

      • 0 avatar

        Yes, any balloon finance contract or closed end leases are predicated on someone guaranteeing a value at end of term. In most cases, these residual values are insured. Private cap leasing companies generally use residuals that are conservative enough they self insure.

        Banks and captive finance arms DO engage in open end leases, but it is mostly predicated on the credit and financial strength of the lessor. The lessor borrows the money from the lender, buys the vehicle, leases it to the lessee, and typically marks up the rate in return for the lessee using the lessor’s credit line.

        My point about Tesla is that no one will insure their residual values at the rather optimistic number they’ve set, so they are self insuring. That is risky. One might even expect them to set up a “risk fund” on their balance sheet, but I see no evidence of that.

        If Tesla offered their deal based on a residual value that could actually be insured the offer wouldn’t be particularly compelling.

        Yes, their business is VERY faith driven at this point, but in their defense, so are a lot of start up businesses.

        Yes, there has been a LOT of complaining by traditional dealers about Tesla’s advertising. Its all in how the disclosures are made. I once wrote a column about the VOLT, where I said I thought they were marketing the vehicle all wrong. It was entitled, “Who In Their Right Mind Would But a Chevy VOLT?” You can Google it if you are interested. I expressed my opinion that they should have stressed the lease opportunity less the fuel savings.

        • 0 avatar
          JalopNick

          Read your article and, while I agree that GM is marketing the Volt about as ineptly as possible, I think your hinting that the “right wing” is tho blame for its failure is naive.

          The Volt had the misfortune of being released just as this administration were busy wiping their asses with some 100+ years of legal precedent in bankruptcy matters. The billions after billions gifted to the various unions and “special interests” etc while secured debtors and bondholders were bullied into accepting a few cents on the dollar in closed-door meetings must have soured a lot of people’s mood vis-a-vis GM, it surely didn’t make this one GM stockholder particularly happy. Add 230 MPG and other such nonsense on top of that and you can see why their credibility didn’t quite improve with people.
          The short story is that the VOLT is a product that should be selling like hot cakes and it isn’t. For every one Tesla sold, you’d think GM would sell some 20 Volts. They’re not.

          Tesla started with some of the same egg on their face, free plant gifted to them after Nummi closed, half a billion loan with little in the way of guarantees etc. Tesla however, being lead by a capitalist geek and not by a communist lackey, took the opportunity and did pretty much everything right, culminating with raising private capital to pay off the government loan in order to avoid the bad press. The goodwill they have earned through their actions and the quality of their product is quite possibly second only to Apple in the last couple of decades (by quality I don’t mean reliability by any means). Treehuggers and right wingers love Teslas just the same, albeit sometimes for different reasons. Watch Elon Musk’s demeanor and expression at the introduction of the Model X, notice how uncomfortable he is with the Jerry Brown ass-kissing on stage. The guy just wants to introduce his project and talk about how cool it is. That geek factor and the genuine interest in the product has pretty much everyone with the means in Silicon Valley lining up to buy one. GM has none of that … and the Volt is not selling.

          Here’s my personal EV dilemma:
          I do very much want an electric vehicle. I tried the the Leaf, the FFE etc and I read everything I could find about pretty much every EV on the market. The fact is that for my driving habits, only two vehicles would work, a Tesla or a Volt (other plug-in hybrids have too short an electric range and I’m looking to maximize electric driving and I’m not concerned with small fuel savings). If a Tesla made any financial sense, I’d get one in a heartbeat but I will not get near a GM if they paid me to drive it … so I plan to get an e-tron when they finally arrive in the US. The sad thing is that the e-tron is nothing more than a German Volt. GM had the technology and the product all these years yet managed to snatch defeat from the jaws of what should have been a solid victory.

  • avatar
    Rod Panhard

    Previously, Tesla had guaranteed that the resale value/residual of the S would be tied to Mercedes-Benz S class. Now, I don’t know what the fine print had said about which Tesla S model would be tied to which equipment specification on the Mercedes-Benz S class, but even then, the Mercedes-Benz S class is not the stellar example of outstanding resale. If anything, it’s the opposite.

    But good luck Tesla. You need it.

    • 0 avatar
      JalopNick

      Is that actually in the sales contract? Because if it isn’t it’s not worth the paper it’s printed on.

      I do think this is a very good move on their part. Given the very risky situation they’re in, they probably are having a progressively harder time getting people to accept a 100k risk. Risking only half-ish of that value by virtue of having the lessor own the vehicle and therefore taking the most of the risk, may very well make the prospect of driving a Model S more palatable for a number of people, especially business owners and those self-employed.

      On the other hand, an A7 is $700 a month vs a base S85 at $1200 …

  • avatar
    el scotto

    Could this be a way for Tesla to circumvent franchise laws? It’s leased from Tesla Motor Corp, is maintained by Tesla, serviced by Tesla, and will be returned to Tesla when the lease is up. Want to purchase your Tesla when your lease is up? Your service advisor can advise which state this can take place.

    • 0 avatar
      Pch101

      Musk made personal guaranties to the banks in order to backstop the residual values of the leases. This sounds like a move to push that problem away from Musk and back to the corporation.

      I do have to give these guys credit. They really know how to play the game.

  • avatar
    probert

    Elon Musk was one of the founders of paypal- that’s where his billions come from. My guess is that he knows what he’s doing.

  • avatar
    enzl

    I’ve casually shopped a Tesla for a biz lease . As of January of this year, they were guaranteeing 50% residual after 3 yrs, but no leases in traditional sense.

    MB must be above 50 on the new S for 3 years.

  • avatar


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