Tesla Leasing Partner Embroiled in Financial Trouble

Matt Posky
by Matt Posky
tesla leasing partner embroiled in financial trouble

Tesla’s Dallas-based leasing partner, MUSA Auto Finance, finds itself in a tough spot. Apparently, the business is having trouble keeping up with all the business the automaker is doing. Founded in 2016, MUSA joined up with Tesla in June of this year. However, it has reportedly been unable to finance new leases since October.

According to Automotive News, Tesla caused MUSA’s leasing volume to increase by a factor of six between August to September. As of December, MUSA dealer clients said lease approvals have yet to resume — leaving some dealer partners up a creek without a paddle and some customers without their car.

From Automotive News:

MUSA’s sudden turn of fortune created snarls that Dave Guttenberg, owner of Automotive Imports, a used-vehicle store in Denver, still is navigating. Even though dealers were told MUSA — known for its automated decision-making software — would honor all leasing contract approvals sent before the October email, Guttenberg says he is owed nearly $180,000 for three pending lease agreements secured before the announcement. He still is waiting for funding — and answers — from the company.

“We didn’t want to have to call customers up and say, ‘We’re sorry — remember that really good lease deal that you were skeptical about? Well, we can’t lease you that car,'” he said.

On October 16th, MUSA issued an email to dealers stating the sudden increase in leasing volume from Tesla “forced us to look closely at how we fulfill our obligations to our core dealers and OEM partner.”

“Effective today, we can no longer approve new applications until we retool some of our business processes,” said the email, signed by Derek Walker, MUSA vice president of sales and marketing. “We’re hoping this is a very short process, maybe a week … Please stay with us. Please believe in us. These are just growing pains for a start-up auto finance company with big dreams that grew faster than anyone expected.”

Sources close to the matter say MUSA simply didn’t have enough money to handle its Tesla partnership after the automaker ramped up production. One anonymous source said the leasing firm is now seeking more investors to fund the business.

Prior to the Tesla deal, MUSA announced it had secured funding capacity of $175 million to originate leases. Michael Buckingham, senior director of J.D. Power’s automotive finance in Costa Mesa, CA, said leasing contracts on pricy vehicles like the Model S and X probably made short work of it. “With the high ticket price of autos, you burn through that rather quickly,” Buckingham said. “They simply ran out of capital.”

Further hampering the situation is a lawsuit from former MUSA president Richard Frunzi. In September, he sued the company for unpaid severance. He’s seeking 18 months of base pay and benefits, valued between $200,000 and $1 million. He also cited “improper” behavior from CEO Jeff Morgan that “could negatively harm MUSA and its investors.” However, Frunzi’s former employer asserted that his employment was properly terminated, and that he was ineligible for any further severance or compensation.

MUSA has also gone through two CFOs since forming in December of 2016 and doesn’t appear to have anyone filling that position at present.

Fortunately, the finance problem hasn’t been a universal issue. “I don’t have anything negative to say about them,” a representative of Michael’s Auto Sales, a luxury used-vehicle retailer in West Park, FL, told Automotive News. “I got paid on my deals. They stopped originating, but we’ve had other companies stop originating and left us holding the bag.”

Those touched by MUSA’s money troubles are left with two options, according to Buckingham. They can either find another lender willing to buy the unfunded contract or take control of the leases themselves. Ouch. Even if dealers find new lenders, they may not agree to the same terms as MUSA, forcing retailers to subsidize the remainder of the lease — which they’re unlikely to be able to afford.

[Image: Tesla Motors]

Join the conversation
3 of 14 comments
  • Indi500fan Indi500fan on Dec 17, 2018

    With Musk bringing (fairly ambitious) things like body shop, insurance, and car delivery transport in-house, I'm surprised they find the need to use a lowbrow leasing outfit.

  • Add Lightness Add Lightness on Dec 18, 2018

    I am amazed at how the values of used Teslas is being propped up. What they want for a 5 yo one is way out of line with other electric or expensive 4 door cars.

    • SCE to AUX SCE to AUX on Dec 18, 2018

      EV resale value is primarily governed by battery degradation, which is lowest on a Tesla, but often horrendous on older Leafs, for example. As for the comparison to other expensive 4-door cars, they don't have the rabid fan base that Tesla does, nor do they perform like a Tesla.