Published on July 13th, 2016 | by Zachary Shahan42
Tesla Resale Value Guarantee Disappears
July 13th, 2016 by Zachary Shahan
If you’ve been following Tesla news for a few years, you probably remember well Tesla’s announcement in April 2013 that it would guarantee the resale value of a Tesla Model S “for the same residual value percentage as the iconic Mercedes S Class,” holding 50% of its value after 3 years for the base purchase price, and 43% for all of the added options. Tesla CEO Elon Musk went out of his way to personally back this with his own wealth (should Tesla Motors happen to go under).
As it’s turned out, Tesla resale value has been superb (which those of us looking for used Teslas probably haven’t been thrilled about). Teslas hold value better than almost any other cars … and in the UK, the Model S was actually found to hold value better than any other car.
With (arguably) no apparent need to guarantee a high resale value (well, a low resale value compared to what used Teslas actually sell for), Tesla has dropped the resale value guarantee … quietly.
The change came two weeks ago, on July 1, 2016. A Tesla spokesperson said that the change was made “so we can keep interest rates as low as possible.” Basically, because of the way financials are considered by the banks that pull the strings on loans and leases, Tesla determined that it would serve the company’s customers much better to nix the resale value guarantee and offer better loan and lease deals. I’ll let any finance experts chime in here for more perspective on that matter. [Update: There’s plenty of good input in the comments, particularly focusing on how this change affects GAAP finances and profitability.]
It seems pretty straightforward, and a solid move, but as it seems all things with TSLA go, it is likely to lead to a range of “yay, Tesla!” and “Tesla’s a scam and will crash!” articles.
Will this move deter potential Tesla buyers? I’d be surprised. As noted above, resale values are so high that I doubt many people even think about the guarantee.
Will it lead to more sales? If loan & lease terms/prices are significantly better, it must.
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