Last week, Tesla announced that it would no longer offer open-ended leases on any of its products. Depending on who you ask, this is either a solid move that helps ensure a future robotaxi fleet, or a cynical cash-grab by a Tesla Motors finance arm that has been missing out on the skyrocketing prices on used cars.
Jo starts off with a quick explainer of traditional, “open-ended” leases, which allow people a “stop” after 24 or 36 months to re-evaluate the purchase, and either buy the car out at the previously agreed-upon residual value, or drop it off at the dealer. No harm, no foul. A “closed end” lease is a little different, in that the consumer doesn’t have the option to buy the vehicle at the end of the lease.
Why is that a problem? According to Jo, it places all the financial risk on the consumer, and enables the finance company to “cash in” on resale values that exceed their initial estimates. In other words: it enables Tesla to charge more than the difference between MSRP and residual value, and add even more profit to their industry-leading bottom line at the expense of their consumers’ pocketbooks.
TL;DR: more options for consumers = good. Fewer options for consumers = bad.
Where do you stand on Tesla’s move to close-off leases? Will it impact your Tesla-buying decision, one way or another? Check out the latest episode for yourself, below, then let us know what you think in the comments section at the bottom of the page.
Show Notes “Tesla Drops Lease Buyouts, Mobile Charger”
We talk a bit about open-ended leases being around forever, and make the claim that their benefits have never really been explained to consumers. Here’s an article from 1990 that paints a pretty rosy picture of leases. Here’s a more modern article that paints a much less compelling picture.
All of this is referencing an article we wrote on the day of Tesla’s announcement, which you can read here.
Click “play” on the Spotify player plugin, above, to hear the episode, or you can listen on Anchor, Apple Podcasts/iTunes, Breaker, Google Podcasts, Overcast, Pocket, Podbean, Radio Public, Spotify, or Stitcher.
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