Electric car sales are trending up nicely in most of America, but the rising cost of battery materials is causing the sale price of many EVs to rise. Couple that with the recent increase in interest rates by the Federal Reserve and buyers in the market for an electric car are being hit with a double whammy — higher sticker prices and higher borrowing costs.
A Better Deal On Electric Car Financing
Tenet is a Silicon Valley based startup that is using data to create more affordable financing options for electric car shoppers. It says traditional lending models don’t take into account many of the factors that make Evs unique. “Software upgrades, lower maintenance costs, and tax credits mean EVs should be treated differently than gas cars. Other auto lenders may not take this into account when they price your loan, but we do,” it says on its website.
Tenet co-founder and CEO Alex Liegl tells Canary Media most US car buyers aren’t getting a fair deal on the loans they take out to buy EVs and he says he has the data to back that up. For instance, the federal tax credits plus state and utility incentives might not reach the buyer until a year or more after the purchase but they make it more likely buyers will keep up with their monthly payments
“Our job is to pull that forward to the point of purchase or shortly after,” Leigl says. “When they’re buying their vehicle, they can apply that as a deferred down payment” through a structure that Tenet has crafted with its lending partners.
EVs also cost less to fuel and maintain than gasoline vehicles, which lowers the monthly financial burden on their owners. Finally, if an owner defaults on the loan, used EVs tend to be worth more than conventional cars. That higher value should be factored in to the loan calculation as well, Leigl says. It’s all there in the data Tenet assembles. “The more data we’re able to collect, the more efficiently we’re able to price our consumer loans, and the more savings we’re able to pass on.” The upshot, he says, is that electric car buyers are better credit risks and that should be a factor in the lending process.
Tenet doesn’t carry loans on its own balance sheet, Liegl explains. Instead, it earns money from banks, credit unions, automakers, dealers, and other financing partners that use its underlying data analysis to “connect the dots and align those incentives.”
The company has enabled several thousand loans so far, is active across 33 states, and is aiming to get at least 10,000 EVs financed by the end of 2023, he said. On average, these loans offer monthly payments that are about $150 less than payments on loans for EVs that are made in more conventional ways, Tenet said.
Nick Christian, head of specialty financing for Silicon Valley Bank, says the financing units of most major automakers have been offering special deals for EV loans for years now, as have certain banks and credit unions, but “they don’t underwrite any differently for EVs than they do for an internal combustion engine vehicle.”
In other words, these offers aren’t necessarily backed by underlying analysis of the data that might justify them, he said. Tenet, in contrast, has pulled together the relevant data on EV buyers’ ability to repay their loans and the long term value of the asset they’re borrowing against in a way that Christian hasn’t seen other auto lenders do yet. “I suspect that if someone is successful, there will be copycats,” he said. “But they’re first.”
Treehouse Streamlines Electric Car Charger Installations
Treehouse is another Silicon Valley startup that has built a data driven approach to bundling the cost of buying and installing EV chargers at home. Lots of automakers and car dealers offer EV buyers discounts on home chargers but few offer help in determining how much it will cost to install those chargers. Treehouse CEO Eric Owski tells Canary Media none of them are bundling the cost of charger installation into the loan for buying an EV. Treehouse and Tenet plan to start doing precisely that in the first quarter of 2023.
“Most EV owners are receiving fairly poor guidance at the point of sale” about how to ready their homes for charging their new EV, Owski says. That can be a problem for homes with inadequate electrical service to support heavier charging loads or wiring that doesn’t extend to where they park their cars. “Anecdotally, probably 10 to 20 percent of EV buyers have run into a problem they wish they’d known about beforehand. For a small percentage of those, it becomes a real deal breaker.”
Treehouse collects data from prospective customers via an online form that asks a relatively simple set of questions — home address, what type of building it is, preferred charger location, and the location and amperage of the electrical panel. It combines that information with a growing store of its own data to provide a cost estimate for the installation.
The company has hired its own electricians to do installations and also contracts to third parties, which can save “hundreds if not thousands of dollars” on both upfront and ongoing charging costs. Cutting the costs and complexities of owning an EV will be important to help EV adoption move beyond “a lot of early adopters who were willing to break through barriers on their own,” he said. “I think we’re seeing that consumer perspective shifting as EVs hit that tipping point. Everything has to work smoothly.”
A recent survey by EV-charging company Volta found that nearly 60% of people who plan to buy an EV in the next 12 months have household incomes below $75,000 a year, while less than a third of current EV owners have incomes below that threshold. That means this new class of buyers will be particularly cost conscious.
A Foot In The ESG Door
Both Treehouse and Tenet see the electric car as a point of entry into a general rethinking of how electricity is used in the home. “Consumers are much more open to broader electrification options once they have an EV in their home,” Owski says. Liegl adds that EVs are a “natural entry point” for broader electrification of home heating and cooking and other home decarbonization and efficiency measures. “We want to be that financial network for the climate economy.”
Silicon Valley Bank has its eye on ESG values as well. Nick Christian says that like many banks, it has experience bundling individual loans into asset backed securities, including loans for installing residential solar systems. Securitization has helped drive down the cost of capital for rooftop solar systems and could play a similar role for EVs and broader home efficiency investments as well, he noted. “If we can help [Tenet] like we would a normal consumer lender, but also do something that’s good for the broader environment, that’s a plus for us.”
Bundles of EV loans could be more valuable than bundles of loans for gas powered cars. While the ESG value of EV loan backed securities has yet to be established, the fact that EV purchases displace purchases of polluting fossil fueled vehicles is likely to have value in the market, Liegl says.
In fact, data about how EVs are driven could make these loans even more valuable as ESG investments, he noted, since that can provide a record of just how much pollution and carbon emissions they’re preventing compared to gasoline-fueled vehicles. That gives investors “insights into how much CO2 they’re helping to avoid. They can start tracking their climate impact and begin to think about how that slots into their overall ESG goals.”
For years, we at CleanTechnica have been touting the benefits of an electric car. Primarily, we tend to focus on the reduction in carbon emissions associated with driving on electrons but maybe we can’t see the forest for the trees.
Electric cars are an entré into a whole new way of looking at the world. If you drive an EV, you are much more likely to be interested in rooftop solar, a residential battery, heat pumps, and ways to use your vehicle to get you and your family through a power outage.
What we are seeing is the beginning of an attitude shift. Let me explain. At one time in America, everyone smoked. Today? Not so much. Attitudes change, and both Tenet and Treehouse are tapping into those changes. What even they have not yet anticipated is the impending decline in the value of used conventional cars. That is when the difference between financing gas powered cars and electric cars will become fully apparent.
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