Today, Elon Musk’s Tesla Motors announced a plan to allow consumers to finance its Model S Electric cars, thanks to a partnership with Wells Fargo and US Bank.
The company says that this is a new kind of financing product that “combines the surety and comfort of ownership with all the advantages of a traditional lease.” So while this isn’t a straight-up lease, this is a hybrid that is as close to owning one of these cars as you’re going to get without paying cash for it.
The “true net out of pocket cost” for a Model S with this deal is less than $500. After three years you’ll be able to turn the car in for cash or equivalent trade-in.
Here’s how it works, it’s not as complicated as it sounds, but it is pretty genius math and marketing:
- US Bank and Wells Fargo have agreed to provide 10 percent down financing for purchase of a Model S (on approved credit).
- The 10 percent down payment is covered or more than covered by US Federal and state tax credits ranging from $7,500 to $15,000. New Jersey, Washington and DC also have no sales tax for electric vehicles. These advantages are not available when leasing.
- When considering the savings from using electricity instead of gasoline, depreciation benefits and other factors, the true net out of pocket cost to own a mid-range Model S drops to less than $500 per month.
- After 36 months, you have the right, but not the obligation, to sell your Model S to Tesla for the same residual value percentage as the iconic Mercedes S Class, one of the finest premium sedans in the world, made by Daimler (also a Tesla partner and investor).
- Not only is Tesla guaranteeing that resale value, but Tesla CEO Elon Musk is personally standing behind that guarantee to give customers absolute peace of mind about the value of the asset they are purchasing.
If you want to keep the car after three years, you simply continue making payments for another two years. The advantage to this approach is that you’re never locked in like a lease and that consumers are “building equity” in their vehicle, Musk explained during the conference call today.
Tesla has updated its website and offers more details on the program, along with a pricing calculator based on where you live:
The announcement came along with a video featuring Musk, providing a personal guarantee on the Tesla Model S, which he says is “the world’s best car”:
Also during the call, Musk was asked what his net worth was, which is tied to what the founder means when he says he’s “putting my money where my mouth is.” If Tesla cannot pay a customer the residual value for a Model S, Musk will do so personally. While he didn’t give an exact number, he said that reports by Forbes, which list his net worth at $2.7 billion, “weren’t far off.”
Before you go and order one, take a look at our Model S test drive from last year: