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Tesla’s Car Financing – What I Think Happened

Now we know what Tesla’s (TSLA) big announcement was and how it involves Elon Musk putting his money where his mouth is “in v major way.” Let’s recap what Tesla has on offer and think a little about what this involves for the company, for the banks, for Elon Musk, why it has turned out as it has, and what it all may mean for shareholders.

Here is what Tesla has on offer if you strip away all the ‘showmanship and hype’:

Tesla’s Bank Financing Scheme

Feature Description
Coverage 10% down
Term 66 Months
Rate 2.95%
Residual Guarantee
Tesla + Musk
Like MB S-Class
~43% @ 36 months

It’s a fairly conventional bank supplied financing deal for a luxury car, except for the Residual Guarantee. What this guarantee does for the customer is to make the financed purchase effectively convertible to a walk-away lease that the buyer may terminate at 36 months. It’s a great way for Tesla to assure buyers that their touch screen won’t fail and their battery will keep charging. Customers who would like a new Tesla and are either concerned about the company, the car or the battery, or are unable to write Tesla a six-figure check will love this deal.

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