Sorry, potential Model S buyers but your time is no longer money.
On April 3, Tesla Motors chief executive Elon Musk unveiled a “revolutionary” new financing offer that slashed monthly payments for its $70,000 electric luxury sports sedan from $1,100 to a low, low $500. But only if you counted all the time and thus money Tesla said you would save from not schlepping to the gas station and by gaining entree to the carpool lane for electric cars (if you happen to live in California.) This assumed, of course, that you make $140 an hour just for breathing.(See Quartz’s detailed deconstruction of the Tesla offer math here.)
Today Musk came off the ledge and said a revamped lease deal would no longer include such “non-financial” calculations. “When we did our financing announcement about a month ago we didn’t get it quite right,” he said on a conference call with reporters. “We were looking at a lot of valid criticism from journalists and customers and have taken corrective action.”
Still, he couldn’t resist adding, “I do think people undervalue time. That sort of time value element is very significant for doctors, lawyers, consultants.”
But to keep the monthly payments relatively low—and we use that phrase liberally—Tesla has sweetened the deal by extending loans up to 72 months from Wells Fargo and US Bank. And Musk now personally guarantees that the trade-in value of the Model S after three years will exceed that of a comparable car from Audi, BMW, Jaguar, Lexus or Mercedes. (The previous offer only matched the residual value of a Mercedes S Class sedan.)
So here’s how Tesla’s new, new math works:
We’ll opt for the $81,070 Model S with an 85-kilowatt hour battery—that gives you a US government-rated range of 265 miles on a charge—since Musk said that’s the version most customers are buying. At 2.99% interest and a 15% down payment, the monthly payments are $1,045.
Tesla still deducts the amount of money you’ll save from not buying gas but has made the estimate more conservative. Not too conservative, though–the company thinks gas will cost $4.90 a gallon over the next three years. Even in San Francisco, where gas prices tend to be high, a gallon currently goes for under $4. Okay, we’ll play along as there is a real monthly savings to be had from plugging in rather than gassing up. Tesla deducts $261 a month from your payment, assuming you drive 15,000 miles a year.
Then Tesla deducts $91 a month because that’s the value it assigns to the guaranteed trade-in value of the Model S. That’s quite a jump from the $8 under the previous financing offer.
That leaves an “effective” monthly payment of $754 for a high-end Model S. Nonetheless, that’s a chunk of change considering the average monthly mortgage payment in California last year was $1,445, according to Lending Tree.
“As a cash purchase, it’s available to the top 1% of households,” Musk acknowledged. “With financing it’s accessible to the top 10%.” He said Tesla’s third-generation car would be affordable for the Honda-driving masses.