How Elon Musk’s creative financing for the Tesla Model S turns $1,199 a month into $500

Just think—if this were a Tesla Model S, you’d be saving more than $2 a minute.
Just think—if this were a Tesla Model S, you’d be saving more than $2 a minute.
Image: AP Photo/Reed Saxon
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Tesla Motor’s “revolutionary” new financing for its Model S luxury electric sports sedan will set you back about $1,199 a month. Or a more manageable $500—if, that is, you value your time at $140 an hour.

“It can actually be less than that,” Tesla chief executive Elon Musk, who last week revved up anticipation of “really exciting” news on Twitter, said during a press conference today.


Musk relies on some really creative math to justify the $500-a-month price tag that appears over the image of a sleek $70,000, 85 kWh Model S on Tesla’s website. But before you rush to trade in your Toyota Camry, we suggest you run the numbers. Here’s how Tesla gets to the “effective” monthly $500 cost on a 66-month lease:

If you’re a Californian, $10,000 in state and federal tax credits and rebates will be applied toward a required $7,000 down-payment (financed by Wells Fargo and US Bank). That takes $53 off the monthly payment. That’s straightforward enough.

Then Tesla estimates you’ll save $284 a month in fuel costs (provided you previously drove 15,000 miles a year in a car that got 19 miles per gallon.) Your actual mileage may vary, but fine, we’ll buy that. That’s also assuming electricity costs $0.11 per kWh, which is the national average, though it’s more like $0.15 in coastal states where most Tesla drivers are likely to live (and a staggering $0.23 in Los Angeles). But fine, we’ll buy that too.

Now deduct $8 a month because Musk, whom Forbes estimates to be worth $2.7 billion though three years ago he told a divorce court he had no cash left, has personally pledged to make good on a guarantee that your Model S will have a residual value equal to a Mercedes S Class sedan after three years. You can either sell the car back to Tesla for that price or continue making payments. Okay.

This is where things get a little weirder. Tesla claims that drivers should arrive at their true monthly payments by calculating the time they’ll save commuting in the car pool lane—something California allows electric car drivers to do—and by not having to schlep to the gas station.

In the example on Tesla’s website, shaving five minutes off your daily commute will lower your monthly payment by a tidy $233 a month—if you bill your time at $140 per hour. You’ll save another hour a month, Tesla estimates, by plugging in rather than taking four 15-minutes detours to fill up with gas—another $140. Of course, if you make $325 an hour, your Model S is effectively free, by Tesla’s math.

This, naturally, assumes you get paid for every hour you save not doing something. Maybe this happens in Mr Musk’s universe. Most of us, however, don’t find dollars showering out of the sky every time we decide to skip an episode of Game of Thrones.

Or as one tweet put it:

Still, Tesla aficionados will probably want to keep up with Musk’s Twitter feed.

“We’re going to put out a new announcement probably every week or two from here on out,” he said. Brace yourselves.