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Tesla trims Model S lineup, adds 'revolutionary' financing option

Nearly 5,000 deliveries give electric-car maker its first quarter in the black, the 40-kWh sedan gets dropped, and a new financing program tries to guarantee residual values.

By James_Tate Apr 2, 2013 1:30PM

There’s no word on whether the press release announcing Tesla Motors’ first-ever profitable quarter was sent out on Sunday so as to avoid being seen as some sort of early April Fools' joke, but the company says it's real.

In a letter sent out to investors in February, the Palo Alto, Calif.-based electric-vehicle company promised delivery of 4,500 of its Model S sedans over the first three months of 2013. It managed to surpass that goal with 4,750 cars delivered. The large number of Model S deliveries caused Tesla to amend its first-quarter guidance numbers to reflect, for the first time, full profitability.

Between the unexpected first-quarter numbers for Tesla Motors and the safe return of Space X’s Dragon unmanned space capsule near the end of March, Space X founder and Tesla Motors CEO Elon Musk is having quite a run of good fortune.

“There have been many car startups over the past several decades, but profitability is what makes a company real. Tesla is here to stay and keep fighting for the electric-car revolution," Musk said in a statement March 31.

Musk plans to continue Tesla’s 2013 success by eliminating the 40-kilowatt-hour version of the Model S from the lineup. Making up only about 4 percent of Model S orders, the 40-kWh version is now seen as extraneous compared with the more popular, higher-range 60-kWh, 85-kWh and 85-kWh Performance versions.

While eliminating the least expensive car it makes -- the 40-kWh Model S had a base price of $59,900 -- Tesla will make good for customers who already placed deposits on that car. Those in line to receive a 40-kWh Model S will get a car with the 60-kWh battery pack with software that limits it to the range of the smaller battery. Current or future owners of these 40-kWh cars can pay to unlock the 60-kWh’s extra range if they choose, but will gain the 60-kWh’s improved acceleration and top speed, gratis.

Also revealed in the press release is an upgrade to the 60-kWh Model S: All current and future 60-kWh models with be equipped with Tesla’s Supercharger hardware, reflecting yet another Musk gamble — this time, in Tesla's fast-charging stations, which he hopes will  populate the United States the way gas stations do now. That would extend the range of Tesla’s vehicles and make them a more realistic, practical option for consumers outside of urban areas who need the extra range.

If that weren't enough, Tesla has also unveiled a new financing system that it modestly calls “revolutionary.” With some very creative math, Musk says that this new leasing program will amount to a $500-per-month effective payment over the life of the Model S. On top of that, he's giving lessees the right to sell the car back to Tesla after 36 months for the same residual value percentage as a Mercedes-Benz S-Class — a value Tesla Motors and Musk himself are guaranteeing, if not a particularly big one.

Essentially, this works out as a lease-to-own program that will run about the same cost as purchasing one through private financing -- around $90,000 for most Model S sales with options factored in. Where Tesla's new factory-backed financing will appeal to buyers is in that buy-back clause. Under current lease agreements, the bank financing the deal keeps the tax credits associated with the Model S, but with Tesla's new system you can keep the tax credit and still sell the car back to Tesla under contract.

You don’t make it to space without taking some major risks, and this program is certainly a big risk. Residual value of the S-Class is just under 50 percent at best, and that $500-per-month number is ripe for ridicule in the face of what is actually a $1,199-per-month financing program for 66 months. Time will tell whether Musk’s newest bet pays off, but he and Tesla have defied the odds before, and may just be able to do so again.  

 [Sources: Tesla Motors; The Los Angeles Times;; Photo via MSN Autos Canada]

Apr 9, 2013 5:32AM

The "KEY" to what Tesla is offering the "Effective Payment amount. I think it's great that they are now offering leases for their model S. If you have ever leased a vehicle you well know that you are never going to lease a $75,000.00 +++ vehicle in the $500.00 a month payment range unless you pony up a 50% +++ down payment..

To be sure this is "Creative" financing at its' VERY  best. !!!!!

I went to Tesla's website to calculate how they come up with the $500.00 per month payment.

They figure in the time you don't spend gassing up each month at $100.00 per hour.

It almost feels like the very small, extensive print for a credit card application. It's there you know you should read and understand it but who does !

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