Tesla increased the guaranteed residual value of the Model S

Article by Christian A., on May 6, 2013

After the three-year lease-to-own period of Tesla’s electric Model S sedan, its guaranteed residual value will be raised to 50%. The guaranteed residual value has been compared to the 43% of the Mercedes-Benz S class, which is low when compared to the overall luxury segment considering that it has been 36 months already.

At a recent conference call, Tesla CEO Elon Musk said that the company is prepared to make the major jump from 43 to 50%. This means that for a base Model S that’s priced at $71,070 (which includes shipping and fees), $250 is taken away from the monthly payment, bringing it down to around $800.

In a statement, Musk said that technically, the Tesla program is not a lease. Instead, it’s a purchase program that comes with a guaranteed "put option" after a three-year period.

Tesla’s statement says that the revised residuals mean "a guarantee that the resale value will be higher than that of BMW, Audi, Mercedes, Lexus or Jaguar."

Tesla also said that the revised residuals will be applied retroactively to those who have financed a Tesla through US Bank or Wells Fargo from April 2 onwards.

Tesla aims to produce around 20,000 Model S sedans in 2013. If a consumer places an order today, there would be a long wait of over six months. It’s not only Tesla that’s backing the guarantee. Musk is personally putting up his funds too.

Forbes magazine estimates that he has a net worth of $2.7 billion. In addition, US Bank and Wells Fargo have extended longer-term loans to cut the monthly payment of the Model S, from 63 months up to 72 months.

Musk said that around 20 or 25% currently use Tesla's financing via Wells Fargo or US Bank. But with the expectation that more financing partners will arrive, Musk thinks that around 65% will use Tesla's financing plan.

Tesla explained that it has revised several of the defaults on its Web site's payment calculator so that there will be a more precise measurement of gasoline prices and depreciation used for business.

Tesla Model S is not like your average all-wheel drive vehicle. All-wheel drive vehicles are generally known to raise fuel consumption in a bid to control traction. This is not the case with the Tesla Model S, and a lot of it has to do with what lies inside the Tesla Model S. It is suited with a front motor and rear motor that enables it to have traction control capability that is unseen in any other all-wheel drive.

This is boosted further by the Tesla Model S’s capability to digitally and independently control torque, resulting in an all-wheel drive that can regulate both traction and fuel consumption, with the Tesla Model S showing an EPA rate of efficiency of just close to 90 mpg.

But traction control and fuel efficiency are not all there is to the Tesla Model S. It is also built for speed, as it is able to register a 0-60 mph acceleration in just 2.8 seconds, making it the fastest four-door sedan in history. But even at top speed, the Tesla Model S still shows smooth maneuverability because its low center of gravity is grounded on the innovative idea of placing the battery pack centered between axles and along the floor pan. Doing so has made this all-wheel drive offer easy handling.

More than anything, the Tesla can be an ideal group or family car. It comes fully loaded with media, cabin control, communication, navigation and vehicle data integrated by an intuitive interface controlled by a 17” center touchscreen, thus making it ideal for long drives and road trips. It also offers a spacious interior that can accommodate up to 5 adults and 2 kids since the Tesla Model S comes without an internal combustion engine, allowing for more legroom and cargo space.

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