Tesla to Finance Leases for Business Owners

24/7 Wall St.

On the company's corporate blog Tuesday, Tesla Motors Inc. (TSLA) announced a new leasing program for small and medium-sized businesses that the company said is a result of requests from business owners. Tesla has established its own financing arm, Tesla Finance, to offer the leases to business customers.

The company already offers a guaranteed buyback offer for Model S owners that is very much like a lease. Tesla will take the car back after the buyer has driven it for three years at a predetermined price. The car's owner gets the benefit of the $7,500 federal tax credit as well as the guaranteed buyback price. For a car with a sticker price that starts at around $70,000 and can climb to well over $90,000, this has been a successful program for Tesla and mirrors leasing programs for other luxury vehicles.

ALSO READ: Nine CEOs with the Worst Reputations

Under the leasing program for business owners, Tesla Finance will arrange financing with partner banks and set a buyback price for the car at the end of the lease period.

When Tesla announced fourth-quarter results in February, the company said that it expects the average price of a used Model S to be "meaningfully above" the company's guaranteed buyback price.

Tesla needs to boost demand for its Model S in order to justify spending more cash on expansion. The company delivered 22,450 of its Model S sedans to U.S. customers in 2013 and expects to double that total in 2014. Expansion into China will soak up some of the production increase with sales in the Middle Kingdom reaching the same level in 2015. And because the Model S is not manufactured in China, buyers will not be eligible for state subsidies to buyers of other electric vehicles. Still, Tesla expects that it will not be able to meet 2014 demand for its Model S from Chinese buyers.

The Model S is already the best-selling electric vehicle in Norway, but it is fighting in several U.S. states for the right to sell cars through a manufacturer-owned outlet.

Tesla shares traded up about 2.4% shortly before noon on Tuesday, at $212.87 in a 52-week range of $40.33 to $265.00.

Related Articles

View Comments (0)