Elon Musk did something today that is somewhat rare for a CEO.
He admitted that he was wrong, and his critics were right.
Musk announced today Tesla will tweak its lease-buy financing scheme that it announced last month.
Tesla partnered with Wells Fargo and US Bank to create a financing situation which it believed could knock the monthly cost of a Model S down to less than $500 a month.
However, the sub-$500 monthly payment was based on a number of dubious factors, and upon close examination it didn't add up.
Musk admitted today that the criticism of Tesla was fair. As a result, he's tweaking the financing model.
Originally, Tesla used the resale value of the Mercedes S Class as a benchmark for the Model S's resale value. Today, Tesla is going to use the highest resale value it can find for any luxury sedan.
"Buying a Model S through the Tesla financing offering now comes with a guarantee that the resale value will be higher than that of BMW, Audi, Mercedes, Lexus or Jaguar," says Tesla.
Tesla is also getting longer lease terms from its banking partners.
He now estimates it will cost $580 per month for personal use, and $315 per month for business use, when factoring in gas costs.
Here's the full release:
Tesla Improves Financing Product With Best Resale Value Guarantee and Lower Monthly Payments
PALO ALTO, CA -- (Marketwired) -- 05/03/13 -- Tesla Motors (NASDAQ: TSLA) announced today that it is raising the Model S resale value guarantee to be the highest of any premium sedan brand made in volume (excludes rare, low volume or limited edition vehicles). Buying a Model S through the Tesla financing offering now comes with a guarantee that the resale value will be higher than that of BMW, Audi, Mercedes, Lexus or Jaguar.
To protect people that have already purchased a Model S via this program, the guarantee will extend retroactively to anyone that made use of Tesla financing, created in partnership with US Bank and Wells Fargo, from when it was first announced on April 2, 2013. As with the prior resale guarantee, this higher number is also backed personally by Tesla CEO Elon Musk to give owners complete peace of mind about the long term value of the product.
"We appreciate the feedback from a number of journalists and customers that the first version of our financing product wasn't quite right," said Tesla Co-founder & CEO Elon Musk. "They were right, so we are fixing it and, moreover, upping the ante by providing the best resale value guarantee in the automotive industry. The Model S is rated by Motor Trend, Automobile Magazine and many others as the best car of 2013, so it should naturally therefore have the highest resale value."
In addition, our financing partners have agreed to provide longer term loans that reduce the monthly payment considerably. Those who buy the Model S electric car for personal use will now pay a monthly rate of $580 taking only gasoline savings into account. When purchased via a business, assuming 70% of miles are for business use, the depreciation benefit further reduces the effective monthly cost of owning a Model S down to $315.
For those in careers that have a significant cost of time, such as doctors, lawyers, consultants and executives, the Tesla financial calculator makes it easy to factor in the value of time saved by being able to use the carpool lane or avoid trips to the gas station. However, this is now selected off by default and the above numbers do not include any consideration of time saved.
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