Tesla Expands Guaranteed Residual On Model S Into UK – Offers New “Lease”

3 years ago by Eric Loveday 10

Tesla Model S

Tesla Model S

P85 Performance "Lease" Details

P85 Performance “Lease” Details

A week or so ago, we reported on Tesla being undecided on whether or not to expand its guaranteed residual program for the Model S outside of the U.S.  At the time, Tesla’s Georg Ell, Tesla Motors UK and Ireland director, told Business Car that Tesla had not yet decided if it would follow that guaranteed residual format in the UK.

Well, now comes official word from Tesla Motors that the guaranteed residual program for the Model S is coming to the UK.

Here’s a rundown of how the program will work in the UK:

Tesla will buy back any Model S purchase through the program in the 37th month of the “lease” for 50% of the base MSRP (60 kWh version) plus 43% for options added.  Tesla is viewing the 85 kWh battery pack upgrade as an option in this regard.

Georg Ell, Tesla Motors UK and Ireland director, stated:

“We understand that many customers enjoy the simplicity of a hire purchase but also may seek some assurance of the future value of Model S.”

Like in the U.S., there will not be a true lease deal offered on the Model S, but here are how the numbers break out in Tesla’s quasi-lease Model S program:

60 kWh

  • £7,542 down & £701 per month for 6 years
  • £7,542 down & £820 per month for 5 years
  • £7,542 down & £998 per month for 4 years

(£7,542 = $12,056 USD – Monthly payments range from £701 ($1,121 USD) to £998 ($1,595 USD), so definitely not cheap).

Of course, these figures are for the base 60 kWh version.  A decked-out P85+ will cost substantially more.

According to Tesla, Alphera Financial Services is behind this “lease” program, which is basically a buy deal with Tesla guaranteeing the residual value.

More details here at Tesla’s UK site

Tesla UK Program Details

Tesla UK Program Details

Tesla Undecided On Whether Or Not To Guaranteed Residual Value On Model S Outside Of U.S.

Tesla Alters Model S Lease/Finance Deal; Raises Residual Value to 50% and Slightly Drops Monthly Payment

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10 responses to "Tesla Expands Guaranteed Residual On Model S Into UK – Offers New “Lease”"

  1. DaveMart says:

    If this is structured the way it is laid out here, it is not as wonderful as it sounds;

    ‘According to Tesla, Alphera Financial Services is behind this “lease” program, which is basically a buy deal with Tesla guaranteeing the residual value.’

    There are two ways of financing this.
    Tesla could pay the financial company a fee, in return for which they cover any additional losses on resale of the car.

    I understand that is the way Nissan operate their guarantee on the Leaf, and is the responsible, solid way of doing it.

    That is going to cost a lot of money though, for a one product company, and that product cutting edge.

    So it looks like Tesla is guaranteeing itself, which is about as effective as guaranteeing your own house insurance.

    It is a basic principle of insurance that the entity offering the guarantee has to be bigger than the insured event, which is why insurance companies do not guarantee against wars and so on, as they could not cover the losses.

    If there were minor losses on the residual guarantee, then Tesla might be able to cover it.

    Any major losses would result in Tesla, who are supposed to be guaranteeing the value, going bankrupt and people still not being able to collect.

    I admire a lot of Tesla’s technical engineering, and loath their financial gamesmanship, which verges on sharp practise.

    So your car is guaranteed against loss of value, providing that they don’t lose too much value, or the company doing the guaranteeing won’t be there anymore.

    Wonderful.

    1. Rob Stark says:

      If residuals are low enough to bankrupt Tesla then the product is horrible. Which would lead to Tesla going bankrupt without the residual value guarantee.

      As we are seeing in the US, the residual values are on track to hold up better than the guarantee level.

      And Tesla will control the returned vehicles. They can send them to Scotland or anywhere else in the EU if there is an over supply in London for example.

      Returned cars are an additional revenue stream not a cost.

      1. DaveMart says:

        I am commenting on it as an insurance.
        Clearly if no problems occur and values hold up then it is irrelevant anyway.

        Anyone who thinks that they have a solid guarantee is swallowing moonshine.

        A house fire is unlikely, but it is nice to know whether you are covered or not.

        Thinking wrongly that you are is not a pleasant experience.

        1. Mint says:

          Your house example is nonsense. Tesla is orders of magnitude bigger than a single car.

          And insurance companies do indeed have assets far less than the total value of coverage. They assume that not all houses will have major damage at the same time, so it’s possible that some catastrophic events would not be covered, e.g. Katrina would’ve resulted in insurance company bankruptcies had the federal gov’t not assisted.

          Tesla’s RVG is not intended to cover the doomsday scenario. But banks are happy knowing that Tesla is putting its money where its mouth is, and banks can hedge against such catastrophe by shorting Tesla.

          I think Tesla’s biggest threat to their RVG is making the Model 3 really good, hammering resale value of the S. But if that happens, then they’ll be raking it in on sales of the three anyway.

          1. DaveMart says:

            Its a single car MODEL whose resale value will rise or fall together.

            A fall in value is therefore a single insurable event.

            Insurance companies re-insure and spread the risks across the industry.

            That is how they can pay out for hurricanes etc. if they happen to do a lot of business in the affected area.

            1. Stimpacker says:

              That sounds contrary to the advice everyone in the finance world spouts – that it is better to be self-insured. Only catastrophic insurance is needed.

  2. ffbj says:

    “If this is structured the way it is laid out here, it is not as wonderful as it sounds;”

    Is it ever? Dave you need to take off those rose colored glasses and look at the world a little more gloomily.

    1. DaveMart says:

      One lens rose, the other blue, my friend! 😉
      It works, but excites some adverse comment by the conservatively minded!

  3. Dr. Kenneth Noisewater says:

    So.. What will the CPO prices be when the first wave of Model S’ are traded in for the dual-drive, added features, Model X, etc.?

    Cuz that’ll likely be My First Tesla :p