Is Tesla's direct sales model the way of the future?
The Tesla buying experience is unique compared to the typical car buying process offered by Big Auto. There’s no sitting down, negotiating, and (sometimes) no test drive. More on that in a minute. First, there are a few things you should know before walking into a Tesla store. For starters, it is not a dealership.
- This article comes to us courtesy of EVANNEX (which also makes aftermarket Tesla accessories). Posted by Matt Pressman. The opinions expressed in these articles are not necessarily our own at InsideEVs.
Above: A look inside one of Tesla's company-owned stores (Image: Tesla)
Traditionally, dealership franchises are privately owned. Direct sales are illegal in many U.S. states, so individually owned franchises are tightly regulated. Many in that industry are opposed to Tesla’s direct sales model and claim it's unfair. Tesla is constantly fighting these dealers (and states) for the right to sell their cars directly to consumers. The reasons for this are complicated, varied, and arcane.
Regardless, direct sales allow Tesla to keep its costs lower for the consumer. Tesla’s profit margins are akin to that of a manufacturer rather than a third party seller. If Tesla was forced into the franchise model, the cost of their cars would increase — by skipping the middleman, they can keep prices down and pass along those savings to the consumer.
Above: Inside the thorny franchise dealership laws that are challenging Tesla and other carmakers when they try to sell direct (Youtube: Sean Chandler)
Depending on location, Tesla plays by a different set of rules. In some states, Tesla cannot discuss pricing or offer you a test drive. Some states even force you to make your Tesla purchase across state lines. Nevertheless, Tesla has found solutions (albeit not always ideal) in many of these states. And in many cases, while buying a Tesla will be state-dependent, the overall experience is just about the same. That said, let's look into the basics of buying a Tesla.
THE TEST DRIVE
For many, this could be as simple as walking in and asking to test drive a car. But depending on where you live, Tesla might not be able to offer you a test drive. In addition to all the other roadblocks being placed on Tesla, franchise dealerships are working hard to outlaw the ability for Tesla to offer test drives.
Above: Step inside the Tesla Model 3 (Image: EVANNEX)
In turn, Tesla may (depending on the state) rely on their return policy. With Tesla, you can drive your new car for up to 7 days before deciding whether or not you want to keep it. This gives you the opportunity to really get a feel for the car — as an owner.
Of course, there are other options if you’d rather not write the check beforehand. Some Tesla owners have been providing free test drives. You could also use Turo, the car rental app, to rent a Tesla for a day in order to help evaluate the vehicle before making a decision.
Tesla does offer trade-ins like a traditional franchise, but they may offer (relatively) lower amounts. They do, however, match the price of large chains such as CarMax.
Above: Store staff demo the Model 3's center touchscreen at Tesla's Aventura Mall location in Miami (Photo: Jorge Sierra)
Because Tesla has no traditional car lots, they'll often send trade-ins to auction. These auctions are held privately and is where the traditional franchise dealerships often snag their inventory. Because of this, it might be worthwhile to consider selling your vehicle elsewhere or attempting to have Tesla match another quote.
However, you should look into your own state's specific tax codes. In Florida for example, you do not pay sales tax on your vehicle trade-in. For instance, let's say I trade in a $20,000 car and purchase a $60,000 Performance Model 3. I would only pay sales tax on the $40,000 difference. If I sold the trade-in vehicle elsewhere, I would have to pay taxes on the full $60,000 amount.
BUYING A TESLA
After taking a test drive, your next step is the vehicle purchase. There is no office to sit down and wait for a salesperson to talk to. And there's no time spent waiting an eternity for him to get the manager to haggle over pricing. You simply go to Tesla.com, click the model you’d like to buy, configure your vehicle, and place your deposit.
Above: A look at Tesla's online configurator (Image: Tesla)
In fact, there's no haggling over price at all. Tesla offers no discounts or negotiations. The price you see is the price you pay. However, there may be some "inventory" models with a few thousand miles on them (used as "loaners" at service centers and/or customer test drives) that offer a small decrease in price — check at your local Tesla store.
Once you place your order, your Tesla account will request a few documents including your license, insurance, etc. All of the above can be uploaded online without ever speaking with someone. If you still have some questions, a specialist will email you shortly after your order. He/she will guide you through any questions and help you buy your new Tesla. You could make the entire purchase without ever speaking to someone in-person or over the phone.
Your next step is to find financing. If you choose to buy your Tesla in cash, all you need to do is pay-in-full on your day of delivery. You could also look into leasing. Regardless, if you choose to finance, you have a couple of options.
Above: Financing your Tesla (Image: EVANNEX)
Tesla offers their own in-house financing you can apply for on their site. After you create an account and place your order you will be allowed to apply for financing as long as it's within 30 days of your scheduled delivery.
Your other option is to seek financing elsewhere. You can use DCU, an online bank, for a similar experience to Tesla Finance with (potentially) lower rates. You could also just give your bank a call and request auto financing or stop by your local credit union. Credit unions tend to offer the lowest rates but it will not be as easy as a couple buttons on a computer as most prefer physical documentation.
Here is a spreadsheet with over 100 different banks and their loan rates created by T3slaMecca. The table is updated hourly with data taken directly from bank websites so you can compare and find which is best for you.
Another option employed by some is to take your loan approval and send it to LightStream where they will match the rate and loan terms. They will then give you an unsecured loan meaning the money will be transferred directly to your bank account and you can pay cash for the car.
If you are unsure about your monthly payments or how much you can afford, Tesla provides a handy calculator to guide you.
You have two options when it comes to your car's delivery. You can either pick it up at your nearest Tesla store or take advantage of Tesla Direct (see below) and have it delivered directly to you.
Above: Tesla Direct is being implemented worldwide (Youtube: Vincent Yu)
For those that pick up their Tesla at a local store or service center, the process is simple. Tesla will make you an appointment. When you arrive, your car will be on display for you to do a full walkthrough. You hand them your check or the draft provided to you by your bank, sign a few documents, and drive off. The entire process can be done in as little as 5 minutes. If you have a trade-in, this is where you would hand them the keys.
That's it! You just drove away with your brand new Tesla without any of those typical dealership headaches. Without a doubt, buying a Tesla is not like buying other cars. It's a refreshing change from the norm and likely the direction the industry is heading as a whole. Franchise or not, a simpler, more pain-free car buying experience should be the overarching goal (and future) for automotive sales.
BUYING A USED TESLA
If you were looking into a used Tesla rather than new, the process is almost identical. You can visit Tesla’s used inventory listings and scroll through everything available. You can even narrow it down to your zip code for faster delivery. Once you pick out your car and place your deposit, everything else is done exactly the same.
Tesla no longer has a CPO program so all used vehicles come as-is. Once you’re in contact with your Tesla delivery specialist you can request pictures of the vehicle before making any final decisions. There is no return policy on used inventory.
Above: Another option to buy a used Tesla (YouTube: nctv17)
Of course, other options also exist. Some franchise dealerships also offer used Tesla models on their lots. But then you'd have to go through their cumbersome dealership buying process. That said, one especially innovative third-party solution is offered via Current Automotive. However you decide to proceed, leaving that gas pump behind will definitely feel good.
An earlier version of this article appeared on EVBite. EVBite is an electric vehicle specific news site dedicated to keeping consumers up-to-date on any developments in the ever-expanding EV landscape.
InsideEVs Editor’s Note: EVANNEX, which also sells aftermarket gear for Teslas, has kindly allowed us to share some of its content with our readers, free of charge. Our thanks go out to EVANNEX. Check out the site here.