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Tesla Falls After Guaranteeing Resale Value of Model S

by
April 3, 2013 7:58 am
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Shares of electric car maker Tesla Motors (NASDAQ: TSLA) are trading slightly lower in Tuesday’s after-hours session following the company’s much ballyhooed announcement, which has proven to be something of financing hybrid between a lease and actual ownership of the Tesla Model S.

In partnership with Wells Fargo (NYSE: WFC) and US Bancorp (NYSE: USB), Tesla has reached an agreement where the two banks will provide 10 percent down financing for purchase of a Model S.

“The 10% down payment is covered or more than covered by US Federal and state tax credits ranging from $7,500 to $15,000. New Jersey, Washington and DC also have no sales tax for electric vehicles. These advantages are not available when leasing,”said Tesla in a statement.

After three years, the buyer/lessee can sell his or her Model S to Tesla for the same residual value percentage as the iconic Mercedes S Class, one of the finest premium sedans in the world, according to the statement.

Essentially, Tesla CEO Elon Musk is personally guaranteeing the resale value of the Model S. The Model S ranges in price from $62,400 for the 60 kWh model to $72,400 for the 85 kWh model. Tesla offers an enhanced version of the Model S for $87,400, according to its Web site. At $87,400, the priciest Model S is more expensive than a new Porsche 911.

Shares of Tesla rallied in recent days in anticipation of Musk’s announcement and after the company said on Monday it expects to be profitable in the first quarter. California-based Tesla sold 4,750 Model S units in the first quarter, topping its own estimate of 4,500.


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