Did you know that you can lease a used car? It’s not exactly common, but it is possible, and now you can take the plunge on a pre-owned Tesla Model 3 or Model Y. It appears that you have to live in California or Texas, however, but the deals are pretty tasty: zero down and monthly payments as low as $225, according to The Drive (citing Tesla’s X account), although I found a Model 3 with about 73,000 miles that Tesla appears to be leasing for $127 per month. The terms are 24 months, with mileage capped at 10,000 miles.
This is actually good news for consumers, who now have another way to pick up a used EV. It’s not good news for Tesla, of course. As The Drive pointed out, the company probably has a lot of pre-owned inventory that it’s trying to get rid of. Customers who go for the deal will also face a $2,000 delivery fee and a two-to-three week wait for their car in California with a lower fee in Texas ($500 for Dallas, nothing for Houston) but still a multi-week delay for delivery. One could look at this as yet another example of Tesla’s travails amid declining sales and a sliding stock price. I prefer to see it as the company exercising its pricing power, as it has often done in the past.
What do Teslas actually cost anyway?
Tesla’s pricing has always been sort of all over the place. They simply cost what Tesla says they cost during a particular period of time. Tesla can do this because it controls most of the transactional chain thanks to being the only meaningful practitioner of a direct-sales model in the U.S. auto industry. The company also has (at least for now) a trillion-dollar market cap and something like $37 billion in cash on hand, so whatever issues that might arise with residuals, depreciation, and carrying inventory on these older, higher mileage vehicles are something that Tesla can whistle past.
That said, the company is obviously dealing with some stuff. Forget about Elon Musk’s various antics and controversies – the overall business is showing cracks all over the place. It has lost its mojo and is vulnerable to fair accusations that it has to make off-the-grid moves to contend with an understandable lack of enthusiasm for used EVs given the way these cars rapidly lose value and fall behind on technology. Leasing used Model 3s and Ys takes that risk off the customer’s plate and puts it on Tesla’s.
Yes, there can be innovations in leasing
Affordability is a major problem in the EV market, so you could consider Tesla’s lease offerings here and cheerfully conclude that the company is at least trying to give less affluent customers a shot at some sub-$30,000 cars. The idea is to lease and re-lease, refurbishing along the way but dropping the price until the vehicle wasn’t worth much anymore, at which point the automaker could reclaim the car one last time and recycle it as much as possible. The financial aspect is tricky, but the scheme – at least in theory – could allow a car company to tap the vehicle for extra revenue over a longer timeframe. A younger customer with a modest budget could get a cheap EV with limited commitment.
I don’t think this is Tesla’s game plan here. Rather, I think they’re just stuck with a whole lotta cars that nobody wants to buy. Rather than sending them to auction, they’re giving the used-leasing gambit a spin. It will be interesting to see if they continue to do this, or if it was a one-off maneuver. Time will tell.
