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New Resale Value Guarantee Terms

New Resale Value Guarantee Terms

Just got this from Tesla. Of course the terms have changed between by order and delivery. In order to get the RVG you have to finance 60% of the vehicle value for 36 months. I was only going to finance to get the RVG, but not sure it is worth it given the new terms and the rates I was quoted by US Bank (2.75%) and Wells Fargo (1.99%).

Welcome to the Tesla Family! Your vehicle identified above (“Vehicle”) qualifies for our Resale
Value Guarantee
(“Guarantee”). We guarantee that your vehicle will have a resale value after 3 years of at least
the Guaranteed Resale Value specified above. This value is equal to 50% of the base purchase price
of the 60kWhr Model S at the time of your purchase of the Vehicle, plus 43% of the original
purchase price for all options including the upgrade to the 85kWhr battery pack (exclusive of
taxes, fees and accessories). During the period between 36 months to 39 months from your Guarantee
Effective Date, you have the option to sell your vehicle to Tesla for the Guaranteed Resale Value.
This Guarantee is subject to the following terms and conditions:
TERMS AND CONDITIONS

• The Vehicle is financed through Tesla’s official vehicle financing program with U.S. Bank,
N.A. or Wells Fargo Dealer Services. The Vehicle will need to continue to be financed through this
program and your account must remain in good standing for a minimum of 36 months.

• The Vehicle is maintained by Tesla Motors or its subsidiary according to Tesla’s recommended
service schedule. You must not have taken any action that would void the New Vehicle Limited
Warranty on the Vehicle.

• The Vehicle will be inspected by Tesla and the Guaranteed Resale Value will be adjusted for
damage, excessive wear and use based on Tesla’s standards for normal use and for mileage in excess
of 15,000 miles per year. Excess mileage will reduce your Guaranteed Resale Value at a rate of
$0.25 per mile.

• To exercise this Guarantee, you will need to contact us and deliver the Vehicle to us for
inspection and purchase during the period between 36 months to 39 months from the Guarantee
Effective Date. Prior to or in conjunction with our purchase of the Vehicle, you will need to
provide proof of ownership and clear title for the Vehicle. To obtain clear title on the Vehicle,
it is your responsibility to clear all outstanding obligations with the lender, including any
principal amount, late payments, penalties, and other fees that may be due to the lender.

• This Guarantee may not be assigned or transferred to any person or entity at any time. Only
the Owner(s) identified above, and no other person or entity, including any heirs or successors,
has any rights under this Guarantee. This Guarantee only applies to the vehicle identified above.
Tesla Motors, Inc. and any of its successors hereto, may assign or transfer this Guarantee, or any
portion thereof, to any third-party without your prior consent or approval. This Guarantee
automatically expires on the 39 month anniversary of the Guarantee Effective Date.

soma | October 2, 2013

I did not think overall it was worth it, since the value of this policy is the difference between what we expect these cars would sell for after 3 years, and 50% of the purchase price.

To have that option, you have to pay ~1% more in interest, and pay for the service plan every year. Which = ~$4,000-5,000 more than if you financed the car at 1.5% at one of the credit unions discussed elsewhere. That is probably negating a good portion of the value of that policy.

bronto | October 2, 2013

The guarantee also makes more sense on the surface for a MS 60 than someone who got a P85. But when you actually do the math, it seems the difference if negligible (just a 1% difference in resale value on a well-equipped MS).

As a comparison:
1. MS 60 with air, tech, pano, park sensors, supercharger, upgraded 19" tires = $80,320. Tesla guaranteed resale value = $39,513 (49.2% of original price)

2. MS P85 with air, tech, pano, park sensors, supercharger, upgraded 19" tires = 97,320. Tesla guaranteed resale value = $46,823 (48.1% of original price)

soma | October 2, 2013

I think the question is, what do we believe we would get for these cars after 3 years on the free market (if we wanted to sell them)? And do we need a guarantee because we think that the value will be much less than 50% of purchase price?

bronto | October 2, 2013

Elon is a smart guy and they have analyzed this very carefully before offering the price guarantee (and before he put his own personal money behind it). My bet is that considering the real useful battery life will far exceed 8 years, a healthy used market will form which will keep the resale value at reasonable levels. Combine that with the due diligence Tesla has done proving to themselves that this is true and I'd be willing to wager the real-life resale value will not drop below the guaranteed value at the 3 year mark.

ks-man | October 2, 2013

That kind of sucks. I was planning to finance since it was 30% for 6 months. Not worth it for 60% for 36 months. Big difference in interest cost.

This new policy is for any car taking delivery now or only for orders placed after today? I placed my order 3 weeks ago and would love to get the resale guarantee with the old terms.

cbassdriver | October 3, 2013

I placed my order a couple of weeks ago and just got off the phone with Tesla. Apparently they are NOT grandfathering those who had already placed orders (despite the fact that this was a program that the sales representatives promoted heavily). Accordingly, I asked Tesla to put my order on hold. Not sure how I feel about what is very much a significant bait and switch. The amount of the loan has increased 2 times and the term of the loan has increased 6 times!

For a company that is counting on people "trusting them" since they have such a short operating history, this is truly disturbing. If I can't trust their word when they are still looking for my money, how will I be able to trust them once they have already received my money?

AmpedRealtor | October 3, 2013

If you finance a car specifically to get the buyback guarantee in three years, why would you get upset when the lender tells you that you must keep your financing current for the full three years and cannot pay off the loan early? Obviously one of the reasons they are able to offer the financing guarantee in the first place is because they are making money on the loan.

I never read the language of the buyback guarantee, but presumed that you had to keep your financing in place through the buyback anniversary date. If you pay off the loan right after you get it, how can you justify getting the buyback guarantee when your loan has been paid off? Once your loan is paid off, all obligations and benefits under that loan program also terminate.

From my perspective, anyway, it seems a little over the top to get upset about something that makes sense.

DallasTXModelS | October 3, 2013

I don't see the big difference. When I first saw it the terms were to make the guarantee match leasing a Mercedes or Audi for three years by financing 60%.

I don't understand why this only applies in the 14 states Tesla can sell directly to the consumer.

My current car is financed by a bank in Fort Lauderdale, I bought it in Richardson, TX.

My Tesla I am buying in California, I live in Texas, why can't it be financed by a bank in California with a rate and guarantee negotiated by Tesla?

cbassdriver | October 3, 2013

The difference is that previously the loan only had to be for $30K and only for at least 6 months. Effectively, I was agreeing to pay above market interest for a certain period of time to take advantage of the buy back option (which was explicitly not tied to the loan remaining outstanding until the buy back option was exercised). Now, instead of the loan being for about 30% of the car, it has to be for 60% of the car and instead of it only being for 6 months, it is for between 36 months and 39 months. Therefore, the prior "cost" of having that option was approximately $270 (interest on the loan) and now the "cost" has increased to approximately $2,850, an almost $2,600 change in the cost of getting the repurchase guarantee.

AmpedRealtor | October 3, 2013

But haven't they also reduced the interest rates from 2.5% to 1.9%?

EC7 | December 9, 2013

Can someone please clarify the following:

'To exercise this Guarantee, you will need to contact us and deliver the Vehicle to us for
inspection and purchase during the period between 36 months to 39 months from the Guarantee
Effective Date.'

I understand that if you turn in your vehicle between the 36th and 39th month you will be eligible to receive the guaranteed value (50% on the base price, 45% on options, with exception of excess mileage, wear and tear charges). What if you decide to turn in the vehicle on the 39th month? Will the percentages adjust accordingly?

The reason I ask is because in some cases, the principal balance on the 36th month could be higher than the guaranteed value. Keeping the car, and making payments, for another two months should likely get the principal balance below the guaranteed value, assuming that the percentages do not adjust.

===================================================

'Prior to or in conjunction with our purchase of the Vehicle, you will need to
provide proof of ownership and clear title for the Vehicle. To obtain clear title on the Vehicle,
it is your responsibility to clear all outstanding obligations with the lender, including any
principal amount, late payments, penalties, and other fees that may be due to the lender.'

Related to the question above, I have read from another forum that the buyer is necessarily not required to be responsible for paying off the loan (with USB or WF), prior to turn in, as long as the loan balance is below the guaranteed value. Is this true? I cannot find any official statement from Tesla about this.

Captain_Zap | December 9, 2013

@EC7 - It would probably be best if you contacted Tesla to get the specifics. Perhaps they can provide you with the official statement and the fine print in advance. I would certainly request it before making a decision.
Those programs did not exist when I got my car.

crmohler | December 9, 2013

@AmpedRealtor, I just got the guaranteed residual financing at 1.99% for 60 months. It was through Wells Fargo. Not sure how much they would cover, I put down 20%.

EC7 | December 13, 2013

I had a chance to speak with a Tesla rep regarding the the following terms and conditions

'To exercise this Guarantee, you will need to contact us and deliver the Vehicle to us for
inspection and purchase during the period between 36 months to 39 months from the Guarantee
Effective Date.'

==>> My Question:
I understand that if you turn in your vehicle between the 36th and 39th month you will be eligible to receive the guaranteed value (50% on the base price, 43% on options, with exception of excess mileage, wear and tear charges). What if you decide to turn in the vehicle on the 39th month? Will the percentages adjust accordingly?

The reason I ask is because in some cases, the principal balance on the 36th month could be higher than the guaranteed value. Keeping the car, and making payments, for another two months should likely get the principal balance below the guaranteed value, assuming that the percentages do not adjust.

==>> Their Answer:
The 50%/43% represents the bottom residual value (excluding wear and tear, and excess mileage), which means that there is a chance that the cars value at time of turn in may be higher (mainly due to less mileage).

===================================================

'Prior to or in conjunction with our purchase of the Vehicle, you will need to
provide proof of ownership and clear title for the Vehicle. To obtain clear title on the Vehicle,
it is your responsibility to clear all outstanding obligations with the lender, including any
principal amount, late payments, penalties, and other fees that may be due to the lender.'

==>> My Question:
Related to the question above, I have read from another forum that the buyer is necessarily not required to be responsible for paying off the loan (with USB or WF), prior to turn in, as long as the loan balance is below the guaranteed value. Is this true? I cannot find any official statement from Tesla about this.

==>> Their Answer:
Tesla would not require that the loan is paid off before they buy the car. They will send the check to the bank. But they can only do this if the value of the car exceeds the principal owed in the loan.