Tesla’s Model S buyback offer may generate substantial future revenue

Tesla insists on doing things differently, and the unconventional financing it offers on Model S is one example. The company guarantees a resale value of 50 percent of the original purchase price after 36 months – it’s technically a loan, but in a way, it works more like a lease.

It’s a pretty good deal for customers, and it may be an excellent deal for the company, generating a chunk of additional revenue when the automaker sells used cars, according to Bloomberg.

The plan gives Tesla more control over used vehicle resale prices than traditional automakers, said Bloomberg analyst Kevin Tynan. He estimates that used Model S sales may generate as much as $368 million in annual revenue for the company in 2016.

“Buying back three-year-old cars at a set price means Tesla to a great extent can control the secondary market for Model S and other cars it brings out,” Tynan said in an interview. “The company’s going to be the main buyer and gets a chance to earn a second gross profit on the same car.”

Jeff Evanson, Tesla’s head of investor relations, declined to confirm the Bloomberg estimate. “The biggest unknown right now is how many cars will come back,” he said.

Ed Kim, an analyst for AutoPacific, agreed that Tesla’s plan is enviable. “To be able to control that process in-house would be a dream for most automakers. It means there are no dealers to negotiate with or dealing with auctions. You set the terms and control the experience.”

This may be (more) bad news for traditional dealers, who won’t be getting their customary piece of the action, but it may be excellent news for those of us who are itching to buy a Model S, but can’t afford the $70k-plus price tag. Bloomberg figures the company will be reselling as many as 10,000 used vehicles in 2016, at an average price of $36,763.                                 

 

Source: Bloomberg via AutoBlog Green