Tesla Turns More Heads with Model S Buyback Plan

April 28, 2016

The Tesla Model S has been making news for everything it is, everything it represents: innovation, American engineering and design, and a modern business model. With the latest news from Tesla, the build upon this last element, adding even more interest in the blooming American car brand.

Why the New Model S News Has Tesla Fans and Analysts Buzzing

Tesla STesla has already made headlines by bypassing the traditional dealership model (a move that may be complicating its business objectives in some states). The electric car manufacturer recently announced a buyback program for the current Tesla Model S that will help ensure that the company maintains control over the pricing of their vehicles, new and used. News of the buyback program has sent Tesla stock soaring to a crisp $166.37 per share.

How the Tesla Model S buyback program will work

So what’s the big deal about the Model S buyback program? The biggest news is that Tesla guarantees that the Model S will retain a purchase price equal to 50% of the original base purchase price, as well as 43% of the purchase price of all options after 36 months. This program would ensure that Tesla would be the best place to sell back used cars, which allows Tesla to maintain control of the used market for their own cars. Such a practice would bolster the company’s income over the long term. Historically, automakers aren’t the largest seller of their own cars in the used market and this move would change things for Tesla. Preliminary estimates have the resale value of the Tesla Model S tagged at $36,763. Not a bad price for what is currently a $70,000 luxury electric car.

Tesla Motors has it all planned out

If the Tesla S buyback program sounds like a great idea, then we should probably mention their version of leasing. The buyback plan is hinged on the prospect that most of their customers will be leasing their car for three years. After that, they’ll trade them in for a new lease. These used cars are where Tesla is doubling down, which could be a risky bet.

Tesla doesn’t know how many Model S cars will come back to them at the end of the lease term. The company provides its customers the option to buy at the end of the term, which could mean Tesla won’t have as many cars to sell as it currently projects. Overall, the outcome of what many automakers are calling an enviable sales model is still uncertain and it will be 2016 before Tesla has any real numbers and the analysts have anything they can work with. On the other hand, Tesla has already announced that they will be introducing a new model soon at a more economical price point. All signs point to Tesla Motors taking the lead in the US auto game in the not too distant future, providing their bets pay off.


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