Tesla Motors in the USA announced on Tuesday a new finance product in partnership with Wells Fargo and US Bank, which has revolutionised automotive financing. The new financing is in line with the new Telsa electric car – the Model S.

Here is how the financing works as explained by Telsa:

1.  The US Bank and Wells Fargo have agreed to provide 10% down financing for purchase of a Model S (on approved credit).
2.  The 10% down payment is covered by the 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. This avoids the traditional leasing structure in which the leasing company would keep the $7,500+ in tax credits the Model S earns.
3.  When considering the savings from using electricity instead of gasoline, depreciation benefits and other factors, the true net out of pocket cost to own a mid-range Model S drops to less than $500 per month.
4.  After 36 months, you have the right, but not the obligation, to sell your Model S to Tesla for the same residual value percentage as the iconic Mercedes S Class.
5.  Not only is Tesla guaranteeing that resale value, but Tesla CEO Elon Musk is personally standing behind that guarantee to give customers absolute peace of mind about the value of the asset they are purchasing.

If you want to keep the car after three years, you simply continue making payments for another two years. The advantage to this approach is that you’re never locked in like a lease and consumers are “building equity” in their vehicle, Musk explained.

The idea is to allow the advantages of leasing and owning, lower cost to entry, and the hassle free of selling the Model S when you decide to upgrade. There is also the freedom to continue making the payments after the lease period ends, allowing you to purchase the Model S outright.

An advantage of this is that people who might have refrained from purchasing a Model S because of the type of car could have rapid depreciation, which is now eliminated. The depreciation of the Model S is guaranteed to be similar to a conventional internal combustion engine and similar to a well-known predictable brand (Mercedes S Class).

Telsa has provided a calculator on their website, which has become a bit of a laughing stock with many people (for e.g. a calculator estimating the cost of time spent at the petrol station). The more likely cost for owning this car is $1,000 per month. The $500 price a month assumes state and federal incentives (which are different in each state), not paying for petrol, using the car for your business and the bizarre calculation of the time saved not using a petrol station.

Whatever the real calculated costs are, this is an excellent marketing idea and hopefully this will catch on in Australia with other car manufacturers. This new approach to financing is only available in the USA and soon in Canada. The Telsa Model S is an impressive car – if you haven’t seen it I highly recommend you check it out.