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The suitability of Tesla Motors to the car financing model may meet its first significant test with anticipated mass rollout of the Model 3 in 2019. The Model 3 is promised as the first ‘affordable’ vehicle in the Tesla range, expected to cost around $35,000 in the US and £35,000 in the UK. As a zero-emissions electric vehicle costing under £40,000, the Model 3 will also be exempt from road tax.

Leasing options on the Model 3 are as yet unavailable, though in June 2018 Tesla Motors chief executive office Elon Musk responded to a query on Twitter:

"Leasing negatively affects Tesla cash flow, so we probably won’t offer Model 3 leases for 6 to 9 months. Loan financing is a better deal anyway, as bank conservatism for new car models is very conservative about residual value, but Teslas have always had strong residual value."

The company is entirely dedicated to releasing new vehicles every 12-18 months with no upgrade features for existing vehicles, which also calls into question Musk’s claims that the cars can retain residual value in perpetuity. The ‘negative’ effect leasing could have on Tesla relates to how deposits on the vehicle are currently made directly to the company, and are included as a critical part of the company’s cash flow. Further reasons to neglect motor finance deals may also derive from Tesla’s vertical integration model and rejection of traditional dealerships, and therefore an unwillingness to work with outside parties on the issue of financing.

If traditional motor finance is less appealing to Musk, Tesla Motors have worked to disrupt the European car rental market. Established in 2016, White Car claims to have the largest fleet of white Tesla vehicles in the UK, operating out of Heathrow, Gatwick, Manchester and Edinburgh airports. In January, White Car secured £1.29m funding in order to expand into Europe. Plans are in place to introduce this summer at Heathrow a system where customers can use an app on their phone to access a car which can then be delivered to the driver personally. 

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With its advertisements as the first mass marketed Tesla vehicle, any future leasing options on the Model 3 will need to be at competitive rates compared to other leasing options available for electric and hybrid vehicles on the market. A four year leasing deal on a Hyundai Ioniq hybrid vehicle can cost £222 a month, and in the US the Chevy Bolt EV is available on limited basis from $329 (£247) per month. Comparatively, the only leasing options currently offered by Tesla in the UK is for the luxury Model X, with personal leasing costing around £905 a month.

The anticipation over what leasing options will be available for the Model 3 is linked to musings on the company as a whole. Those most notable regard whether Tesla Motors can resolve its myriad issues limiting production rates of the Model 3, can the car be ‘reasonably’ priced, can Tesla Motors enter profitability, and what would a collapse of the most visible AV company mean for the industry in general.

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