Tesla, a dominant force in the electric vehicle (EV) market, is increasingly turning to leasing programs as a strategic move to navigate evolving market dynamics. This pivot comes as competition intensifies and growth in key markets like the U.S. faces headwinds. Automotive industry analysts, including Tom Libby from S&P Global Mobility, point out that this surge in leasing is driven by both necessity and the robust financial capabilities of companies like Tesla.
This strategic adjustment aligns with a broader industry trend where rival automakers are leveraging the $7,500 federal lease incentive to offer compelling deals on their EV models, making leasing a potent tool in attracting customers.
For Tesla, this emphasis on leasing is particularly timely. After implementing significant price reductions over the past two years and introducing attractive financing options such as a 0.9% APR for 60 months on the Model Y, leasing presents itself as a highly promising strategy to maintain sales momentum. To further sweeten the deal, Tesla is also offering incentives like three months of complimentary Supercharging and a trial period for its Full Self-Driving (FSD) software.
This increased focus on leasing directly addresses a recent slowdown in Tesla’s sales figures, both globally and within the critical U.S. market. While CEO Elon Musk had previously projected global deliveries to exceed 1.8 million units, actual global sales experienced a 2.3% decrease in the first three quarters of 2024. Furthermore, U.S. registrations witnessed an even sharper decline of 7.3% during the same period.
To bolster its leasing program and provide greater flexibility to consumers, Tesla reintroduced lease buyouts for the Model 3 and Model Y in November 2024. This decision was a direct response to consumer demand for more options at the end of their lease terms. This marks a significant shift from Tesla’s previous policy, which mandated the return of leased vehicles. While lease buyouts were previously available for the premium Model S and Model X, they were discontinued in 2022. Now, the buyout option extends across Tesla’s entire model lineup, including the highly anticipated Cybertruck, which is being offered for lease at a starting price of $999 per month.
Despite the clear advantages of expanding its leasing program, it’s crucial to acknowledge the inherent risks associated with EV leasing, particularly concerning residual values. Industry expert Libby cautions that predicting the future value of EVs remains a complex task due to the relatively short history of EVs in the used car market and the rapid pace of technological advancements in the sector. A study conducted by iSeeCars in September 2024 highlighted this volatility, revealing a substantial 25% drop in used EV values between August 2023 and August 2024, in stark contrast to the modest 4% decline observed for gasoline-powered vehicles. Notably, the Tesla Model 3 experienced the most significant depreciation in value within the EV segment, underscoring the potential risks as Tesla scales up its leasing operations.
However, Tesla’s robust financial health provides a buffer to absorb potential financial impacts from increased leasing activities. The company’s third-quarter financial report for 2024 showcased a net income of $2.2 billion, a significant 17% increase compared to the previous year. This strong financial performance indicates that Tesla possesses the necessary resources to effectively manage the inherent volatility associated with its expanded Tesla Car Leasing Program and leverage it as a strategic tool for sustained growth in a competitive EV landscape.
