Tesla Motors Inc (TSLA): Its Numbers Don’t Add Up

Tesla Motors Inc (NASDAQ:TSLA) announced late on Tuesday that it had created what it called a “revolutionary automotive financing product”, in conjunction with U.S. Bancorp (NYSE:USB) and Wells Fargo & Co (NYSE:WFC).

It’s not a lease program – more on that below – but it’s meant to be similar to a lease, and a way to make the company’s electric Model S sedan accessible to more buyers. Tesla Motors Inc (NASDAQ:TSLA) wasted no time updating its website to tout a “true cost of ownership” of “$500 a month”, a claim that CEO Elon Musk reiterated to Bloomberg.

That’s an impressively low-sounding payment on a luxury sedan that starts at $62,400 (after a $7,500 federal tax credit) and can be optioned up to over $100,000.

But it turns out that the $500-a-month claim comes with an awfully big asterisk, and some observers are already saying that Tesla Motors Inc (NASDAQ:TSLA)’s numbers don’t add up.

Some dubious “savings” to get to that $500
The financing product is essentially a 66-month loan with a 2.95% interest rate, with a few interesting twists. The banks will provide qualified customers with 10% of the purchase price, an amount that will be largely reimbursed by that federal tax credit and various state green-car incentives.

And after three years, the buyer has the option of selling the car back to Tesla at a value pegged to the depreciation rate of the Mercedes-Benz S Class, one of the world’s best regarded luxury sedans.

It’s an interesting program that tries to simulate the experience of a lease by doing away with down payments and offering a chance to “turn the car in” at what is likely to be a good price after three years. It’s obviously meant to compete with the popular leasing programs offered by luxury-car makers like Mercedes and BMW. And as I said above, Tesla Motors Inc (NASDAQ:TSLA) is already advertising it that way, touting a $500 monthly cost of ownership.

But that cost of ownership calculation comes with an awfully big asterisk, or really several asterisks: To get to that number, Tesla Motors Inc (NASDAQ:TSLA) is factoring in owners’ savings on gasoline – as well as a bunch of more iffy benefits, like the tax savings that could come from claiming the car as a business expense, and a placing a monetary value on the time you save by not driving to the gas station.