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Yes, Tesla is offering a financing deal that’s hard to pass up. The company is offering 0.99% APR financing on a new Tesla Model Y! That’s a crazy-low financing option. Note that it’s only available on the Model Y, though, not the Model 3.
Wait, what’s going on — the federal interest rate is 5.3%, so how can Tesla be offering 0.99% financing? And one week ago, the lowest financing rate on a Model Y was 6.49%!
Basically, Tesla is subsidizing the financing. Confused yet? With federal interest rates at 5.3%, banks can’t come in and offer 0.99% financing to consumers. However, shifting money around a bit, Tesla can subsidize the financing instead of doing the usual vehicle price cuts (or can do both).
“Typically, when an automaker offers an unusually low interest rate, it’s accounted as a price cut for the manufacturing side of the business,” Barron’s notes. Of course, I don’t have to tell you: Tesla doesn’t always do things the typical way. However, one way or another, Tesla is footing the bill for the lower interest rate — no bank is doing so.
Just to end, note that this low interest rate offers big potential savings. If you put down $4,250 and get the low rate, you could be saving $100 a month, or $6,000 across five years. To be honest, this is a huge incentive (assuming it’s not too hard to qualify for the low interest rate). I assume it will actually drive a good surge in new Model Y sales.
The bigger story is nothing new. Tesla has been pulling different consumer demand levers to stimulate more sales for about a year and a half now. We are long past the days of Tesla naturally having more demand than it can supply. Production capacity grew and grew and grew, and it eventually grew more than consumer demand, which seems to be on a kind of plateau now. There’s much discussion about whether a bunch of new models could get Tesla back to its high targeted growth rates, or if that could only happen from legit Full Self Driving and robotaxis, but the fact of the matter right now is that Tesla needs to move more vehicles and it keeps exploring more demand levers in order to do that (while also cutting costs).
I also wonder if this is a sign that Tesla is getting ready to roll out its updated Model Y (like the updated Model 3 that is now on the market). If it is going to announce that soon, it’ll probably want to move out as many of the first-gen Model Ys it has on hand as soon as possible. However, really, I think the simpler, more boring matter of Tesla needing to stimulate more sales on an ongoing basis is the core story.
From a consumer’s perspective, though, if you are thinking about getting a Model Y, this 0.99% financing rate on top of already low prices has got to be very appealing! I would be extremely tempted to jump on it if I wasn’t much more interested in the refreshed Model Y. And, even though a refreshed Model Y will see a consumer demand bump and probably increased sales for a bit, I do assume Tesla is more or less at its natural limits with demand for this model and would count on price cuts and low financing a year or so after this Model Y “Juniper” is released. We’ll see!
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