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Thread: How does Tesla buy-back "set the market"?

  1. #1
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    How does Tesla buy-back "set the market"?

    I'm trying to decide about financing via Tesla or elsewhere. I see the value of Tesla financing in that in guarantees that the users of Tesla financing can sell the car at a set price in 3 years. But I don't see how it benefits other MS owners.

    Others have said that the Tesla buyback program 'sets the market' for used MS's. I don't completely get this. If there is some unforeseen problem(s) with Tesla or the MS, won't my MS only be worth what a private buyer is willing to pay (assuming I don't do Tesla financing)?

    What am I missing here?

    Thanks!

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    S85 - VIN:P05130 - 3/2/13 jerry33's Avatar
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    Elon has guaranteed the funds regardless of the state of Tesla Motors, so that's the minimum amount that you can get.
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    Quote Originally Posted by tomp View Post
    I'm trying to decide about financing via Tesla or elsewhere. I see the value of Tesla financing in that in guarantees that the users of Tesla financing can sell the car at a set price in 3 years. But I don't see how it benefits other MS owners.

    Others have said that the Tesla buyback program 'sets the market' for used MS's. I don't completely get this. If there is some unforeseen problem(s) with Tesla or the MS, won't my MS only be worth what a private buyer is willing to pay (assuming I don't do Tesla financing)?

    What am I missing here?

    Thanks!
    Yeah, I don't get this either. Take a look at some of the Model S currently on cars.com or autotrader.com & try to interpolate what the dealers actually paid the owners in trade.

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    Quote Originally Posted by jerry33 View Post
    Elon has guaranteed the funds regardless of the state of Tesla Motors, so that's the minimum amount that you can get.
    True, but that only for cars financed through Tesla's particular financing agreement. In theory, that means that helps set the used price since some portion of the cars have a guaranteed buy back amount.

    However, that only works if the S has other reasons to hold value. If some fatal flaw comes out and Tesla goes bankrupt, Musk might guarantee the specially financed cars, but the others are going to be worth very little.

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    But remember that people were scared by the prospect of owning an expensive EV. What if tesla fails, what if the batteries fail prematurely, etc. this reassured some segment of the market that they will be in the same situation as Mercedes S class owners.

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    Quote Originally Posted by tdiggity View Post
    But remember that people were scared by the prospect of owning an expensive EV. What if tesla fails, what if the batteries fail prematurely, etc. this reassured some segment of the market that they will be in the same situation as Mercedes S class owners.
    Assuming you "bought into" the program by paying the financing $600/year for service, which probably adds up to at least $5K.

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    S85 - VIN:P05130 - 3/2/13 jerry33's Avatar
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    Quote Originally Posted by Atebit View Post
    Assuming you "bought into" the program by paying the financing $600/year for service, which probably adds up to at least $5K.
    But even if you didn't, there will still be a kind of herd immunity.
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    Quote Originally Posted by jerry33 View Post
    But even if you didn't, there will still be a kind of herd immunity.
    i guess this is the part I'm missing. How, or why, exactly?

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    Quote Originally Posted by tomp View Post
    i guess this is the part I'm missing. How, or why, exactly?
    The assumption is (and you know what ASSUME means!) that if there are 75% of the Telsa's sold were done with the guaranteed resale financing that even if the other 25% are not able to get the guaranteed buyback they will still have a similar value since they would be propped up by the value of the 75% that were guaranteed. In other words, if those 75% were all bought back at an average of 50% of the MSRP then even the cars that are not covered under that program are also going to have a similar resale value since a rising tide raises all ships. My problem with this assumption is that if for some reason, GOD FORBID, that Tesla went under, I don't see these 75% percent getting their guaranteed buyback from Elon. Is that because I do not trust Elon? Nope. It's because the majority of his wealth is tied to the stock value of Tesla. If Tesla is worthless, he, relatively speaking, has no money. He would not be destitute by any means, but he might not have the millions it would take to make the buy back happen. I love Tesla's products and respect Elon and his candor, but I think that some owners are living in la la land if they think they will be getting their money back no matter what. I am more of a realist and know that we all are taking risk with our hard earned money, but I believe in the product and the man's mission so I am willing to take that gamble.

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    S85 - VIN:P05130 - 3/2/13 jerry33's Avatar
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    Quote Originally Posted by tomp View Post
    i guess this is the part I'm missing. How, or why, exactly?
    Assuming that a substantial number of Teslas are sold on the plan, then those for sure won't sell for less. There will be another group where the owners are still keeping them, so they don't affect the price at all. That just leaves the ones being sold that aren't on the plan, which should be a small percentage of the total cars at any given time. So this reduces availability and keeps the price at the Mercedes S price--or whichever similar car is higher--Mercedes S was just used as an example. When the plan was announced some folks complained that other similar cars had less depreciation than a Mercedes S, so Elon altered the plan to match whichever car had the highest value at the time.

    My thought is that because the Model S requires much less maintenance than an ICE, in the worst case the price won't drop like a DeLorean. I also suspect that many Model S purchasers will keep their cars longer then they kept their previous cars which will reduce the amount of used cars available at any given time.

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    Quote Originally Posted by Shumdit View Post
    The assumption is (and you know what ASSUME means!) that if there are 75% of the Telsa's sold were done with the guaranteed resale financing that even if the other 25% are not able to get the guaranteed buyback they will still have a similar value since they would be propped up by the value of the 75% that were guaranteed. My problem with this assumption is that if for some reason, GOD FORBID, that Tesla went under, I don't see these 75% percent getting their guaranteed buyback from Elon. Is that because I do not trust Elon? Nope. It's because the majority of his wealth is tied to the stock value of Tesla. If Tesla is worthless, he, relatively speaking, has no money. He would not be destitute by any means, but he might not have the millions it would take to make the buy back happen. I love Tesla's products and respect Elon and his candor, but I think that some owners are living in la la land if they think they will be getting their money back no matter what. I am more of a realist and know that we all are taking risk with our hard earned money, but I believe in the product and the man's mission so I am willing to take that gamble.
    My expectation is that SpaceX will net him far more than Tesla Motors. I don't believe it will be a problem unless Tesla goes under in the next two years. I don't see how that could happen though.
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