Financing, under somewhat unique circumstance.

JohnSnowNW · Mar 12, 2015

I tried to find out more about Tesla's financing option on the teslamotors website, but it seems that I can't gain access to the info without the car (Model X) being in production. Anyway, I'm asking here since no ones has financed an X, obviously.

So, I was just wondering if anyone knows the basic terms of the lending program. We are in a bit of a strange financial situation, though one that is common in the medical field. My wife is in Fellowship, and will be in her last year when we take possession of the X (lateish '16 assumed). So, her salary isn't particularly high, but is supplemented though moonlighting...and when she finishes Fellowship will be substantially higher. Obviously with the moonlighting our income is based on how often she does it, and therefore can vary quite a bit.

When we bought the house we had to do so through a special lending program tailored to those with high debt, but also high earning potential.

Back to the vehicle. Our current plan is to put down 10% of the vehicle cost, upon delivery, but we could plan for more. I'm wondering if there are provisions in the Tesla lending program for situations like ours, or should we consider looking at financing through a specific institution. Are there things we can do now to ease the process in the future?

If more information is needed, let me know.

Thanks!

JohnSnowNW · Mar 13, 2015

Bump.

Any advice would be appreciated.

bonaire · Mar 13, 2015

Do you want debt management advice and why you should delay until you are more certain about your future? I'd be glad to go into that. But it sounds like you do want someone to figure out how you can leverage deeper into debt to get something that will be depreciating faster than your salaries will be growing.

I do this from time to time. It is a pay-it-forward kind of thing. I will offer to pay for you and your wife's attendance to Financial Peace University - a program to help young folks manage their future and plan for debt management when either just starting out or when trying to get a handle on debt. I have done this a couple times here on the TMC forum and also a few others. A few have taken me up on this. It's minor in cost but highly regarded at putting your debt views on a more solid footing. If anything - look into "Financial Peace University" or at least some of the books by Dave Ramsey.

Good luck - I wrote the above mainly because I want you to really consider debt as something to try to avoid rather than dive headlong into.

TexasEV · Mar 13, 2015

You say any advice would be appreciated? I will second Bonaire's advice. No way you should consider a car in the price range Model X is likely to be with what you say is "high debt", a special lending program for your house, and just finishing fellowship. Wait until the high earning potential produces actual earnings.

ElectricTundra · Mar 13, 2015

I'll third. I've seen too many people with high potential miscalculate or run in to simple bad luck. The really great thing about high potential is that the wait until that potential is reached isn't very long and then you can pay cash and get much more enjoyment out of your purchase than you ever can when in debt. Debt is indeed a four letter word and second only to women not being tolerant of their husbands liasions when it comes to causes of marital strife, divorce, and a lot of unhappiness.

Beryl · Mar 13, 2015

I so agree with everything so far because I don't believe in debt.

Some borrow against assets and potential earnings and it works out well for them. However, many more do this and it turns out badly. The assets they used for borrowing lose value and their planned earnings never materialize. It is devastating and they often don't recover. It is a gamble because you don't know what the future holds.

After the tax code eliminated consumer debt interest deductions, I vowed to never carry any debt except a mortgage. I eliminated that in 2010.

(For the record, I'm considering a home equity loan instead of paying cash for my MX. I probably won't do it though. )

bonaire · Mar 13, 2015

Another topic that can get in the way. Baby. Pregnancy changes things whole lot in this kind of plan.

cmu5p · Mar 13, 2015

JohnSnowNW said:
I tried to find out more about Tesla's financing option on the teslamotors website, but it seems that I can't gain access to the info without the car (Model X) being in production. Anyway, I'm asking here since no ones has financed an X, obviously.

So, I was just wondering if anyone knows the basic terms of the lending program. We are in a bit of a strange financial situation, though one that is common in the medical field. My wife is in Fellowship, and will be in her last year when we take possession of the X (lateish '16 assumed). So, her salary isn't particularly high, but is supplemented though moonlighting...and when she finishes Fellowship will be substantially higher. Obviously with the moonlighting our income is based on how often she does it, and therefore can vary quite a bit.

When we bought the house we had to do so through a special lending program tailored to those with high debt, but also high earning potential.

Back to the vehicle. Our current plan is to put down 10% of the vehicle cost, upon delivery, but we could plan for more. I'm wondering if there are provisions in the Tesla lending program for situations like ours, or should we consider looking at financing through a specific institution. Are there things we can do now to ease the process in the future?

If more information is needed, let me know.

Thanks!

I've been in your shoes, JohnSnow. Now ten years out of fellowship and finally comfortable enough to finally warrant a well deserved and much-deferred reward for our toils. My advice is: WAIT. Get a Honda civic (or odyssey if kids) then trade up. You don't need the first X's off the line, besides, a year or two for a production model will help with ironing out the kinks. (Gosh, I sound like my dad.)

Winter is coming, Jon Snow, but summer will be right around the corner after your wife's been in practice for a few years.

JohnSnowNW · Mar 13, 2015

bonaire said:
Do you want debt management advice and why you should delay until you are more certain about your future? I'd be glad to go into that. But it sounds like you do want someone to figure out how you can leverage deeper into debt to get something that will be depreciating faster than your salaries will be growing.

I do this from time to time. It is a pay-it-forward kind of thing. I will offer to pay for you and your wife's attendance to Financial Peace University - a program to help young folks manage their future and plan for debt management when either just starting out or when trying to get a handle on debt. I have done this a couple times here on the TMC forum and also a few others. A few have taken me up on this. It's minor in cost but highly regarded at putting your debt views on a more solid footing. If anything - look into "Financial Peace University" or at least some of the books by Dave Ramsey.

Good luck - I wrote the above mainly because I want you to really consider debt as something to try to avoid rather than dive headlong into.

TexasEV said:
You say any advice would be appreciated? I will second Bonaire's advice. No way you should consider a car in the price range Model X is likely to be with what you say is "high debt", a special lending program for your house, and just finishing fellowship. Wait until the high earning potential produces actual earnings.

ElectricTundra said:
I'll third. I've seen too many people with high potential miscalculate or run in to simple bad luck. The really great thing about high potential is that the wait until that potential is reached isn't very long and then you can pay cash and get much more enjoyment out of your purchase than you ever can when in debt. Debt is indeed a four letter word and second only to women not being tolerant of their husbands liasions when it comes to causes of marital strife, divorce, and a lot of unhappiness.

Beryl said:
I so agree with everything so far because I don't believe in debt.

Some borrow against assets and potential earnings and it works out well for them. However, many more do this and it turns out badly. The assets they used for borrowing lose value and their planned earnings never materialize. It is devastating and they often don't recover. It is a gamble because you don't know what the future holds.

After the tax code eliminated consumer debt interest deductions, I vowed to never carry any debt except a mortgage. I eliminated that in 2010.

(For the record, I'm considering a home equity loan instead of paying cash for my MX. I probably won't do it though. )

bonaire said:
Another topic that can get in the way. Baby. Pregnancy changes things whole lot in this kind of plan.

cmu5p said:
I've been in your shoes, JohnSnow. Now ten years out of fellowship and finally comfortable enough to finally warrant a well deserved and much-deferred reward for our toils. My advice is: WAIT. Get a Honda civic (or odyssey if kids) then trade up. You don't need the first X's off the line, besides, a year or two for a production model will help with ironing out the kinks. (Gosh, I sound like my dad.)

Winter is coming, Jon Snow, but summer will be right around the corner after your wife's been in practice for a few years.

I appreciate these suggestions. Reserving the X was not a decision we made lightly, and we wouldn't be doing so if it wasn't doable with our current, and future, finances.

So to answer a few thing here:

When we bought the house my wife wasn't able to moonlight, which is why we had to go through a special lender. That is, we couldn't show an earning potential with a paycheck. She makes roughly 2.5x more than when we bought the house...and will make considerably more after Fellowship. She does not have a signed contract after Fellowship...but it is unlikely that she will have difficulty finding a position. Our debt, sans the house (which is a starter and not that costly), could be completely wiped off with her first years salary, with enough left over to cover our current yearly budget.

We have no large expenditures, or life changing events planned, but of course something could always come up to derail our future plans.

I agree that it would be prudent to wait, but this isn't what either of us wants. Of course, we have at least a year to make the final decision and we will definitely continue to weigh the pros and cons of the purchase.

I really do appreciate the suggestions/responses, so I hope it doesn't seem as though I'm ignoring sage advice. However, at this point, we are committed to purchasing an X. I think our next step based on some of these comments, however, is perhaps to consult a financial adviser...and see if there may be something we aren't considering with our current plans.

Thanks, all!

Auzie · Mar 14, 2015

I better chime in, to counterbalance overwhelming one-sided argument of avoiding debt.

Debt is extremely useful tool to get you much faster to a desired financial destination, in this case, a great car. As any other tool, debt or leverage can be more or less effective, depending on your financial skills.

It follows that rather than discarding extremely useful tool, it might be much more prudent to learn how best to use that tool. In your specific case, a very simple exercise of building a spreadsheet model of your projected income and costs over several years may give you the answers that you need. Also, some research of the best financing options might go a long way.

If the model tells you that your income may be a bit short to support the lifestyle that you want, my personal approach would be to find a creative way to make up for the shortfall and still get a desired lifestyle rather than give up on it. If you want something, find a way to get it rather than compromise or give up. Forward-looking should be focused on goals, not on obstacles. Often people give up too easily on their dreams and shortchange their lives, because of fear of debt or failure.

Debt is very cheap now, rates might go slightly up, so that may need to be factored in your model.

JohnSnowNW · Mar 14, 2015

Auzie said:
I better chime in, to counterbalance overwhelming one-sided argument of avoiding debt.

Debt is extremely useful tool to get you much faster to a desired financial destination, in this case, a great car. As any other tool, debt or leverage can be more or less effective, depending on your financial skills.

It follows that rather than discarding extremely useful tool, it might be much more prudent to learn how best to use that tool. In your specific case, a very simple exercise of building a spreadsheet model of your projected income and costs over several years may give you the answers that you need. Also, some research of the best financing options might go a long way.

If the model tells you that your income may be a bit short to support the lifestyle that you want, my personal approach would be to find a creative way to make up for the shortfall and still get a desired lifestyle rather than give up on it. If you want something, find a way to get it rather than compromise or give up. Forward-looking should be focused on goals, not on obstacles. Often people give up too easily on their dreams and shortchange their lives, because of fear of debt or failure.

Debt is very cheap now, rates might go slightly up, so that may need to be factored in your model.

Thanks, I appreciate the suggestion. We have basically done what you describe, though with the aid of some budgeting software that we already use. The X is the biggest purchase we plan on making in the near future. My wife has debt from Medical School, but if you remove this amount we have far less debt than the average homeowner.

Our current yearly expenses are so low that we save around $25,000/yr while my wife makes 1/3 (current salary + moonlighting) the amount she is projected to make at the end of her Fellowship. Our expenses, sans the X and some loan repayment, will continue to remain the same for at least the next 4 years.

We are quite financially conservative, and the X would be the only thing that we would really be spending money on. So, I don't feel that purchasing an X will put any financial strain on our household. But, again, I could be missing something.

cmu5p · Mar 14, 2015

In all this financial discussion, I forgot to answer your real question: when I looked earlier this year, tesla financed at 3.x% with a guaranteed resale value at three years. I can't remember the downpayment (10%, maybe? But I could be way off). It was only available in some states (not offered in VA, where I am). You could probably get better rates elsewhere, but forego the resale guarantee. Alliant and Pentagon Federal have been discussed in other forums as competitive. I would've bitten with better terms, but ended up paying cash for reasons outlined previously. Good luck!!

JohnSnowNW · Mar 14, 2015

cmu5p said:
In all this financial discussion, I forgot to answer your real question: when I looked earlier this year, tesla financed at 3.x% with a guaranteed resale value at three years. I can't remember the downpayment (10%, maybe? But I could be way off). It was only available in some states (not offered in VA, where I am). You could probably get better rates elsewhere, but forego the resale guarantee. Alliant and Pentagon Federal have been discussed in other forums as competitive. I would've bitten with better terms, but ended up paying cash for reasons outlined previously. Good luck!!

I appreciate the information, thanks!

sundoc · Mar 14, 2015

cmu5p said:
Winter is coming, Jon Snow, but summer will be right around the corner after your wife's been in practice for a few years.

Good advice... And GREAT G.O.T reference! Haha

cmu5p · Mar 14, 2015

sundoc said:
Good advice... And GREAT G.O.T reference! Haha

I contemplated "You know nothing, Jon Snow....." (Not directed at OP), but thought that might offend.

Fan of the books, not so much the show.

flash80 · Mar 14, 2015

JohnSnowNW said:
I tried to find out more about Tesla's financing option on the teslamotors website, but it seems that I can't gain access to the info without the car (Model X) being in production. Anyway, I'm asking here since no ones has financed an X, obviously.

So, I was just wondering if anyone knows the basic terms of the lending program. We are in a bit of a strange financial situation, though one that is common in the medical field. My wife is in Fellowship, and will be in her last year when we take possession of the X (lateish '16 assumed). So, her salary isn't particularly high, but is supplemented though moonlighting...and when she finishes Fellowship will be substantially higher. Obviously with the moonlighting our income is based on how often she does it, and therefore can vary quite a bit.

When we bought the house we had to do so through a special lending program tailored to those with high debt, but also high earning potential.

Back to the vehicle. Our current plan is to put down 10% of the vehicle cost, upon delivery, but we could plan for more. I'm wondering if there are provisions in the Tesla lending program for situations like ours, or should we consider looking at financing through a specific institution. Are there things we can do now to ease the process in the future?

If more information is needed, let me know.

Thanks!

I recently purchased a demo P85 and financed through Tesla. I had to put 15% down, since it was a 2013 model with a 2.99% interest rate (60 months). The actual financing is done through an outside lender--initially it was with Wells Fargo, but it ended up with US Bank (Wells Fargo didn't want to finance a 2013 vehicle). There's really nothing special about the Tesla financing program, it was just more convenient for me and the rates were the same as my credit union. Good luck!

p.s. I'm 5 years out from residency, good luck to your wife!

JohnSnowNW · Mar 14, 2015

cmu5p said:
I contemplated "You know nothing, Jon Snow....." (Not directed at OP), but thought that might offend. Fan of the books, not so much the show.

I hear it often enough, and would not have offended

Books > Movies/TV

- - - Updated - - -

flash80 said:
I recently purchased a demo P85 and financed through Tesla. I had to put 15% down, since it was a 2013 model with a 2.99% interest rate (60 months). The actual financing is done through an outside lender--initially it was with Wells Fargo, but it ended up with US Bank (Wells Fargo didn't want to finance a 2013 vehicle). There's really nothing special about the Tesla financing program, it was just more convenient for me and the rates were the same as my credit union. Good luck!

p.s. I'm 5 years out from residency, good luck to your wife!

Thanks, and thanks!

Drucifer · Mar 14, 2015

Leverage

I am 50, but in a similar position in a way. I have lived my whole life avoiding knowledge of Dave Ramsey and using leverage and debt to get things going.

I borrowed 97% to finance my first house. With the proceeds of that, I bought my next house with 10% down and the house I am in now with 20% down - that 20% was about as much as the first home was if I paid cash for it.

I own or am a partner in 4 businesses. I am now considering borrowing about $60-$70k to buy a Tesla (I would put about 25% or so down) in celebration of paying off the last of the debt I incurred to start and expand businesses. Now, you could argue that I should wait another year or two until I could pay cash for the car, but after paying off about $300k in business debt in the last 3 years, why shouldn't I reward myself with a car that I would really enjoy by incurring about $60k in debt that can be easily handled.

Seriously, I could lease another Chevy Volt for $400 a month, vs. the $1000 a month Tesla payment - but instead, I took a hard look at all expenditures in the businesses and at home and found ways to improve cash flow by cutting back or finding greater efficiencies to the tune of about $600 a month to rationalize the difference.

Now, the question is, am I right or am I wrong? At this point I have only real estate related debt equal to about 50% on my primary house and 50% on a house I rent out.

I will agree that debt is a tool. A chainsaw can be used to cut down dead trees that will crush your house or it can be used to have massacres in Texas.

Not to be circular in logic, but I will also agree that delaying sometimes makes the eventual receipt of what you want all the sweeter.

Auzie · Mar 14, 2015

Drucifer said:
I am 50, but in a similar position in a way. I have lived my whole life avoiding knowledge of Dave Ramsey and using leverage and debt to get things going.

I borrowed 97% to finance my first house. With the proceeds of that, I bought my next house with 10% down and the house I am in now with 20% down - that 20% was about as much as the first home was if I paid cash for it.

I own or am a partner in 4 businesses. I am now considering borrowing about $60-$70k to buy a Tesla (I would put about 25% or so down) in celebration of paying off the last of the debt I incurred to start and expand businesses. Now, you could argue that I should wait another year or two until I could pay cash for the car, but after paying off about $300k in business debt in the last 3 years, why shouldn't I reward myself with a car that I would really enjoy by incurring about $60k in debt that can be easily handled.

Seriously, I could lease another Chevy Volt for $400 a month, vs. the $1000 a month Tesla payment - but instead, I took a hard look at all expenditures in the businesses and at home and found ways to improve cash flow by cutting back or finding greater efficiencies to the tune of about $600 a month to rationalize the difference.

Now, the question is, am I right or am I wrong? At this point I have only real estate related debt equal to about 50% on my primary house and 50% on a house I rent out.

I will agree that debt is a tool. A chainsaw can be used to cut down dead trees that will crush your house or it can be used to have massacres in Texas.

Not to be circular in logic, but I will also agree that delaying sometimes makes the eventual receipt of what you want all the sweeter.

Congratulations on your successfully leveraged financial successes.

About delaying getting what one wants, there is some merit in reasonable delays, however, there is also a risk of delaying too much and/or too often.

Habitual delaying may make life less enjoyable. If the delay is too long, by the time one gets to a desired destination, such destination may lose its appeal. People that set themselves more aggressive life targets are more likely to work harder to achieve them. Once these targets are achieved, there are new targets on the horizon.

How fast one wishes to go through their desired destinations is really a personal preference. Fast flyers are more likely to use leverage to speed up their journey. There is nothing wrong with slow flyers or gliders, perhaps they enjoy the scenery:smile:

sitter_k · Mar 14, 2015

Previously my mindset was to avoid debt, then it was to only incur debt to buy appreciating assets. So this concept of leveraging to go deeper into debt for a car seemed foreign to me. I bought nice cars the cheapest way possible. CASH and 1-2 years old used and imported from the US where prices are significantly lower than in Canada (yes i'm that cheap). Well a new Tesla might change my mind on this, I'm a bit more stable financially and figure why buy an extremely high tech car that is ever evolving straight cash at a cost of $100k when i can spend $20k and invest the $80k.

My advise to the OP, if you want to leverage/borrow to buy your Tesla go ahead. But have a solid plan for investment. Otherwise buy your lower cost car then in the next yr or 2 when you realize your financial success get an EVEN BETTER Tesla!!! You know there's going to be one, and the model X will have many kinks like the first few Model S'

Financing, under somewhat unique circumstance.

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