Tesla Offers 84-Month Auto Loans in Response to Rising Interest Rates
Tesla Inc has responded to rising interest rates by introducing 84-month auto loans as an option for consumers. This comes after Elon Musk expressed the need to address the issue.
Previously, Tesla offered loans with a maximum term of 72 months. By extending the loan terms, monthly payments can be lowered, but customers end up paying more in interest and face the risk of owing more than the car’s value.
Musk has been critical of the Federal Reserve and its rate increases, warning of a potential severe recession. However, these predictions have yet to materialize.
Musk stated during Tesla’s recent earnings call that “when interest rates rise dramatically, we actually have to reduce the price of the car, because the interest payments increase the price of the car. So we have to do something about that.”
While 84-month auto loans have been growing in popularity, the trend has slowed down in recent months according to credit-reporting company Experian. In the first quarter, only 34% of new vehicle loans had terms longer than six years, down from 38% the previous year.
Despite delivering a record number of vehicles in the last quarter, Tesla has consistently sold fewer cars than it has produced in the past five quarters. The company’s shares plummeted after Musk suggested that prices may need to be further lowered if interest rates continue to rise.
In Canada, Tesla is offering 96-month loans, as stated on its website. These loans require a $7,500 down payment and come with an interest rate of 6.83%.
Contributions to this report were made by Automotive News Canada.
