Swapalease’s Scot Hall on Leasing Tesla Model S and other EVs

Used car prices are expect­ed to soft­en sub­stan­tial­ly this year, with much of that com­ing from the grow­ing influx of off-lease units. Plug-in elec­tric vehi­cles are start­ing to come off-lease this year. Tes­la Motors has been get­ting a lot of atten­tion in the auto indus­try late­ly as it attempts to bypass state fran­chise laws and sell direct­ly to con­sumers. With Tes­la going out­side the tra­di­tion­al deal­er sys­tem, the com­pa­ny has come up with its own cre­ative leas­ing pro­gram – what it calls a guar­an­teed “buy back” pro­gram where Tes­la offers to buy back the elec­tric sports car between 36 and 39 months. The Tes­la Mod­el S is not the only elec­tric vehi­cle (EV) enter­ing off-lease chan­nels – leas­ing has played a dom­i­nant role in EV sales.

Scot Hall, Exec­u­tive Vice Pres­i­dent at Swapalease.com, has been close­ly watch­ing what’s going on with Tesla’s leas­es – and oth­er EV leas­es through OEM cap­tive finance arms. Swapalease.com helps its cus­tomers exit their vehi­cle leas­es ear­ly by mar­ket­ing their car lease to lease buy­ers seek­ing a short term lease assump­tion or lease trans­fer; it’s the world’s largest auto­mo­tive lease mar­ket­place and mon­i­tors every type of lease out in the mar­ket­place.

Hall thinks that leas­ing makes quite a lot of sense for con­sumers inter­est­ed in try­ing out the new tech­nol­o­gy in EVs. “It’s a lit­tle but unknown,” Hall said. “Leas­ing resolves it.”

Tesla’s guar­an­teed resid­ual val­ue on the Mod­el S has been based on the Mer­cedes Benz S Class as the bench­mark – Tes­la promis­es the Mod­el S won’t depre­ci­ate any low­er than the S Class; and Tes­la will buy back the car at the agreed price. It’s not a lease as the car own­er has to finance and pay tax­es on the full vehi­cle. The $7,500 fed­er­al tax cred­it is only avail­able when you lease an elec­tric vehi­cle through a local deal­er­ship. Tes­la has a direct sales mod­el and does not sell through deal­ers, essen­tial­ly pre­vent­ing them from offer­ing a stan­dard lease pro­gram.

Beyond the Tes­la Mod­el S, EV leas­es through oth­er automak­ers have been stan­dard and very sim­i­lar to any oth­er lease trans­ac­tion, Hall said; they’re usu­al­ly car­ried by OEM cap­tive finance arms. The Mod­el S has been out­side the Swa­palease pro­gram, though there were a few Tes­la Road­sters in Swa­palease. Hall said that for Nis­san Leaf lessees par­tic­i­pat­ing in Swa­palease, they have found the pay­ment offer­ing attrac­tive, and over­all, it’s been a sat­is­fy­ing expe­ri­ence for them.

Some auto­mo­tive ana­lysts won­der what resid­ual val­ues will look like for EVs com­ing off-lease. While there’s been con­cern over their mar­ket val­ues expressed by Kel­ley Blue Book and NADA Used Car Guide, Hall doesn’t it expect it to be a sig­nif­i­cant prob­lem. He hasn’t seen dra­mat­ic changes yet in plug-in EVs or hybrids com­ing off-lease, and con­sumers are shield­ed from resid­u­als when they go off-lease. Used car prices are expect­ed to go down this year, and EVs could poten­tial­ly see an even greater chal­lenge than oth­er vehi­cle cat­e­gories, he said. It is a bit ear­ly in the used car mar­ket off-lease cycle to know for sure.

Some of the EV leas­es may have been struc­tured with over­ly opti­mistic price val­u­a­tions to make the EVs more price com­pet­i­tive; but cap­tive finance arms are being more real­is­tic than they were 10-to-15 years ago on resid­ual val­ues over­all, Hall said. Used EVs can also present OEMs and deal­ers with an oppor­tu­ni­ty for cer­ti­fied pre-owned vehi­cle pro­grams as well, he said.

Here are a few oth­er points Hall made on leas­ing……….

• While some of the lease prices are up there, own­er­ship cost isn’t nec­es­sar­i­ly a deal break­er for con­sumers inter­est­ed in EVs. Some of them have envi­ron­men­tal con­cerns and don’t just look at com­pet­i­tive pric­ing on the mar­ket. EVs can be more prof­itable for OEMs long term.

• For those end­ing their leas­es ear­ly in Swa­palease, it’s not just about the typ­i­cal assump­tions made about Mil­len­ni­alls. Con­sumers in oth­er age groups such as those in their 40s or 50s are just as like­ly to opt into end­ing their lease ear­ly.

• Mobile phone two-year con­tracts seem to have their influ­ence on con­sumer choic­es. Last sum­mer, T-Mobile issued its “Jump” plan where users could get out of their plans ear­ly and upgrade to a dif­fer­ent phone. That sounds fair­ly sim­i­lar to what Swa­palease has been doing, Hall said.

• Hall has career expe­ri­ence in the deal­er­ship world, includ­ing the F&I depart­ment where auto loans and leas­es are writ­ten. He doesn’t see the EV buy­ing expe­ri­ence tak­ing sev­er­al hours of time for deal­er staff, dis­cour­ag­ing them from sell­ing the EVs in the first place. The car sell­ing and buy­ing expe­ri­ence cer­tain­ly takes longer than it used to, but that has much to do with all the elec­tron­ic gad­gets on every new car, he said. “It takes a lot of time to get the Sir­ius XM radio set up, OnStar (or oth­er telem­at­ics), and get­ting their phone synced to the dash­board,” he said.

• Swa­palease staff have had access to two Chevy Volts, and they’ve enjoyed the expe­ri­ence. They are look­ing for­ward to the next gen­er­a­tion Volt com­ing out, which should dou­ble the bat­tery dri­ving range.


1 Comment

  • Tinashe Gwena says:

    I am just look­ing up for a peri­od of 6 month car rental, hope you peo­ple cater for such amount of time. Will con­tact soon for the same, good to know about your ser­vice.

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