Someone get Dave Ramsey a punching bag.
In certain social circles, owning a Tesla has become a revered status symbol. Driving up in one is a signal that you’ve arrived financially, just like how BMWs and Mercedes have been treated in the past. And whenever that’s the case, there are people who are financially reckless enough to buy a status symbol car long before they can truly afford the thing. That makes the news of Tesla offering 84-month loan terms so very interesting.
As we’ve covered before, the demand for EVs is softening, both on the used and new market. Some have theorized that’s why Elon Musk has ordered the continual dropping of Tesla prices. And it’s not unreasonable to postulate that’s why the Texas-based automaker is now offering car loans that last for seven years.
We’ve heard of 84-month vehicle loans before, simultaneously laughing and shuddering at the same time. There are many possible reasons why people are taking on such a loan term, including rising interest rates and average new car prices. But the reality is too many car shoppers focus almost exclusively on their monthly payments, ignoring the bigger picture of how much they’re paying for their new ride.
The longer a loan term, the more likely you’re paying a shocking amount in interest alone. It’s really not a wise financial move. But Tesla will gladly get people who probably otherwise couldn’t afford to buy one of their EVs into a payment plan that doesn’t end for 84 months if they take it to the full term.
A lot can happen in seven years, rendering the vehicle you thought was sufficient at first a burden of sorts. People lose their jobs, get married, have kids, move, and experience other lifestyle shifts. In the meantime, most vehicles require at least a few fairly pricey repairs by the time they’re seven years old and have over 80,000 miles on the clock.
What’s more, with used EV values dropping like rocks lately, you’re likely to be quite upside down in your new Tesla with an 84-month loan term. That’s less than optimal if you need to unload the vehicle suddenly because of a life-altering event. Most people don’t think about that and car dealerships, or in this case automakers, count on that.
Image via Warner Bros.