Posted on Wednesday October 9th, 2024
In a surprising move, Tesla (TSLA) has brought back 0% financing in the United States, offering buyers a big incentive just a week after ending its previous subsidized financing program last month. This incentive is a significant move considering we are only in the second week of the new quarter, but there's a notable catch that potential buyers should be aware of.
Tesla’s Incentives Come in Waves
Tesla has a pattern of offering incentives that tend to peak at the end of each quarter, often to boost delivery numbers and meet financial targets. After each wave, there’s typically a brief lull at the beginning of the following quarter without such offers. That’s why it was surprising to see Tesla reintroduce 0% financing so soon after ending the last round of incentives.
Tesla updated its website to introduce the new 0% Annual Percentage Rate (APR) on new Model Y and Model 3 orders in the US. In the current high-interest rate environment, a 0% APR is a powerful offer—essentially providing buyers with interest-free financing for up to six years. However, there’s a significant stipulation: buyers must also purchase Tesla’s $8,000 Full Self-Driving (FSD) package to qualify for this financing rate.
FSD Required: The Catch
The catch with this financing deal is that it requires buyers to opt for the Full Self-Driving package. The FSD package, currently priced at $8,000, is a major add-on to the cost of a new Tesla vehicle. It seems Tesla is using the 0% financing as a way to boost the adoption rate of its FSD, which is believed to be relatively low compared to initial expectations.
Tesla CEO Elon Musk has claimed in the past that Tesla vehicles would become “appreciating assets” because of their ability to achieve full autonomy with FSD, and that the value of FSD would continue to increase as the software improves and gets closer to a robotaxi-level system. However, the reality has been a bit different. While Tesla did increase the price of FSD to $15,000 at one point, they later reduced it to $8,000 due to a combination of market pressures and FSD still being far from full autonomy.
Current Status of Full Self-Driving
Although Tesla’s FSD has made significant strides, it is still not at the level required for true robotaxi functionality. Based on crowdsourced data, the software remains in a supervised state, with drivers required to monitor the system and intervene when necessary. The dream of a fully autonomous Tesla fleet is still on the horizon, but this financing offer makes it clear that Tesla is keen on getting more customers to buy into that vision—literally.
Financing Details
The 0% APR offer is available for a 72-month financing term, with a required down payment of 15%. This effectively means buyers can finance their Tesla over six years without paying a dime in interest—a particularly compelling offer given the current financial climate, where interest rates on car loans are relatively high. However, the lack of a firm timeline for this promotion means that it could end as abruptly as it began, so interested buyers may want to act quickly.
The Strategy Behind the Offer
It’s likely that Tesla’s move to bring back 0% financing is a strategic effort to clear inventory while increasing the uptake of FSD. With high-interest rates affecting vehicle affordability for many buyers, offering interest-free financing could make a new Tesla much more accessible—provided buyers are willing to shell out for FSD. The strategy could also help bolster the “take rate” of FSD, an area where Tesla has faced challenges, as the package hasn’t yet delivered on its full promise of complete autonomy.
Looking Ahead
For potential Tesla buyers, this new 0% financing incentive could be a great opportunity—especially for those who were already considering adding the FSD package. However, it’s important to weigh the cost of the FSD feature against its current capabilities and the fact that it remains a supervised driver-assistance system rather than true autonomy.
For Tesla, this move highlights its ongoing strategy to push FSD adoption, even if it means creating financial incentives to do so. Whether or not this will prove successful in increasing the adoption of FSD remains to be seen, but it certainly adds another chapter to Tesla’s bold, and sometimes controversial, journey toward the future of autonomous driving.