Should Tesla Cuts Loans To 0% APR?

By Douglas McIntyre • April 11, 2024

Rathaphon Nanthapreecha Pexels

Tesla’s lowest loan rate is 6.39% APR for 72 months, and that is for someone with good credit. Ford does not sell many Mustang Mach-E models but offers 0% APR for 72 months. At that level, a Ford becomes much more attractive financially.

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Tesla has won most market share battles in the US EV market. Its share is about 55%, and the balance of the competition is fragmented. No other manufacturer has more than 10%.

Tesla’s route to keeping share has been price reductions, which probably works often. However, most buyers consider the monthly cost of owning a car, and interest rates are critical to keeping those costs low.

Company-based loans have been part of the auto industry for decades. They undermine manufacturers ‘ margins when they are below market, so they have value only if they drive strong sales. Experimentation on loan levels is easy when cars are selling in volume, and testing can be done in a matter of weeks if not days.

Tesla can sell more vehicles if it is willing to offer low-interest-rate loans in addition to its price discounts.