Customers can now spread payments over longer period; but may end up paying more than car’s actual value
Customers can now spread payments over longer period; but may end up paying more than car’s actual value
Tesla. Inc. (NASDAQ:TSLA) CEO Elon Musk previously expressed concerns about the impact of rising interest rates on car purchases and floated the prospect of cutting vehicle prices even further.
What Happened: The company’s website shows that the duration of a loan extended by a Tesla financier or third-party lender will now be 36 to 84 months. The cap was previously at 72 months.
This suggests that cash-strapped customers can now spread their payments over a longer duration. Since March 2022, the Fed has hiked the fed funds rates aggressively in the current tightening cycle.
But there is a downside to Tesla’s updated payment plan — customers could pay more than their car’s actual value if they agree to the extended-period option.
Why It’s Important: Thanks to the Fed’s successive and aggressive hikes, interest rates are now at a 16-year high of 5%-5.25%. To assess the impact of the rate hikes, the central bank agreed to a pause during its June meeting.
The Fed’s monetary policy setting-arm, the Federal Open Market Committee, is set to meet next week to decide on its monetary policy. The futures market has priced in nearly 100% probability of a 25-basis-point increase in rates to 5.25%-5.50%.
Central bank officials, in their public appearances, have continued to signal that more rate hikes could be on the horizon.
Musk has been a critic of the monetary policy and has, in the past, expressed worries about the Fed pushing the economy into a recession. The futures market has priced in nearly 100% probability of a 25-basis-point increase in rates to 5.25%-5.50%.
Tesla closed Friday’s session down 1.10% at $260.02, according to Zenger News Pro data.
Produced in association with Benzinga
