Tesla cancels guaranteed-price buyback program for electric cars


Tesla Store Los Angeles [photo: Misha Bruk / MBH Architects]

Tesla Store Los Angeles [photo: Misha Bruk / MBH Architects]

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As of July 1, Tesla no longer offers its guaranteed buyback program for electric cars.

The program was launched in 2013 to help reassure consumers buying the then-new Model S sedan that its resale value wouldn't plummet.

Under the terms of the program, which Tesla promoted as an alternative form of leasing, owners could sell their cars back to Tesla after three years at a guaranteed price, equivalent to about 43 percent of the purchase price of a Model S at the time.

CHECK OUT: Big Mystery Unveiled: You Can Now 'Lease' 2013 Tesla Model S (Apr 2013)

Three years later, the guaranteed buyback program is now a significant drain on Tesla's cash reserves, according to Reuters.

A Tesla spokesperson told Reuters that the program was discontinued to "keep interest rates as low as possible and offer a compelling lease and loan program to customers."

But Tesla may also need the cash it had set aside to buy back used cars to fund its many ongoing projects, including completion of its Nevada battery "gigafactory" and preparations for the start of Model 3 production.

Tesla Model S at Supercharger site in Ventura, CA, with just one slot open [photo: David Noland]

Tesla Model S at Supercharger site in Ventura, CA, with just one slot open [photo: David Noland]

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Tesla valued the liability of the buyback program  at $1.58 billion as of March 31, according to its latest quarterly filing with the Securities and Exchange Commission.

That's up more than 20 percent from the end of 2015.

ALSO SEE: Used electric cars sell quickly even as new sales remain flat

Currently, only a small number of Model S electric cars are sold through the used-car auctions that handle the majority of cars traded in by owners.

Those cars are selling at a strong premium, according to Reuters, even while average prices of other used electric cars with lower ranges have declined.

Tesla Model 3

Tesla Model 3

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Used electric cars spend around half the time on dealer lots that gasoline cars do, but their average prices have dropped 15.2 percent compared to 2015, according to a recent study by used-car website iSeeCars.com.

Model S prices too may drop as more cars hit the secondhand market, analysts suggest.

MORE: Tesla delivers 14,370 electric cars in Q2, fewer than planned

Either way, used Model S prices will be largely out of Tesla's control for the first time.

Most carmakers leave the values of their used vehicles to market forces, but the guaranteed buyback program gave Tesla some influence over Model S prices during the roughly three-year period it was in effect.

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