Tesla Developing Used-Car Program To Boost Profits

Oct 07, 2014 03:00 PM EDT | Jordan Ecarma


It's not enough that Tesla is trying to change the car-buying game by making electric cars that have long battery ranges and selling them only at factory-owned retail outlets. Now the company wants to create its own certified pre-owned car program, according to Automotive News.

The move would boost profit for the startup since it will make the rather expensive Model S more affordable and bring more business to the company's showrooms.

The program makes sense, given that the oldest Model S cars are now three years old and company chief Elon Musk had guaranteed resale value to consumers uncertain about how an electric car might do in the pre-owned market.

Some buyers have worked out contracts that allow them to return the car after three years in exchange for a payout that recovers 43 to 50 percent of the original sticker price.

If owners choose to take Tesla's offer, there will be a lot of used Model S cars in Tesla's hands in 2016 and 2017. The vehicles could be worth even more than what Tesla initially promised customers, and there's a chance that the launch of the Model X crossover could drive more owners to trade in their Model S.

Since Tesla owns its sales and service centers, it also has to deal with the cost of operating them. A certified pre-owned program will help Tesla capture a chunk of the profitable used-car market, which is tripling the profits of new-car sales with a 12 percent margin, according to the National Automobile Dealers Association.

With all of its facilities being factory-owned, that means that Tesla would capture all the profit of used-car sales, instead of losing some of it to independently owned dealerships. That would be huge for the automaker, which has turned just one profitable quarter in 11 years in business.

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