Amid increasing interest rates, Tesla has revised its financing terms for customers in the United States, as it has increased the annual percentage rate (APR) for car loans.
Customers with excellent credit ratings will now face an APR of 6.09% for a 72-month loan, a slight increase from the previous rate of 5.89%. Furthermore, Tesla has rolled out an APR of 6.84%, up from the initial rate of 6.39% for the 84-month loan (via @SawyerMerritt).
The extended loan term, equivalent to seven years, comes as a response to current financial market dynamics. Until recently, the maximum loan term was limited to 72 months or six years. Despite the extended term leading to lower monthly payments, the total interest paid over the course of the loan will increase due to the lengthened repayment period.
On July 22, Tesla added an 84-month financing option, and now we’re seeing higher interest rates just over a week later.
Tesla CEO Elon Musk pointed out the company’s strategy to counteract the impact of rising interest rates during their Q2 earnings call. “When interest rates rise dramatically, we actually have to reduce the price of the car, because the interest payments increase the price of the car,” Musk stated. “So we have to do something about that.”
Other countries, like Canada, have longer repayment terms such as 96 months, or eight years. These longer-term loans were popular when interest rates were around the favorable 2% mark. However, with interest rates now having more than tripled, Tesla has made the decision to adjust its financing terms to help maintain vehicle affordability for its customers.
