Tesla Cancels Guaranteed-Price Buyback Program

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.

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

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 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.

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 and 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.

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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