Tesla’s lease buyout policies promoted profits over customer transparency, report states
Four people familiar with Tesla’s retail operations have reported that from 2019 to 2024, the company told leasing customers they would be unable to buy their vehicle at the end of their lease, instead forcing them to return it to Tesla. The automaker claimed they would use the cars to help build its robotaxi fleet, but instead upgraded the cars with new software and flipped them for more than what lessees would’ve paid. According to Reuters, Elon Musk said at a 2019 California Tesla investor gathering that the company would have “over 1 million robotaxis on the road” by 2020. One of the four people familiar with Tesla’s retail operations, who asked not to be identified, said re-obtaining leased vehicles allowed the automaker to “jack up the price” of its used cars. As of mid-May, Tesla hasn’t launched its Robotaxi service, and the paid rideshare platform’s start, which is scheduled for June in Austin, Texas, is facing new regulatory pushback.
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Shady, but not illegal
The report claims that Tesla sold the leased vehicles through stores and online auctions. While Tesla’s retail strategy wasn’t illegal, they denied lessees the ability to buy leased cars under misleading policies. The used Teslas received upgrades like an acceleration increase worth $2,000, and Full Self-Driving (Supervised) tech, currently priced at $8,000. Periods when Tesla’s pre-owned resales would’ve been especially valuable include the COVID-19 price surge stemming from industry-supply chain constraints.
Leases have represented 4.4% of Tesla’s deliveries, totaling 314,000 cars. Tesla’s ban on customers buying leased vehicles began in 2019 with its Model 3, expanded to all models in 2022, but ended in November without any robotaxis hitting the roads. Model Y lessee Joe Mendenhall of Indianapolis told Reuters that Tesla staff notified him of needing his SUV back for its robotaxi fleet at the end of his term, but later sold it at an auction. Joseph Yoon, consumer insights analyst at Edmunds, believes that Tesla ended its lease buyout policy in November to avoid being caught “holding the bag” as the values of its pre-owned vehicles began dropping.
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Yoon’s comment is supported by Edmunds data published in March, highlighting Tesla customers trading in their cars at record-high rates, reflecting a broader decline of used Tesla values. Teslas from model year 2017 or newer model years represented 1.4% of all vehicle trade-ins until March 15th, a 0.4% increase year-over-year that equals its highest-ever share. This percentage doesn’t include direct-to-consumer sellers, so the percentage was likely higher. Autoblog contacted Tesla for comment, but didn’t receive a response.
Final thoughts
In November, the average used electric vehicle (EV) listing price declined 1.3% month-over-month and was 10.3% lower than the previous year, according to Cox Automotive. In essence, Tesla’s practice of banning lease buyouts and reselling its used inventory was a profit-boosting measure, just like the company’s decision to repeal its lease policy in November. Additionally, the used vehicles that Tesla resold underscore the company’s failed robotaxi ambitions, which include Musk missing his goal of Tesla having “over 1 million” robotaxis on the road by 2020. The National Highway Traffic Safety Administration (NHTSA) has given Tesla until June 19 to report the number of models it will deploy for its paid robotaxis Texas launch in June.