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Tesla dropped its lease policy after CEO Elon Musk said the company needed the cars back to build its robotaxi network.
Tesla’s lease policy started in 2019 with the Model 3 leases.
For years, Tesla customers in the US were told they couldn’t buy their cars at the end of a lease. The reason? The vehicles were supposedly being kept for Tesla’s future robotaxi fleet. But it wasn’t the case. According to a report by Reuters, Tesla dropped that policy in November last year. It had been in place since 2019 which started with the Model 3 leases. At the time, Tesla CEO Elon Musk said the company needed the cars back to build its robotaxi network.
“You don’t have the option of buying. We want them back,” he said at an investor gathering in California in April 2019. Musk had also claimed that by the next year, Tesla would have over a million robotaxis on the road. That never happened.
Instead, Reuters reports that Tesla found another way to profit from its off-lease cars. People familiar with Tesla’s retail operations told the outlet that the company would upgrade the returned vehicles with software like “Full Self-Driving” or “acceleration boost.” These features were sold separately for thousands of dollars. The cars were then resold at higher prices, more than what a lease customer would have paid to buy them at the end of the lease.
The move was legal but the practice denied lessees the industry-standard option of buying their vehicles and misled them for years about the reason. Since 2019, Tesla has leased to customers worldwide more than 314,000 vehicles, or 4.4 per cent of its total deliveries, Reuters reported.
Buying a leased car is a common practice in the auto industry. Leasing a car usually means paying monthly to use a new vehicle for a set time, often two to four years. During this period, the person leasing the car doesn’t own it and has to return it to the dealer once the lease ends. But most lease agreements let customers buy the car when the lease is over, or even before that if they want.
But Tesla’s website and staff repeatedly told customers that purchase wasn’t an option. The robotaxi explanation was given again and again, even though the cars ended up being resold.
Joe Mendenhall, a Tesla lessee from Indianapolis, told Reuters he was informed he couldn’t buy his car because it would be used for robotaxis. Later, he found out the car had been sold. “Lies about not being able to buy out my lease. The car gets sold at auction, not turned into a robotaxi like I was told,” he posted on X.
Tesla’s robotaxi promises have been around since 2016. Each year, Musk has said self-driving Teslas were just around the corner. In fact, just last October before showing a robotaxi concept called “Cybercab” at an event, Ark Investment Management said that the off-lease inventory could help quickly ramp-up an autonomous ride-hailing service.
Even now, Musk is promoting another event in June that promises to showcase self-driving progress.
For Tesla, the no-buy lease policy worked well during the pandemic years. Used car prices were high and inventory was low. But things have changed. Reuters reports that prices of used Teslas have dropped sharply. The Model Y’s value fell by over 14 per cent in the past year, while Cybertruck prices dropped by 46 per cent, according to data from CarGurus.
Joseph Yoon, a consumer insights analyst at Edmunds, said Tesla probably changed its policy because the value of used Teslas has been dropping. He explained that the company likely wanted to avoid being stuck with cars that were losing value. “They don’t want to be caught holding the bag.”
In November, Tesla’s official leasing page was updated to say that cars “may be eligible for purchase.” The same day, the company posted on X: “Lease buyout now available.”
But for some former customers, it is a little too late.
“I love the car,” said Vermont resident Marshall Distel, who leased a Model 3 last year. He further said that he didn’t like “what has been going on at the top with the CEO,” so he no longer wanted to be connected to the company.
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