Tesla is changing the automaking world with its innovative electric vehicles packed with tech features. However, automakers are also transforming the car buying process by moving from the traditional dealership model.
While Tesla has some showrooms where buyers can see and test drive cars, the entire buying and financing process happens online. During this process, buyers can apply for a Tesla car loan.
Let’s look closer at Tesla auto loans and what you should know about applying for financing via Tesla.
What Is a Tesla Auto Loan?
A Tesla auto loan is a financial product offered by a child company of the automaker. This company operates under the name Tesla Finance LLC and is responsible for reviewing loan applications, issuing funds, and processing loan payments.
Tesla also has an online platform where you can apply for financing via a third-party company. The automaker works with different partners to offer alternatives to its financing products.
Buyers can also shop around for a car loan and secure financing before ordering a Tesla via a bank or credit union of their choice. Tesla is a flexible company, and getting financing through a lender of your choice won’t be an issue.
Tesla lending is a convenient option because you can order your new vehicle and secure an auto loan through the same online process.
How to Apply for a Tesla Auto Loan
You can apply for financing after placing an order for a Tesla vehicle. Here are the steps to follow:
- You’ll have to place an order for the Tesla EV you want and, if applicable, choose how you want to customize the vehicle.
- Your order will then go through, and you can review the details of the vehicle you selected. You will be able to confirm the scheduled delivery.
- You should receive a confirmation of your order. Then, you can log into your Tesla account again and select a payment method.
- You can pay with cash, apply for a lease, or apply for an auto loan. If you select the loan option, you’ll start a credit application.
- There are different options available. You can select Tesla as your financer or select a third-party lender.
- On the next screen, you’ll have to indicate the total amount you want to finance and the loan duration.
- For the next step, you will need to enter your personal information, contact information, Social Security number, and employment details.
- If you selected Tesla as your financier, Tesla will review your application and respond with a financing offer you can approve online. You must sign the loan agreement at least 24 hours before the scheduled delivery date.
- If Tesla doesn’t approve your request for financing, you’ll hear back from a Tesla representative who will help you explore other options.
- You can find your loan details in your Tesla online account and information on how to make payments. Usually, you’ll have to make your first Tesla auto loan payment 30 or 45 days after the delivery.
- One advantage of getting a loan through Tesla is that you can make your car loan payments via your Tesla account or the Tesla app.
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How to Get Approved for Tesla Auto Loan
Like every auto lender, Tesla has some requirements you have to meet to qualify for financing. You should also know that Tesla will offer you an APR based on your credit score and financing profile.
Tesla Auto Loan Requirements: Who Can Apply for Financing?
Tesla offers financing for its current lineup, including the models S, X, Y, and 3. However, not all buyers can get financing. Tesla has a sales license in 27 states. You won’t be able to apply for financing via Tesla if you live in a state where Tesla doesn’t have a sales license.
Currently, Tesla has a sales license in Arizona, California, Colorado, Florida, Georgia, Idaho, Illinois, Hawaii, Indiana, Massachusetts, Maryland, Missouri, Mississippi, Nevada, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, Utah, Virginia, and Washington.
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What Is a Good Tesla Financing Credit Score?
Tesla doesn’t have any official guidelines regarding credit scores available online. While your credit score is an important factor that auto lenders will consider, they also consider other factors.
These factors include your income, current debt level, and how much you’re willing to pay as a down payment. For instance, a buyer with an excellent credit score might qualify for a higher APR than a buyer with a lower credit score and a stronger income.
On average, buyers score 700 or above when applying for a Tesla loan. You’ll qualify for a better APR and save on the cost of borrowing if you score in the excellent range (above 780).
Tesla may or may not approve your application if your score is below 700. If you’re somewhere in the good range, Tesla will consider other factors like your income and debt level to make a decision.
Does Tesla finance bad credit? You will unlikely qualify for a Tesla auto loan with a poor or fair credit score.
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Financing Different Vehicles
The price range of a Tesla EV can vary greatly from one model to another. The most affordable model, the Tesla Model 3, retails for $44,990. This is less than the average cost of a new car, which is $47,000.
However, a Model S will cost $94,990 before personalization options, and pricing for the Model X starts at $104,990.
Obtaining a loan with a low Tesla financing APR will be much easier for a Model 3 or Model Y. Due to the significant price difference, you’ll need a stronger financial profile to get financing for the other models.
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What Kind of APR Does Tesla Offer?
Tesla’s financing rates start at 2.49%. Buyers with a great credit score and a strong financial profile will qualify for a rate of 2.49% or close to it.
However, you will get a higher Tesla financing rate if you don’t have a perfect credit score. You should know that the average Model X owner has a yearly income of $143,000, while Model 3 owners earn $128,000 annually on average.
There are no official guidelines regarding how income and other factors affect the APR that Tesla will offer. Still, it’s unlikely that you will qualify for the lowest advertised APR of 2.49% if you don’t have the same financial profile as the average Tesla owner.
How Do the Tesla Financing Rates Compare?
Some credit unions advertise lower APRs that start at 1.49% or 1.99%. It’s unclear what kind of credit or income requirements you must meet to qualify for these APRs, but there seem to be other cheaper options to consider.
Other automakers also offer 0% APR to the buyers with the strongest financial profile. It’s not easy to qualify for these financing terms, and you’ll usually need an excellent credit score, a large down payment, or a qualifying trade. However, with a minimum APR of 2.49%, financing via Tesla tends to cost more than other automakers.
You should also know that the current trend is to offer lower APRs for auto loans due to the low sales numbers of the auto industry during the pandemic. In January 2022, the average APR for auto loans was 3.94%. This percentage fell from 4.96% in December 2018, the highest in recent history.
Compared to these numbers, Tesla’s 2.49% minimum APR is lower than the average, but it’s not a dramatic difference.
Tesla Loan Terms
Another important consideration is the loan term or duration. Opting for a longer loan term will result in lower monthly payments, but it will increase the total cost of borrowing.
Tesla offers different terms, including 36, 48, 60, or 72 months. In the past, Tesla offered limited options and didn’t offer all these different terms for all its vehicles. This policy has changed, and Tesla financing is now more flexible.
Tesla offers an online calculator you can use to compare different scenarios and see how different terms would affect your monthly payments.
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Additional Things You Should Know When Financing a Tesla
There are a few additional things to keep in mind if you want to apply for a loan via Tesla:
- A delivery fee of $1,200 is added to the price of your new car. You can finance this fee.
- Delivery takes up to 12 weeks. The financing terms are good for 30 or 60 days, meaning you must place the order and then apply for financing. You’ll have to accept the loan and sign the agreement before delivery.
- You’ll have to pay sales tax on your new vehicle unless you live in a state that doesn’t charge sales taxes.
- If you fill out multiple auto loan applications within a 14-day window, they will only impact your credit score once. It can be a good idea to shop around and compare other offers once you get an APR from Tesla.
- If you can’t secure financing, you can cancel your Tesla order. However, there is a $250 nonrefundable order fee.
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Why Tesla Loans Are a Convenient Option
One of the main reasons to consider a Tesla loan is that applying for financing through Tesla is a convenient experience. To save time, you can secure financing as part of the vehicle ordering process.
Tesla offers a simple interface for filling out a loan application. It also has a convenient calculator for estimating monthly payments. Tesla owners also have great tools for reviewing their financing details and making payments online or via the Tesla app.
Another advantage of choosing a Tesla loan is that It seems flexible. If you don’t qualify for the terms you applied for, a representative will contact you to discuss your options.
It sounds like Tesla is willing to work with buyers to find a solution that works for both parties, whether it’s making a larger down payment, changing the term of the loan, or securing financing through a third party.
The ease of use is a major advantage, but you should know that putting time and effort into shopping around and comparing different options can pay off.
While securing financing through a bank or credit union of your choice makes the process of getting a new car more complex, some credit unions advertise lower APRs for Tesla loans.
Depending on your credit score and financing situation, you might be able to qualify for better terms than the ones Tesla offers.
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Pros and Cons of a Tesla Loan
Does a Tesla auto loan make sense for you? Let’s take a closer look at the pros and cons of this financial product.
Pros:
- It’s easy to apply for financing during the buying process, and Tesla offers a great experience.
- The advertised minimum APR of 2.49% is lower than the current average.
- Tesla has become more flexible and now offers more terms and financing for its entire lineup of new and used vehicles.
- Tesla is a flexible option, and if you aren’t approved, a representative will work with you to find an alternative.
Cons:
- Tesla doesn’t offer financing in all states.
- Tesla doesn’t match the 0% APR that some automakers offer for buyers with a strong profile.
- Some credit unions advertise a lower APR that starts at 1.49% for a Tesla. It can pay to shop around.
- There are no official guidelines about credit or income requirements, so it is difficult to get an idea of the kind of APR you will qualify for until you submit an application.
Conclusion
Tesla financing is an option worth considering if you value this online process’s ease of use. The different terms and relatively low APR are positive points. However, this option seems best for buyers with a strong credit score and excellent income.
Remember that shopping around and comparing different auto loans might not be convenient. Still, it can help you save a lot when financing a new vehicle, especially if your credit score isn’t excellent.
FAQs
Here are a few additional things you should know about financing a Tesla.
Is it easy to finance a Tesla?
Tesla offers a streamlined process for applying for financing. However, not everyone will qualify for a loan. Financing is easier if you have a strong credit score or opt for the more affordable Model 3.
What credit score do you need for Tesla financing?
Tesla doesn’t have any official credit requirements available. Obtaining financing shouldn’t be an issue if your score is in the excellent range.
If your score is 720 or above, you should also qualify for an affordable APR. However, if your score is below 720, you should expect to get a higher APR.
What bank does Tesla use for financing?
Tesla has a subsidiary, Tesla Finance LLC, which acts as its financing department. The automaker also partners with US Bank and Wells Fargo to offer third-party financing.
You can apply for these options on the Tesla website or secure financing by getting pre-qualified with a bank or credit union.
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