2023-07-22 21:30:43
Tesla Inc. has begun offering 84-month auto loans to consumers after Elon Musk said the automaker “would have to do something” due to rising interest rates.
Now, the company includes seven-year loans as an option on order pages in the United States, having previously offered loans of up to 72 months. While extending loan terms can lower monthly payments for car buyers, consumers tend to pay more in interest and face a greater risk of owing more than their vehicle is worth.
The Tesla CEO has been a frequent critic of the Federal Reserve. Musk tweeted in November that the central bank’s rate hikes were “greatly amplifying the likelihood of a severe recession.” However, his predictions of impending deflation have yet to materialize.
“When interest rates go up dramatically, we actually have to lower the price of the car, because the interest payments increase the price of the car,” Musk said during Tesla’s earnings call on July 19. “So we have to do something about it.”
While 84-month auto loans have been gaining popularity, the trend slowed earlier this year, according to credit reporting company Experian. About 34% of new vehicle loans in the first quarter had terms longer than six years, up from about 38% a year ago.
Tesla delivered a record 466,140 vehicles during the three months ending in June, but has sold fewer cars than it has produced in each of the past five quarters. Shares fell after Musk said on the call this week that the company will have to keep cutting prices if interest rates continue to rise.
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