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Tesla Loan Early Repayment

20K views 21 replies 10 participants last post by  TohasBH  
#1 ·
Hi all - if you buy a Tesla using the Tesla loan option, are you allowed to pay off the loan early without any significant penalty - for example could you take the loan over 72 months, but then after 4 years, pay off the fully balance without penalty (and avoiding the last 2 years of interest)?
 
#3 ·
Yes by law if it’s a regulated agreement and the settlement is calculated using a formula laid down by the financial conduct authority. I am sure they are not allowed to charge “penalty” interest any more. If you settle within 14 days it’s a cancellation not an early settlement and different rules apply - it is only permissible to charge a daily charge (a couple of pounds a day in general).
 
#4 ·
Thanks - what I was then wondering is, looking at the Tesla website on their purchase options, why would anyone take the PCP option if you can take the Tesla Loan option with a lower interest rate over 72 months, having much more flexibility and paying less interest in total? I suppose you have slightly less payment per month for the same down payment but it seems like a poor deal to me.
 
#10 ·
You can customise the figures on the website to your requirements, but as an example - Tesla model 3 basic RWD.

PCP - Representative Example | 48 fixed monthly payments of ÂŁ502 | On-the-road cash price ÂŁ44,490 | Total down payment ÂŁ9,100 | Total amount of credit ÂŁ35,390 | Optional Final Payment ÂŁ16,461 | Interest charges ÂŁ5,180 | Fixed rate of interest per year 4.90% | Length of agreement 48 months | Total amount payable ÂŁ49,670 | Representative APR 4.90% | Mileage per annum 10,000 | Excess mileage charge 14 ppm (Plus VAT).

Tesla Loan - Representative Example | 72 fixed monthly payments of ÂŁ554 | On-the-road cash price ÂŁ44,490 | Customer deposit ÂŁ9,000 | Total amount of credit ÂŁ35,390 | Interest charges ÂŁ4,464 | Fixed rate of interest per year 3.99% | Length of agreement 72 months | Total amount payable ÂŁ48,954 | Representative APR 3.99%.

Note that in the PCP example, you are paying more interest even though the term is shorter and you are (notionally I guess) borrowing less money.

In the end, ignoring potential of varying inflation, I suppose if the car is worth more than ÂŁ16,461 plus 48*(554-502) = ÂŁ18,957 at the end of 4 years (which is highly likely), it seems more sensible to go with a loan option.

I think I remember looking at this many years ago when these PCP deals started to become all the rage and concluding the same - these deals don't make sense unless either you literally cannot afford the small difference in payments or I guess if you have a credit rating that won't let you borrow the full amount.
 
#11 ·
OK but do they let you borrow larger amounts for cars - when I've looked at bank loans in the past, they were often limited to ÂŁ20k or somethign like that (at least on the website tools).

To be honest I most likely would save up for some time before buying as I don't want to be borrowing a very large amount even if I could theoretically afford the repayments - I am just curious about these deals as I would like to buy a Tesla eventually.
 
#17 ·
Although it interesting it’s a “Tesla Loan” not a Hire Purchase or Conditional Sale agreement. I wonder if it is NOT regulated - this would scare the bejeesus out of me if so.

There are rules for a regulated agreement - but none really for unregulated, and you are not entitled to any rebate of interest on an unregulated agreement - so come to settle after 2 years and you would get one hell of a shock. If it is unregulated, I wouldn’t touch it with a barge pole. On the day after signing a loan for £35k you owe £39k - no cancellation rights,, no early settlement rebates, nothing.... plus if you default they could take your house, whereas on the PCP usually only the goods themselves and then apply for a CCJ for the outstanding....

I would want to see the agreement, read it and understand it COMPLETELY before signing up for that.
 
#18 ·
In the small print for the terms it states Tesla may reserve the right to seek compensation for early repayments see "section something paragraph something else"...

I don't think it's limited to Tesla's loan but for overpayments of above ÂŁ8000 in any 12 month period they can charge a fee, but I think it's less than 1% of the total overpayment. Don't quote me directly on that, and I don't know if they've ever charged it. But you can overpay, reducing the term and saving some interest. I'm gonna be wiping mine out as soon as I've got more money than what's left to pay. Hopefully 4 years early
 
#20 ·
If it’s a conditional sale agreement and regulated that’s fine.

Tesla Financial Services may well be regulated, but that only means they can do regulated and unregulated agreements, doesn’t tell you which one this is.

But most (not all) conditional sale agreements are regulated - for this sort of money anyhow.
 
#21 ·
Out of curiosity as I'm fairly close to being able to clear my Tesla loan... Has anyone actually done this early and was it free of complications?

When should you do it in relation to the monthly payment that last left your account?

As I understand it, you can't just go on the app and send the full payment using the stored card, you have to submit a wire transfer as you would have done with your initial main deposit quoting your original reservation number for reference.

Anyone?
 
#22 ·
From what I've heard, it's generally possible to do so without incurring significant penalties. Many Tesla owners have actually gone ahead and paid off their loans early, and they didn't face any major complications. It's definitely a smart move if you can manage it.
As for the timing, it would be best to reach out to Tesla or your loan provider for specific instructions. They can guide you through the process and let you know if there are any particular steps you need to follow. Keep in mind that the payment method may differ from your regular monthly payments. You might need to submit a wire transfer rather than using the app or your stored card.
By the way, while browsing online, I came across a Mortgage Broker in Bridlington who might have some helpful insights when it comes to loans. They could provide you with more personalized advice based on your specific situation. You might consider reaching out to them for further guidance.