**Tesla Offers 84-Month Auto Loans in Response to Rising Interest Rates**
Tesla Inc. has introduced 84-month auto loans as an option for consumers in the United States. This move comes after CEO Elon Musk expressed concerns about increasing interest rates and stated that the company would need to take action. By extending the loan terms, Tesla aims to provide customers with lower monthly payments. However, it is important to note that longer loan terms often result in higher interest payments and increased risk of owing more than the vehicle’s value.
**Elon Musk’s Criticism of the Federal Reserve**
Elon Musk has been a vocal critic of the Federal Reserve and its policies. In November, he tweeted about the central bank’s rate increases, expressing his belief that they were significantly increasing the likelihood of a severe recession. Despite Musk’s predictions of impending deflation, they have yet to materialize.
During Tesla’s July 19 earnings call, Musk highlighted the impact of rising interest rates on car prices. He emphasized the need for the company to address this issue, as higher interest payments effectively raise the overall cost of the vehicle.
**The Popularity of 84-Month Auto Loans**
Although 84-month auto loans have been gaining popularity, the trend has slowed down in recent months. Credit-reporting company Experian reported a decline in the percentage of new vehicle loans longer than six years, from around 38% in the previous year to roughly 34% in the first quarter of this year. While longer loan terms may seem attractive due to lower monthly payments, consumers should consider the potential downsides, such as increased interest payments and the risk of being in a negative equity position.
**Tesla’s Sales and Price Adjustments**
Despite delivering a record-breaking number of vehicles (466,140) in the second quarter of this year, Tesla has consistently sold fewer cars than it has produced in the past five quarters. The company’s shares experienced a significant drop following Musk’s statement during the earnings call, in which he indicated that continued increases in interest rates would necessitate further price reductions.
Overall, Tesla’s decision to offer 84-month auto loans reflects its response to rising interest rates. While this move may provide customers with more affordable monthly payments, it is important for buyers to carefully consider the long-term financial implications. Additionally, Tesla’s sales performance and the impact of interest rate changes will continue to shape the company’s strategy and pricing decisions moving forward.
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