How to Finance a Tesla Model 3: A Guide in Plain English


How to Finance a Tesla Model 3: A Guide in Plain English

When you couple a high-performance electric vehicle with a smaller price tag than other Tesla models and a myriad of customizable options, it’s no secret why people love the Tesla Model 3. In order to enjoy all that the Tesla Model 3 has to offer by purchasing one of your own, there’s one thing to get out of the way first: financing it.

How can you finance a Tesla Model 3?  There are 5 main ways of financing a Model 3: 

  • Finance through Tesla
  • Lease through Tesla
  • Get approved for a traditional car loan 
  • Get approved for a luxury or exotic car loan
  • Pay in cash

If you see a Tesla Model 3 in your near future, this article is for you. In good old simple, plain English, we’ll walk you through the different ways to finance a Tesla Model 3 and the factors you should take into consideration when buying a Tesla Model 3 and deciding your best financing option. 

Ways to Finance a Tesla Model 3

Like with most cars, there are several different ways to finance a Tesla Model 3. However, there are some financing options that are unique to Tesla. There are also some financing options you may already be familiar with.

Finance Through Tesla

Just like a lot of other car dealerships, Tesla offers its own financing. 

But, again, like with a lot of other car dealerships, financing isn’t that simple. According to a Tesla Financing Review by Credit Karma, there are some specifics on what makes a Tesla Model 3 eligible to be financed through Tesla.

Tesla Financing Options

There are some limits when it comes to financing a Tesla Model 3 through Tesla. First, Tesla only offers loans for a select few models of new cars only.

So, if you’re looking to buy a used Tesla, you most likely won’t be able to finance through Tesla itself. You’ll need to look at some other financing options, which we’ll discuss later on.

If you’re looking at purchasing a new Tesla Model 3, financing through Tesla can still be an option for you.

Eligible Models

The following Tesla models can be financed through Tesla Lending, as long as they’re new:

  • Tesla Model 3 
  • Tesla Model S
  • Tesla Model X

However, it gets even more specific. While each of the Tesla models can be financed through Tesla as long as they’re new, loan term options vary by vehicle.

Loan Terms

Loan terms of 36, 48, 60, or 72 months are available for the Tesla Model 3, but only 60 and 72-month loan terms are available for the Tesla Model S and Tesla Model X. 

Those looking to finance a Tesla Model 3 are in luck with double the amount of loan term options than the other Tesla models.

Again, Tesla Financing gets a bit more specific. Geographic location in the United States may determine if a Tesla Model 3 is eligible to be financed through Tesla.

Eligible States

Put simply. Tesla Financing is only available in certain states. If you live in one of the following states (and meet all the other criteria), you’ll be eligible to finance your Tesla Model 3 through Tesla:

  • California
  • Colorado
  • Florida
  • Georgia
  • Hawaii
  • Illinois
  • Indiana
  • Maryland
  • Massachusetts
  • Minnesota
  • Missouri
  • Nevada
  • New Jersey
  • New York
  • North Carolina
  • Ohio
  • Oregon
  • Pennsylvania
  • Tennessee
  • Virginia
  • Washington

Estimating Your Loan Payment Through Tesla Financing

If you’ve taken a look at all the previous information and it sounds like you’re eligible to finance a Tesla Model 3 through Tesla Financing, you can even estimate your loan payment before submitting your application.

In this YouTube video, Devlon Northwest, head of the popular channel Credit Card Wars, explains some more of the ins and outs of financing a Tesla Model 3 through Tesla (after all, it’s how he financed his own Tesla Model 3!). 

Devlon explains that right on Tesla’s website, you can enter some of your information to get an estimate of your loan payment through Tesla Lending. 

By navigating to the Tesla Lending page, you can enter information like your zip code, your chosen vehicle, your desired loan term, and APR percentage to get an estimate of what your desired Tesla would cost you per month should you choose to finance through Tesla Lending. 

Applying for Tesla Financing

Naturally, if you want to finance a Tesla Model 3 through Tesla Financing, you’ll have to apply. Tesla’s financing application is unique in a few ways. First, the entire thing can be completed online! 

To apply for Tesla Financing, you’ll have to create a Tesla Account and complete an application form. 

That brings us to the next unique aspect of Tesla’s financing application: the application just needs to be completed within one month of the delivery of your Tesla. That’s right; you don’t need to have your application completed before you can begin driving your Tesla!

Tesla Financing Best Rate Guarantee 

There’s something else that’s important to note when discussing Tesla Financing: Tesla’s Best Rate Guarantee.

As explained on Tesla’s website, the Best Rate Guarantee offers that if you can show proof of valid approval for a lower loan rate from a third-party bank (that is, a loan that isn’t through Tesla itself), Tesla will actually match your rate. 

Devlon Northwest, Credit Card Wars YouTuber, also discusses his experience with the Best Rate Guarantee in his video (he ended up taking advantage of the Best Rate Guarantee and got a lower rate through Tesla).

If you’ve shopped for other car loans outside of Tesla itself (which we’ll discuss later on) and found a better rate than Tesla offered you, you too may be eligible for the Best Rate Guarantee.

In order to get the third-party rate matched by Tesla, proof of approval must be sent, and the approval must be for the same loan amount, type, and payment schedule among a few other conditions.

Lease Through Tesla

Those who are interested in financing a Tesla Model 3 have another option through Tesla itself: leasing. 

Tesla Leasing Options

Tesla offers leases for new Tesla Model 3, Tesla Model S, and Tesla Model X vehicles. 

Lease options for the Tesla Model 3 vary, but only slightly; lease terms are 36 months, with annual mileage options of 10,000, 12,000, and 15,000.

There is one catch to leasing a Tesla Model 3 through Tesla, though: you can’t purchase a Tesla Model 3 after your lease term is up. Only the Tesla Model S and Tesla Model X can be purchased after the lease term is completed.

Just like with financing, leasing through Tesla is limited to specific states. The states a Tesla Model 3 can be leased in are the same as the states referenced above. 

Additionally, as referenced on Tesla’s Leasing Support page, a $3,000 down payment, a $695 acquisition fee, and the first month’s lease payment are due when picking up a leased Tesla Model 3. 

Applying for a Tesla Lease

Applying for a Tesla lease is nearly identical to applying for Tesla Financing. A Tesla Account is necessary, so that an application can be filled out in the account. Tesla lease applications must be completed within 30 days of delivery. 

Shop Around for Traditional Car Loans

Many a smart car buyer knows that it’s typically best not to settle on the first car loan you’re approved for; shopping around for car loans to compare rates, terms, and other critical information can make a world of difference when it comes to financing a car.

The same can be said for a Tesla Model 3. If you aren’t looking to finance through Tesla itself, or want to compare other options, it can be helpful to look around at various traditional car loans. 

Traditional car loans are also one of the better financing options for those who are looking into buying a used Tesla Model 3.

So, where do you start? There are some different options. 

Applying through Tesla

Not to be confused with applying for Tesla Financing, applying for a car loan through Tesla is one option to looking for traditional car loans. 

This option is relatively simple: once you’ve decided you’re ready to finance your Tesla Model 3, you can apply through Tesla. Tesla will then approve (or not approve, although no one wants that option) you through a third-party bank or company for financing. 

Devlon Northwest looked into this option as well as the others we’ve discussed so far. In Devlon’s experience, he applied for a loan through Tesla, and Tesla matched and approved him with a loan from TD Auto Finance. 

However, Devlon explains that he wasn’t completely satisfied with the rates TD Auto Finance offered, so he decided to take matters into his own hands by researching and applying for car loans on his own. 

Searching for Car Loans on Your Own

As Devlon did, anyone can search out and apply for car loans on their own. Some banks and companies like Alliant Credit Union even offer financing especially for Teslas. But what if you don’t know where to start? 

Below are some tips for researching and finding financing for a Tesla Model 3. 

  • Start by looking into the options at financial institutions you already bank with or do business with.
  • Check the options at credit unions – especially if you’re already a member.
  • Inquire about options at other financial institutions you already have loans with, like a mortgage or another car loan.
  • Look into prequalifying online through major lenders like Bank of America, CapitalOne, and Lending Tree.

Generally, there are three key places to research and obtain financing. Those places include banks, credit unions, and online lenders. Which is best for financing cars, though? What are the pros and cons? 

We can break all this information down, thanks to this article from Consumer Report about where to shop for a car loan. 

 ProsCons
BanksGood digital banking platformsOnline applications are common (and easy!)Can offer competitive rates to those who are qualifiedLoan fees can be highCan be tough for those with low credit scores to be considered and/or approvedOften have conservative loan policies
Credit UnionsOften have more personalized serviceTend to offer lower interest rates on loansTend to be localLimited amount of branchesMust become a memberLoan fees can still be high, even if lower than banks
Online LendersMay offer more competitive interest ratesEase of application processApplying doesn’t hurt credit as much as applying to banks or credit unionsMay charge high fees or have penaltiesDifficult to control how personal information is sharedMay be more difficult to get in-person or on the phone assistance

Considerations for Traditional Car Loans and Teslas

Tesla Model 3s can get more expensive than other cars because of all the customization options that are offered, among other costs. 

According to U.S. News, a Tesla Model 3 can cost anywhere from $35,000 to $56,990, and sometimes even more, depending on the options purchased. 

Because of the higher price tag, some lenders may not offer a loan to cover the entire cost of the Tesla Model 3. 

In some cases, those looking to finance a Tesla Model 3 may need to look into luxury car loans, which are designed to finance luxury cars that other lenders might not be willing to finance. 

Shop Around for Luxury Car Loans

The Tesla Model 3 is considered a luxury hybrid and electric vehicle, so it only makes sense that some buyers may want or need luxury car loans in order to finance a Tesla Model 3. 

According to this article by Finder.com, which examines exotic and luxury car financing, obtaining a luxury car loan is a lot like obtaining a traditional car loan. 

The main difference between luxury car loans and traditional car loans, though, is that luxury car loans are typically for a much higher amount.

Most luxury cars start out at a price of $40,000, and traditional lenders may not provide loans for that amount or more.

With the higher loan amounts come longer loan terms and a need for sufficient proof that you can afford the payments (and likely a fairly high credit score, too). Luxury car loan terms typically start at a length of two years and can be as long as twelve years. 

Finder.com recommends considering the following factors when shopping around for a luxury car loan:

  • Loan term
  • Interest rates
  • Fees
  • Repayment options
  • Secured or unsecured? A new luxury car can be used as collateral in order to get a lower rate or a bit extra can be paid, so the car isn’t lost for any reason.
  • Variable or fixed rate? There are options for fluctuating interest rates, which have a chance to be lower as time goes on; there are also options for stable, unchanging monthly payments. 

It’s important to note that in order to qualify for a luxury car loan, great or excellent credit, the ability to afford repayments, and a low debt-to-income ratio tend to be necessary. 

Searching for Luxury Car Loans

There are fewer options when it comes to luxury car loan lenders, but that doesn’t mean they’re hard to find. A simple internet search can turn up results for luxury lenders in your local area and nationwide. 

PolicyGenius recommends Woodside Credit and J.J. Best Banc & Co as lenders that specialize in luxury car loans. 

Additionally, it’s also smart to ask a Tesla associate if they know of any luxury car lenders that might be a good fit for a Tesla Model 3. 

Pay in Cash 

This option is one that most people are knowledgeable about but may not take advantage of very often. When it comes to luxury cars like the Tesla Model 3, this financing option is probably the least popular and most difficult.

It’s simple: another way to finance a Tesla Model 3 is to pay in cash. 

Take YouTuber YoungTesla, for example.  In his YouTube video about how he financed his Tesla Model 3, he discusses that he at first aimed to purchase his vehicle in cash. Although he chose to go a different financing route, paying in cash was an option he at first considered. 

There are certain benefits to paying cash for a car. First, you won’t have to worry about an interest rate or monthly payment that would normally come with other methods of financing. Not only that but paying in cash can sometimes result in discounts if the dealer offers them. 

However, there are, of course, some disadvantages to paying cash, especially when it comes to a Tesla Model 3; as you’d imagine, you have to come up with a large lump sum of cash in order to buy the vehicle. 

Additionally, paying cash may limit you on your options, customizations, and other extras depending on the budget you’ve got to work with. Because of your cash budget, you may have to settle on fewer options or sacrifice the “bells and whistles.”

Things to Consider Before Financing a Tesla Model 3

Financing and purchasing a Tesla Model 3 is likely to be a very exciting milestone. After all, you’ll get to own and drive a Tesla!

Like with other large purchases that may need to be financed through loans and leases, there are some things to take into consideration before committing to financing a Tesla Model 3. 

Credit Score

Your credit score is especially important if you plan on financing your Tesla Model 3 through a loan or lease, regardless of the lender. 

Your credit score can determine your APR percentage, your monthly payment amount, your down payment amount, if you need a co-signer or not, and even if you get approved on the loan or lease in the first place. 

Finder.com notes that the best chances for getting qualified for financing a Tesla Model 3 (and getting good rates) go to those with credit scores of 670 and above. 

670 is a fairly high credit score, and having good credit is needed to finance a more expensive, luxury car like a Tesla Model 3. If your credit score is lower than 670 or more in the fair range, it’s recommended to come up with a down payment of at least 20%. 

Down Payment

Speaking of down payments, you’ll want to consider them before deciding to finance a Tesla Model 3. 

First things first: do you plan on making a down payment? Down payments aren’t always necessary, but this depends on the dealer, person, and vehicle being purchased. Not making a down payment can result in higher rates and/or higher monthly payments. 

If you plan to make a down payment when financing your Tesla Model 3, how much do you want to put down? Remember the tip that if your credit score is less than 670, you might want to consider saving up for a down payment of 20%. 

Additionally, remember that if you plan on leasing your Tesla Model 3, a down payment of $3,000, as well as a $695 acquisition fee, are due when picking up your Tesla.  

Can You Afford the Costs?

One of the most important questions to ask yourself whenever you’re making a large purchase like a Tesla Model 3 is simply: can you afford it? 

Before committing to financing a new Tesla, make sure you’ve really narrowed down and confirmed that you can afford any down payment necessary, monthly payments, interest, and any repairs and other costs that may come with the vehicle. 

It’s recommended to try and keep a monthly car payment at or below 10 percent of your pre-tax monthly income. 

NerdWallet offers a simple Car Affordability Calculator to determine just how much car you can afford by entering information like your credit score, your preferred monthly payment amount, and your preferred loan term length. 

Your Tesla Model 3 Options

Remember how we discussed all the different customizable options available for a Tesla Model 3? There are a lot, and they’re exciting, but they’re also something you need to consider before financing and committing to a Tesla Model 3. 

The different options and add-ons available for a Tesla Model 3 will add to the cost of the vehicle and overall amount that needs to be financed. 

For example, a Standard Range Plus, rear-wheel drive, Partial Premium Interior Tesla Model 3 costs $35,690 to $39,990. 

However, options like the dual-motor, all-wheel drive, Long Range Tesla Model 3 come with a price tag of $44,690 to $48,990, where the dual-motor, all-wheel drive, Performance Tesla Model 3 comes in at $52,690 to $56,990. 

You can find more information about the different options and packages of the Tesla Model 3 with exact pricing and available discounts on the Design Your Model 3 page on Tesla’s website.

Charging Cost and Availability

One of the greatest benefits of Tesla Model 3 is that it’s an electric vehicle. While driving an electric vehicle can save a lot of money on gas costs, it still costs money to charge a Tesla Model 3. 

Additionally, Tesla Supercharger stations are fairly abundant (to make it so you can charge your Tesla with ease), but they aren’t absolutely everywhere. You won’t see a Tesla Supercharger station as frequently as you see McDonalds’ golden arches or a corner 7-Eleven. 

Remember that in order to reap the electric benefits of a Tesla Model 3, it will have to be charged, and the charging will have to be paid for. 

According to CNBC, it costs approximately 26 cents per kilowatt-hour to charge a Tesla Model 3. Owners are charged by the kilowatt-minute or kilowatt-hour, depending on the charging station. 

What about finding charging stations? In North America as a whole, there are 1,441 charging stations with 12,888 Superchargers. On the Supercharger page of Tesla’s website, you can find a map of all the locations of charging stations and Superchargers. 

Tax Credits Have Decreased

Electric vehicle owners and potential vehicle owners are likely aware that tax credits are available for those who purchase and drive an electric vehicle. 

In years past, the tax credit for owning a Tesla was $7,500, but that number dropped to $3,750 – and has since dropped again to $1,875. 

While tax credits have decreased, Tesla Model 3 owners can still claim a tax credit of $1,875.

The tax credits for owning a Tesla of any model have decreased because once an automaker sells a certain number of vehicles, the tax benefit drops. Tesla’s original tax benefit of $7,500 dropped to $3,750 when the company passed 200,000 electric vehicle sales. 

Further, due to the Driving America Forward Act, tax credits were extended to companies up to 400,000 electric vehicle sales. Once a company passes 400,000 electric vehicle sales, the tax credit drops in half again to $1,875 – the new tax credit amount for a Tesla Model 3 (or any Tesla model).

If the large tax credit was a large incentive for you to finance a Tesla Model 3, you might want to take into account that the tax credit has decreased before making your commitment. 

Final Thoughts

There are several different ways to go about financing a Tesla Model 3, each with its own set of benefits and potential drawbacks. Remember, a Tesla Model 3 can be financed by:

  • Financing through Tesla
  • Leasing through Tesla
  • Getting approved for a traditional car loan 
  • Getting approved for a luxury or exotic car loan
  • Paying in cash

Additionally, like with all big purchases and commitments, there are some certain things to consider, like your credit score, your down payment options, your finances, the charging costs and charging availability for Teslas, and the tax credits available for electric vehicles. 

Regardless of which financing option is best for you, you can feel great knowing you’ll soon be driving away in a Tesla Model 3! 

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Greg

Hi, I'm Greg. My daily driver is a Tesla Model 3 Performance. I've learned a ton about Teslas from hands-on experience and this is the site where I share everything I've learned.

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