Tesla Adds New 7-Year Auto Loan Term; Musk Calls Card Debt ‘Freaking Scary’

AUSTIN, Texas–Tesla has introduced a new 84-month auto loan term for buyers of its vehicles.

CEO Elon Musk said the seven-month term is in response to rising interest rates.

In addition to the 84-month financing option in the U.S., Tesla has also added the option for a 96-month loan in Canada, also largely due to rising interest rates, according to Musk, Automotive News reported.

The rate on Tesla’s seven-year loans for its Model 3 was 6.39%.

“When interest rates rise dramatically, we actually have to reduce the price of the car, because the interest payments increase the price of the car,” Musk said during a quarterly earnings call. “So, we have to do something about that.”

According to data from Experian cited by Automotive News, approximately 34% of new vehicle loans in Q1 were for more than six years, dropping from about 38% in 2022.

In the second quarter of this year, Tesla delivered a record 466,140 units. It has also lowered the prices on some of its vehicles.

‘Kind of Breaking Even’

“If interest rates continue to rise, that reduces the affordability of cars. And for a lot of people, they’re really kind of just barely breaking even every month,” Musk added. “In fact, if you look at the rise in credit card debt, they are, in fact, not breaking even every month. Like, credit card debt is freaking scary.”