The Tesla as a rental

John Boyd February 1, 2020 No Comments

The Tesla as a rental

tesla as a rentalThis week has been a crazy one for Tesla investors, especially if you were stupid enough to short Tesla’s stock and hope to win on Wall Street. We often only hear about the incredible earnings people have on Wall Street with the Bull Market that never seems to end, but rarely do we hear about the losers. The electric car manufacturer Tesla had it’s stock hit a whopping $640 a share and as of today, Friday, January 31st, 2020, when I wrote this post, it closed at $650.57 a share! On Thursday, CNBC along with others reported that investors who were shorting the stock lost $1.5 billion collectively. You can read the article and watch the video by clicking here.

Cash value life insurance may be boring to many people and it will certainly not give the kind of returns that many investors are hoping for, but it’s also extremely safe compared to gambling on whether or not a company like Tesla is going to go up or down in value. Life insurance companies earn money year after year with very smart and astute actuaries and investment people who know how to get a nice return on their investments without risking it all on a bet on how one company is going to perform compared to another company like Wall Street. If you own cash value, whole life insurance, from a mutual life insurance company, these companies can pay dividends on the profits earned by the company to their policy holders. These dividends are not guaranteed, but some companies like one I am licensed with has paid a dividend every year for almost 100 years. These dividends can be used to buy additional insurance and increase the growth of the cash value of the policy owned by the policy holder and the cash value grows tax deferred. This cash value can be borrowed against if you need to purchase a vehicle, invest in real estate, pay back student loans or even fund retirement, really whatever you need it for.

Let’s get back to Tesla though and the two guys who rented one in Denver this week. Tesla has a current Market Cap of $117.26B and it’s forecasting to build and sell about 500,000 vehicles in 2020. Compare that to General Motors that will build around 500,000 vehicles in the next three weeks and it only has a Market Cap of $47.71B. It’s stock ended trading on Friday at $33.39 a share, which is quite a difference between the two car companies. I’m not giving stock advice here to anyone, but losing $1.5 billion of investor money in a day on one stock is pretty nuts. Especially, compared to buying cash value life insurance that is tried and true, boring, safe and predictable with guaranteed rates of returns on the money you put into the insurance product. The company I am licensed with paid out $1 billion in claims to people, which is a benefit compared to losing money on the Wall Street casino. Click here to check Tesla’s Stock today – TSLA

What does all of this have to do with Tesla as a rental car?
Over the years manufacturers like GM, Chevy, Ford, Toyota, Nissan and others have been able to increase their vehicle sales by selling them to the rental fleets. Companies like Hertz, Enterprise, Sixt, Avis, Budget, etc. buy these vehicles to rent them and after they put enough miles on them, they sell these late model vehicles off rental at a big discount. I buy these vehicles all the time for my clients either directly before they go to auction or through the dealer auctions. I purchased my wife’s Porsche Cayenne Platinum with about 20k miles at the time this way. Some manufacturer’s like Honda have stayed away from this as a way to increase their sales because they want to keep the resale of their vehicles higher by creating a lower supply and higher demand for their vehicles.

Honda and Acura have a pretty loyal following for their brands and they are not trying to become the largest automobile manufacturer in the world like Toyota or GM, so they don’t really care about putting their vehicles in the rental fleet. It would be pretty rare that you would be able to go and rent a Honda Pilot while on vacation to carry your family and your luggage, but it’s a pretty good bet that you’ll be able to drive a Chrysler Pacifica or a Hyundai Santa Fe. Tesla has figured out that they can sell more vehicles by putting them into the rental fleet as well, which brings me to the rest of this story.

Earlier today, I attended a life insurance seminar put on by a company that I am licensed with and they brought in a couple of online marketer’s from a company that focuses on Facebook marketing. I gave them my card after the meeting and told them I own and they explained that they had rented a Tesla Model S since they had never driven one. I asked if they liked the vehicles and their experience with it. Since they were tech guys I expected them to tell me how much they were impressed with it and how they loved it. Most people never say anything negative about Tesla.

Tesla like Apple has a “cult” following to the point that I have labeled many of these people, “Musketeers”, as faithful and passionate followers of all things Elon Musk and his Tesla vision. To my surprise they said that they didn’t like it. What?! Really? That was not what I expected to hear at all. They thought the ride was rough, they had to pull over to do an update of the technology, but the real kicker was trying to get the vehicle charged in a timely fashion as a rental. They loved the acceleration of the vehicle and honestly who doesn’t? They missed the gears shifting through the transmission during acceleration and the full body throttle sound of a gas powered motor. However, it was the experience that they had with the electric aspect of the vehicle that I found most interesting.

As they had some considerable distance to drive around Denver, they started to burn through the battery power and it has been pretty cold the past few days. They reached the point of only having just a few miles of charge left before finding a charging station. It was not a super charging station, so they plugged it in and the onboard computer said it would be 15 hours to charge. That wouldn’t work. Since they wouldn’t get enough of a charge they left to find a super charger and finally arrived with zero miles left to charge. They were concerned, sweating bullets from the sound of it, that they would not make it before running out of a charge and be stuck.

They told me that they wouldn’t rent a Tesla again in the future based on their experience of almost running out of battery power and having to wait an hour to be able to drive the car again. Clearly there are are pros and cons to owning and driving an electric vehicle such as driving a Tesla and desperately needing a charging station when the battery runs low. If you own one and can charge it for going back and forth to work that’s a different experience for sure.

All too often you only hear about how great new technology is, but there are drawbacks as well as the two guys who came to Denver and rented a Tesla discovered. Something to think about if you are traveling in an unfamiliar area and decide to rent one of these in the future.

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