DETROIT (Reuters) - Tesla Motors Inc, the automaker led by billionaire Elon Musk, overhauled financing strategy for the Model S electric sedan in response to criticism that its initial plan last month overstated the potential cost savings.
Changes include allowing buyers 72 months, instead of 63, to repay loans, lowering monthly costs by more than one-fourth. Tesla also guaranteed that the resale value of the Model S would top other luxury cars in its segment.
"We looked at it and decided we were wrong," Chief Executive Musk told reporters during a conference call on Friday. "Other people were right, and we needed to fix it."
The financing deal is intended to make the Model S electric sedan, which starts around $70,000 before a $7,500 tax credit, more affordable.
But Tesla got flack from critics who said the company was too aggressive in saying payments could be as low as $500 a month. The company's online payment calculator valued time saved filling up on gas at $100 an hour.
The automaker also drew criticism for pegging the resale value of the Model S to the Mercedes S class of sedans.
Tesla has since changed the default settings of its online payment calculators to be more conservative. The calculator now reflects only potential gas savings and assumes premium gas will be below $5 a gallon over the next three years.
Tesla will also guarantee that the resale value of the Model S will be higher than comparable luxury vehicles from BMW (BMWG.DE), Audi (VOWG_p.DE), Mercedes (DAIGn.DE), Lexus (7203.T) or Jaguar (TAMO.NS), the company said.
"We're guaranteeing that the resale value in three years will be better than that of any of the major premium sedan brands," Musk told reporters.
Without taking into account gas savings, the monthly cost of owning a Model S will be around $800, down from $1,100, Musk said during the call. Including gas savings, the cost will be between $500 and $600 a month.
If 70 percent of the miles put on the car are for business purposes, the depreciation benefits cuts the "effective monthly cost" of owning a Model S down to $350, Tesla said.
The new financing deal will be extended to those who financed their Model S purchases over the last month. At least one-fifth of buyers over the last month made use of the financing deal, but Musk told reporters that he expects that figure to go as high as 70 percent.
Reporting by Deepa Seetharaman; editing by Gunna Dickson