Tesla Finance Plan Spurs Probe Request by Dealer Group

Tesla Motors Inc. (TSLA)’s promotion of a lease-style finance program for Model S electric sedans spurred the California New Car Dealers Association to seek a state investigation of what it says are deceptive advertising claims.

Tesla told customers they “can take advantage of multiple incentives, gas savings, and tax savings resulting in low monthly vehicle payments, when it is unlikely that customers will actually realize such savings,” the dealer group said in an e-mail. The association made its request for an investigation of “unsubstantiated and illegal savings claims” with the California Department of Motor Vehicles.

The electric-car maker led by billionaire entrepreneur Elon Musk debuted the finance program in April and revised it in May after the company was criticized for its explanation of monthly payments. When first introduced, Tesla said customers could finance one of its cars for the equivalent of $500 per month, based on factors including fuel and time savings.

While the company’s website shows a monthly cash payment of $916 for a $71,070 version of Model S, financed for 72 months, it also displays an “effective” monthly payment of just $579 that includes fuel and time savings and the impact of a guaranteed resale price after three years.

Shanna Hendriks, a Tesla spokeswoman, declined to comment on the matter.

Tesla, based in Palo Alto, California, sells its electric cars directly through its own stores while vehicles produced by major automakers are sold through franchised dealers. That’s spurred opposition from dealers across the country.

Dealers have filed lawsuits in New York and Massachusetts to block direct sales, and the company also has been barred from selling directly to customers within Texas and North Carolina.

Tesla gained 0.6 percent to $166.58 at the close in New York. The shares have surged almost fivefold this year, compared with a 20 percent increase for the Russell 1000 Index.

To contact the reporter on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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