(Bloomberg) – Tesla Inc. began offering consumers 84-month auto loans after Elon Musk said the automaker “should do something” about rising interest rates.
The company now includes seven-year loans as an option on its US order pages, after previously offering loans of up to 72 months. Although longer loan terms can reduce monthly payments for car buyers, consumers tend to pay more interest and are at greater risk of owing more than the value of their vehicle.
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The Tesla CEO has frequently criticized the Federal Reserve. Musk tweeted in November that the central bank’s rate hikes “massively amplified the likelihood of a severe recession.” Its predictions of impending deflation have yet to materialize.
“When interest rates rise significantly, we actually have to reduce the price of the car, because interest payments increase the price of the car,” Musk said on Tesla’s July 19 earnings call. “So we have to do something about it.”
While 84-month auto loans are gaining popularity, the trend slowed down earlier this year, according to credit reporting firm Experian. About 34% of new vehicle loans in the first quarter were longer than six years, compared to about 38% a year ago.
Tesla delivered a record 466,140 vehicles in the three months to June, but sold fewer cars than it produced in the past five quarters. Shares plunged after Musk said on the call this week that the company will have to keep lowering prices if interest rates continue to rise.
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