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Tesla's Leasing Partner in Trouble

2018-12-20 10:59 Thursday

Tesla's leasing partner, MUSA Auto Finance, has found itself in hot water. The company is having trouble keeping up with Tesla's business volume. Founded in 2016, MUSA established a strategic partnership with Tesla in June  2018 to manage leases for the Model S sedan and Model X crossover models. However, in a span of just a few months the company has become overwhelmed: MUSA has reportedly been unable to finance new leases since October. As of December, MUSA dealer clients said lease approvals have yet to resume, leaving some dealer partners and customers have no cars to lease.

Tesla auto leasing

MUSA sent an email to its dealer customers in October, stating that it couldn't finance leases any longer, after the new Tesla partnership had increased its leasing volume by a factor of six from August to September. Derek Walker, MUSA's Vice President of Sales and Marketing said:" It forced us to look closely at how we fulfill our obligations to our core dealers and OEM partner. We can no longer approve new applications until we retool some of our business processes. We're hoping this is a very short process, maybe a week … Please stay with us. Please believe in us. These are just growing pains for a start-up auto finance company with big dreams that grew faster than anyone expected."

Further complicating the situation is a lawsuit from former MUSA president Richard Frunzi. In September, he sued the company for unpaid severance,  asking for 18 months of salary and benefits, valued between $200,000 and $1 million. He also cited "improper" behavior from CEO Jeff Morgan that "could negatively harm MUSA and its investors." However, Frunzi's former employer maintained that his employment was properly terminated, and that he was ineligible for any further severance or compensation.

Prior to the Tesla deal, MUSA announced it had secured $175 million of funding to support leases. Michael Buckingham, Senior Director of J.D. Power's automotive finance division, noted that with the higher costs of autos, MUSA burned through its funding too quickly, and simply ran out of capital.

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