Tesla Calling For Outside Help To Deal With Increased Used Car Influx

As Tesla is trying to solve delivery issues with the Model 3, it has a new problem on its hands: a burgeoning fleet of used cars.

CNBC reports that the electric automaker is dealing with more used vehicles than ever before, largely because it offered two-year leases for the Model S and Model X in the third quarter of 2016 and three-year leases prior to that.

To deal with the influx of used vehicles, Tesla has called on outside firms such as Manheim and Adesa. These businesses are helping the automaker move and manage its used cars, inspecting them, reconditioning them, and then selling them to wholesale customers.

According to a Tesla employee involved with the used car operation, roughly half of the company’s vehicles that go to Manheim, Adesa and others come back retail-ready and can be sold to customers as certified pre-owned vehicles. Alternatively, they can be used as loaners and employee cars, while some are sold by partners through physical and online wholesale auctions.

Used vehicles returning to Tesla aren’t just those coming off multi-year leases. Some are also trade-ins, lemons, and cars repossessed after non-payment. While the increasing number of used vehicles gives Tesla yet another thing to deal with, it does open up an additional revenue stream.

Despite the influx of used vehicles, very few of them are for the new Model 3. Considering the hundreds of thousands of Model 3s heading to customers in the coming years, it seems likely that the company’s used-car inventory will continue to swell. Tesla says that it is targeting a “30-day or less turn-rate in the sale of pre-owned inventory.”