By the contractual price of the option in stand alone

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by the contractual price of the option in stand-alone transactions, where available, or using the selling price hierarchy where such prices do not exist. Additionally, if a customer purchases a vehicle option that requires us to provide services in the future, we will defer the related revenue based on the undelivered items’ fair value and recognize the associated revenue over our expected performance period. As of September 30, 2013, we had deferred $17.5 million related to the purchase of vehicle service plans and $7.2 million related to access to our Supercharger network. Resale Value Guarantee In April 2013, we began offering a resale value guarantee to all customers who purchased a Model S in the United States and financed their vehicle through one of our specified commercial banking partners. Under the program, Model S customers have the option of selling their vehicle back to us during the period of 36 to 39 months after delivery for a pre-determined resale value. Although we receive the full amount of cash for the vehicle sales price at delivery, we account for transactions under the resale value guarantee program as operating leases. Accordingly, we defer and amortize to automotive sales revenue the initial purchase consideration less resale value guarantee amount on a straight-line basis, over the contractual term of the guarantee program. Similarly, we capitalize and depreciate the cost of the respective operating lease vehicles less resale value guarantee amount to cost of automotive sales over the same period. If a customer decides not to sell their vehicle back to us by the end of the resale value guarantee term, any unamortized deferred revenue and operating lease vehicle net book value is then recognized in automotive sales and cost of automotive sales, respectively. The resale value guarantee amount represents management’s best estimate as to the resale value of the Model S vehicle and related vehicle options during the 36 to 39 month period after delivery. Since we are depreciating our operating lease vehicles to the resale value guarantee amount, we will adjust our depreciation estimates as needed, if the resale value is projected to be lower in future periods. As we accumulate more actual data related to the resale experience of Model S, we may be required to make significant changes to our estimates. As of September 30, 2013, we recorded $160.8 million in deferred revenues and $159.0 million in resale value guarantee related to Model S deliveries with the resale value guarantee and recorded $262.8 million in operating lease vehicles, net. During the three and nine months ended September 30, 2013, we recognized revenue of $9.4 million and $11.3 million in automotive sales, and $5.9 million and $7.3 million in cost of automotive sales related to this program.

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