Extended Service Agreements No Longer Transferable?

[MsElectric]

CPOs come with their own warranty, so they have that advantage over private sales. If private sale values fall because of the lack of transferability of the ESA, it won't affect CPO values.

Except one can always drag down the other...

In the premium car market every upper end premium car (7 series, A8, S Class) has a well deserved reputation for being super expensive to maintain. This is why 3 years later they are barely worth 50% and this with freely available extended warranty options. The Model S has yet to reach this level of low residuals partly because the cost of repairs is not as known.

My point with the Extended Warranty situation is Tesla could have figured out a reasonable price point to freely make extended warranties available so they can pool revenue from the warranties to handle extended warranty repairs so you don't have a situation with some people ending up with repairs that cost into the thousands and all the publicity that will come with that. With competent actuaries they can actually make a profit on the warranty or break even if that's what they want but most of all offer peace of mind to customers driving a Tesla out of warranty.

On the other hand with lack of available extended warranty options when people start having issues with door handles that cost $1,300 to fix out of warranty and word of this gets out, it will indeed affect resale values.

 

[omarsultan]

I signed my ESA in 2013 and the wording follows the earlier post, I have a saved PDF of the agreement that I signed.

• “Deductible” means the portion that You must pay for a covered repair, as indicated above. TheDeductible under this Vehicle ESA is $200.

and

2. A. One-Time Deductible Guarantee
   Once a part is repaired or replaced under the terms and conditions of this Vehicle ESA, and theDeductible is paid, any Deductible for a future repair or replacement of that part will be waived for theterm of this Vehicle ESA.

 

[ddimit]

I sold my 2011 BMW to buy the S I had an extended warranty on the BMW that was the selling point for the buyer. Without that I would have had a hard time selling that car. Luxury cars at this level generally have extended warranties due to the cost of repairs. Anyone buying second hand sees this as a great insurance policy that they did not have to pay for.


If you were thinkng about buying one with the hopes of selling the car off down the road and offering that as an inducement for the buyer, you just lost tangible value in the the car

 

[Haggy]

The more I think about this though, with all the folks jumping in, are some of the people vocalizing their displeasure here also ones that never had any intent to buy either policy? I personally budgeted before ordering, and did buy both agreements to hedge my bets on my $100K investment, and am even more glad now I did... But for others that maybe never did or would have purchased the extended agreements, what's your personal beef beyond a philosophical one? I ask because I suspect owners with extended agreements are in the minority, but I could be wrong. Maybe that would make a good poll.

Not necessarily. I didn't buy it, but am nowhere near the point where my warranty will expire and I expected to have plenty of time. I hadn't expected price jumps and drastic changes in terms and conditions. Realistically, if I do get this, it's not likely I will sell the car while it's active. But I'd be curious what insurance companies do when there's a balance on an extended service agreement if anything happens to the car. It's a moot point if I can cancel it and get money for the remainder, but that's not clear.

 

[clyjr]

I'll chime in as someone who has been looking to purchase a used tesla. I typically keep cars 2 years or less, max of 3 years, min of 1 year (I like to change a lot...). Any car over $20k I don't keep it out of bumper to bumper warranty.

Previous to this change I was considering any Tesla that was still in 4yr / 50k mile warranty, absolutely none out of warranty. For dealer sales I would only consider cars that have at least 2yrs/25kmiles left on the original warranty, but for private party I would be open to any that are still under warranty and the seller was willing to purchase the ESA before selling.
Now after this change, I won't consider any car with less than 2yrs/25kmiles left at all.

So in my eyes Tesla just killed the resale on cars that are over 2yrs old or have over 25k miles.

CPO looks like the best option for me now...

 

[BertL]

...But I'd be curious what insurance companies do when there's a balance on an extended service agreement if anything happens to the car. It's a moot point if I can cancel it and get money for the remainder, but that's not clear.

See other threads where at least one owner who had totaled their MS and provided evidence of that -- received a credit back to their credit card... It took some work because it wasn't standard practice, and it's not written in the (old) agreement Tesla has to do that, but it was done within the last couple weeks IIRC for at least one former owner. That felt like the right thing to do IMHO. OTOH, since Tesla calls out now that the contract can't be transferred, or e.g. In the old agreement it could only be transferred to a private party (i.e. not follow a trade-in or say to CarMax), my personal view is I would not expect them to ever refund the balance if I sold the vehicle without following their qualifications -- those are the terms I agreed to when I paid my money.

As to what companies do with advance purchases of service or warranty policies... Accounting-wise, with companies I have worked before and P&L I've run, the revenue sits on the books as an accounting credit... Not recognized revenue that shareholders would see until the year in which service is to be delivered, e.g. In very simplified terms, if a customer pays $4K for 4-year agreement after their warranty expires, the first $1K of that will first show up as revenue in the 5th and subsequent years, just as any costs against that the company spent against it will... So, while Sales numbers may report the total including those pre-paid agreements (that's how commissioned sales reps would be paid -- but Tesla doesn't have any), revenue recognition will not. Now, as to what happens if a customer never uses those services, well, it ends up being 100% profit for the company in the years the revenue is recognized and there are no associated costs to go along with it. The exception is IF a company puts a policy in place to credit or refund the unused years of prepaid service where those accounting-only-dollars are backed out before being recognized -- it varies widely if companies will or won't do that, or perhaps have a penalty to get back only a portion of what the customer originally paid, and is why smart consumers read agreements before signing to understand the terms they are agreeing to...

 

[Xenoilphobe]

I don't think I will consider another Tesla with this change. This is crap - i have never traded in a car to the dealer - ever!

I would never buy this car outside of the warranty period. Here comes MASSIVE depreciation - with this change you should be able to get a high mileage Model S for the same price as a Model 3 - really not too smart - you are eroding your price points and polluting your next product launch. Who would buy a 3 when they could get an S? I could be considered a fanboy but this is BS. I hope these guys have a good product - http://www.faradayfuture.com.

 

[MsElectric]

I don't think I will consider another Tesla with this change. This is crap - i have never traded in a car to the dealer - ever!

I would never buy this car outside of the warranty period. Here comes MASSIVE depreciation - with this change you should be able to get a high mileage Model S for the same price as a Model 3 - really not too smart - you are eroding your price points and polluting your next product launch. Who would buy a 3 when they could get an S? I could be considered a fanboy but this is BS. I hope these guys have a good product - http://www.faradayfuture.com

This is what I've been saying about how this policy will cause needless depreciation for private party sales.

Don't have any high hopes on Faraday Future. Based on the shell of a toy car they unveiled, I can't take them seriously. Faraday seems to me like a company with a bunch of unsupervised school children running around doing whatever. That introduction I watched online was a joke.

Tesla will not have any real competition until the Germans get into the game. Until then I suppose they can do whatever as what else will you buy after experiencing a Tesla. They won't be able to push unreasonable policies on customers forever though.

 

[Xenoilphobe]

I agree with your comment on Faraday - I'm also not such a big fan of who provides them their capital (Chinese). Love your comment about unsupervised school children - their CEO reminds me of headmaster I had at a private British boarding school when I was a kid in Africa, - or was it a Pink Floyd video.. I can't remember that was so long ago.

I think Apple will be the driving force in the space in a couple years. Imagine docking your iPad / iPhone and having the same functionality as a Tesla with product that gets a hardware refresh every couple of years. This is a shame - Tesla is such a good company with a great product now trying to bully folks into trading in and crippling their ability to be independent - sounds like a car dealer doesn't it.

I abandoned German cars years ago due to quality problems - and with the recent unethical behavior - what else are they cheating on? Lug nuts made in North Korea? Air Bags that don't meet specs? What is a German car anyway - a BMW made in South Africa? Hell i would go back to my Hyundai Genesis before you would catch me in a VW/Audi Anything - well except for the R8.

The key for Tesla is the Supercharger network - and the sled they sell - so sell it to Ford, so I can get an F150 with a Tesla powertrain!!!!

 

[stopcrazypp]

Who would buy a 3 when they could get an S?

I would buy the 3 even if the S was the same price. The S is too big for my uses. I'm sure plenty of Model 3 waiters are in the same boat.

 

[sorka]

I think Bert makes an excellent point. How many ppl who are upset about this already bought the ESA? If you have it already you have little reason to be upset because your terms are not changing. How many ppl who are upset didn't buy the ESA & didn't plan to? Then stop whining because it doesn't affect you. And those who didn't buy it, but planned to, well "you snooze you lose".


This should not be such a big deal.

Except for those that bought it in December after it changed but hadn't realized it had. How many people bought thinking it was transferrable because it has been transferrable and didn't read the fine print?

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Thanks, for clarity. I doubted Tesla would nullify existing ESA terms. Myself, I didn't have enough miles to justify the ESA, not that I wouldn't have eventually purchased it. When you are still under the factory warranty, paying up for extensions is money-lost if the car gets wrecked, or, now, sold. I guess i can take solace in not having spent those funds, even if Tesla just guaranteed me a lower price, at resale.

Generally, I'm a firm believer Tesla needs to do this type of thing, to boost new car sales. We aren't too far away from Model 3 / Used Model S shopper comparisons, at same price. Actions like this tell me Tesla's preference. They also provoke the development of systems that will take the cars almost completely out of their hands. I have faith in that, too.

How many didn't buy the warranty when it was $2500 but would now jump at the chance after it was raised to $4000?

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I sold my 2011 BMW to buy the S I had an extended warranty on the BMW that was the selling point for the buyer. Without that I would have had a hard time selling that car. Luxury cars at this level generally have extended warranties due to the cost of repairs. Anyone buying second hand sees this as a great insurance policy that they did not have to pay for.

....or that they can't pay for even if they wanted as the extended warranties are often only available to the original purchaser.

 

[Xenoilphobe]

I have ESA on my P85, and tried to buy it for my used P85+ and was told I couldn't last March. I don't get it - it's revenue they throw on the books - didn't they miss revenue #'s in the call today?http://edge.media-server.com/m/p/nswqxjz3

 

[MsElectric]

Except for those that bought it in December after it changed but hadn't realized it had. How many people bought thinking it was transferrable because it has been transferrable and didn't read the fine print?

Good point. It was our plan all along to purchase about a 1 year old P85D private party with the ESA so that we would have about 7 years of warranty coverage. If we had bought such a vehicle only to find the ESA would not transfer, we would have been screwed and it would have been a huge mess. It just sucks that now we will not even consider a private party purchase due to the lack of warranty issue.

I feel really bad for buyers and sellers, many of whom do not keep up with the forum, who are going to find out about this horrible Extended Warranty (ESA) policy change only when it is too late.

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I have ESE on my P85, and tried to buy it for my used P85+ and was told I couldn't last March. I don't get it - it's revenue they throw on the books - didn't they miss revenue #'s in the call today?

It makes no sense as presumably an actuary has crunched the numbers and they are not loosing money on the extended warranty. This should especially be the case with the ESA warranty because it was originally meant to be $2,500 and cover the battery and the drivetrain. Now it is $4,000 and the battery and drivetrain coverage is automatic and included for all.

I feel anyone should be able to pay and add the ESA to cover the car up to 8 years from the original in service date.

Perhaps the reason they refused to sell an ESA for your used P85+ is because they want to discourage people from buying private party and only want people to consider buying CPO directly from Tesla? And then again they refuse to sell an ESA also for CPO cars.

Weird that they refuse to sell a product customers would like to pay for.

 

[Xenoilphobe]

Reminds me of the old coal miner company stores. We'll sell to you but you have to sell back to our store - I could see if if they were upgrading the cars to resell with upgraded LTE, Batteries, etc, but they aren't.

 

[BertL]

I don't feel as sorry for people that don't read what they are agreeing to before they sign on the dotted line. It's all business, and if I can't live with it, I don't do it and go somewhere else -- for a car, a home loan, or whatever. I've been the guy on both sides of equations like these -- writing T&C, owning P&L, and sales & delivery for service agreements, negotiating custom contracts with customers -- and also being the customer that has to live with what suppliers deliver to me, as I am here with Tesla.

I spent weeks reading and researching my MS, and in fact caused my sales specialist to provide me with T&C to read for warranty, ext warranty, and service agreement before placing my order... And then I had a couple of clarifications put in writing by my DS (who was a Tesla representative if it ever came to that) before my order was confirmed so I was more comfortable with how Tesla operated within some of the wiggle room I was reading into the T&C this past September. I don't personally believe customers should have to go through so much detail, but there are different sorts of exclusions and provisions in Lexus, MBZ and BMW agreements too -- it just comes down to what is acceptable to each individual buyer, and unless the buyer reads it, well, once they sign, they blindly accept whatever the document says.

 

[Xenoilphobe]

BertL, we are of the same cloth - I researched this car for over a year - read every blog, watched every video I could find online - ordered in jan 2013, called cancelled my originial order to reorder for a Dec delivery (I heard they were adding more options - which I ended up getting (parking sensors, red calibers etc). My issue is their competition is happy to take your money for an extended warranty. I read every document and was satisfied with my initial purchase in Dec 2013. What is strange is that the used market will suffer in this space and this could seriously backfire and erode the used car market. In my mind, I have significant investments in this company, and I think they may be making a strategic mistake. Consumers are not usually the folks who read every detail and look at every element before purchasing - this will have a significant impact to the future of Tesla. Lets see how the market reacts - personally this is an appalling behavior by a company that I am very fond of.

 

[S4WRXTTCS]

I don't feel as sorry for people that don't read what they are agreeing to before they sign on the dotted line. It's all business, and if I can't live with it, I don't do it and go somewhere else -- for a car, a home loan, or whatever. I've been the guy on both sides of equations like these -- writing T&C, owning P&L, and sales & delivery for service agreements, negotiating custom contracts with customers -- and also being the customer that has to live with what suppliers deliver to me, as I am here with Tesla.

I spent weeks reading and researching my MS, and in fact caused my sales specialist to provide me with T&C to read for warranty, ext warranty, and service agreement before placing my order... And then I had a couple of clarifications put in writing by my DS (who was a Tesla representative if it ever came to that) before my order was confirmed so I was more comfortable with how Tesla operated within some of the wiggle room I was reading into the T&C this past September. I don't personally believe customers should have to go through so much detail, but there are different sorts of exclusions and provisions in Lexus, MBZ and BMW agreements too -- it just comes down to what is acceptable to each individual buyer, and unless the buyer reads it, well, once they sign, they blindly accept whatever the document says.

You know who I don't feel sorry for? Those people who don't check to make sure their chair is in place as they're sitting down. It's funny watching them fall down when I pull the chair back when they're not looking.

When I purchased I spent a good part of year researching, agonizing, etc. It was the most involved buying experience I've ever done mostly because it was so different. But, it was also because Tesla kept changing things. Every few months they'd change the packages/pricing/etc. Heck when I did buy I ended up paying a change fee because they made another sudden change, and it made financial sense to change my order to what they changed it to (60 to 70D).

As to the extended service plan (extended warranty) I didn't even have the opportunity to buy it because it wasn't offered in WA state. But, even if it was I wouldn't have gotten it. Why? Cause I had no idea how long I was going to keep the car, and why would I spend money before I needed to? People on this forum debated about it when others inquired and talked about locking in the price/etc. I don't know if anyone had the foresight to expect this latest change though. I didn't do a lot of research into it since I couldn't buy it anyways.

 

[Drivin]

It makes no sense as presumably an actuary has crunched the numbers and they are not loosing money on the extended warranty.

It makes a lot of sense.
I am sure someone crunched the numbers when they first priced out the plan.
But that was based on the data they had at the time and a lot of assumptions.

After getting actual data and a lot of experience, they crunched the numbers again and came up with a different conclusion.

Perhaps the reason they refused to sell an ESA for your used P85+ is because they want to discourage people from buying private party and only want people to consider buying CPO directly from Tesla?

I seriously doubt and hope that that is not their thinking. That is not good for people who want to sell their cars.

Weird that they refuse to sell a product customers would like to pay for.

Not weird at all if the number crunchers determined this is not a good plan.

I find this really odd and un-Tesla-like.
They sold a ESA that is associated with a specific car and terms around on-going maintenance, etc. Why would it possibly matter that the car is now owned by someone else?

Well, good to see that they aren't running service as a profit center. I wonder what they would do if they did. LOL.

 

[luvnMyTS]

Did nobody continue reading this agreement? Paragraph I states: Transfer of agreement. $100 to transfer to new owner.



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Where do you see this information? The agreement on the "my tesla" page hasn't been updated since November 2015. If you aren't an owner you can't see that agreement so I'm wondering were you see this change.
View attachment 110897
I found what you are referring to
View attachment 110899
But if you already purchased a prepaid service plan you can transfer that with your original agreement
View attachment 110900

Did nobody continue reading this agreement? Paragraph I states: Transfer of agreement. $100 to transfer to new owner.

 

[tbone586]

Yes, that was the wording in the OLD ESA, which WAS transferable. If that is the version you purchased, then you are fortunate.

Anyone purchasing an ESA now receives a differently worded agreement, which does NOT allow the ESA to be transfered.