Extended Warranty Price Increase

[BrandonF]

You do realise not-for-profit does not mean make-a-loss right?

The move clearly shows that owners are squeezing Tesla service out of every penny. It's a chicken and egg issue. I saw this coming from the first posts after EM made the not-for-profit announcement. You can see the trend in this forum itself.

Someone might have mentioned this already, but how can Tesla know the profitability of the Extended (Years 5-8) warranty when the oldest car on the road is 1 yr old? Now, maybe they are losing so much money on the repair/labor coverage of the original warranty and they are using the ESA increase as a profit center to cover those additional costs. That extra $1,500 is probably going to push a good amount of buyers to forego the ESA option, which will require Tesla to look for other areas to raise pricing to offset warranty cost.

If standard warranty coverage is being abused and cost increases as a result are causing this move then it seems to me that enforcing standard warranty rules is the way to go. I get the fact they want superior service but saying yes and covering the cost of everything people ask for isnt the only way to obtain superior service. Have the standard warranty spelled out and communicated clearly and up front with all owners and enforce it fairly when warranty service is requested.

 

[BigBadNIN]

Yep that's what I meant. They definitely extrapolated the costs of all the warranty claims that have been coming in. You can just imagine the horrified looks on the guys in Tesla's Finance Department who are going over the P&L of Tesla Service...

They are also shooting themselves in the foot by the way they are running the service dept.

Last week they called to let me know that my 2 week old car was part of the seat latch recall. They said there would be someone in my area that same day that could come by and fix it. I live outside of Cincinnati, almost 2 hours from the Columbus service center. The ranger that came to my house was trailering another car he picked up in Louisville, another 2 hours south of Cincinnati. When I asked what was wrong with the car he said it had a bad belt in one of the tires. I was SHOCKED! They drove a Ford F-150 with a car hauler 4 hours away to pick up a car and haul it 4 hours back to Columbus to replace a tire? WTF? Then obviously they will have to repeat the process to return the car to the owner a couple days later. Talk about a money loser, DAMN! I can't imagine what the additional cost of that must have been between gas and man hours.

I think in the future they will have to get a network of places where they can replace a tire or do an alignment locally. Supposedly that's the only 2 things the ranger can't do on site. They just can't continue to operate the way they are currently.

 

[Crispix]

Wow, glad I saw this thread. I just finalized my order today, won't have my car for at least another month. I asked the rep about the extended warranty a few days ago, and he said, "don't buy it now, just wait 4 years", which made sense and obviously he didn't know about the price increase.

So now what do I do? I see the option in My Tesla to pay $2500. The PDF link already lists it at $4000. Sight unseen, should I extend the warranty before the car is even built? What would you do? Guess I have until July 3 to decide.

 

[dsm363]

Wow, glad I saw this thread. I just finalized my order today, won't have my car for at least another month. I asked the rep about the extended warranty a few days ago, and he said, "don't buy it now, just wait 4 years", which made sense and obviously he didn't know about the price increase.

So now what do I do? I see the option in My Tesla to pay $2500. The PDF link already lists it at $4000. Sight unseen, should I extend the warranty before the car is even built? What would you do? Guess I have until July 3 to decide.

If you were planning on getting the extended warranty anyway I'd talk with the people at Tesla you have been dealing with regarding the sale. When you get the car, anything wrong with it would be addressed by service so seeing the car first before buying the extended warranty might not be necessary. Since you know waiting until the end of year 4 to see how reliable the car is won't be an option might as well get it and avoid the price hike.

 

[irishstoutaz]

The price definitely dropped back down to $2,500 for the extended warranty in the sign up for services link... Just purchased ours before it goes back up!!!

 

[Baiao]

You will need to add sales tax and $200 deductible for each covered repair.

 

[JerryNycom]

Just checked My Tesla as well......Guess waiting for 4 Years IS NOT an option anymore!

 

[PeterK]

Just checked My Tesla as well......Guess waiting for 4 Years IS NOT an option anymore!

View attachment 24607

What do you mean? I read that as you can buy the extended warranty up to 3 years 11 months after you get the car. I don't know what would go wrong then that wouldn't already be a problem so am inclined to wait and see, even with the price increase.

 

[ckessel]

I'd intended to wait as I'm cash strapped at this point. I figured the price would go up, but only marginally. Given the big jump, I went ahead and got it. I'd already gotten the 8 years service, so at this point I figure I'm golden for 8 years outside of the $200 deductible on the extended warranty.

Given Elon's comments about "negative margin" I'm guessing they use a 3rd party behind the scenes to handle it and the 3rd party is charging them a lot more than Tesla expected. It's entirely possible Tesla was negotiating this and had been charging $2500 based on expected fees and now it's turned out the 3rd party is charging a lot more so Telsa had to pass it on.

All guess work, but given the warranty won't kick in for another 3 years on even the earliest cars I can't see any other way it could be negative margin at this point.

 

[brianman]

As an example: I paid for the car, and i deserve glass vanity mirrors. Brought car in to get service to change the plastic mirrors to glass ones. Oh the horror (to the accountant... especially looking at the amount expended for labour costs for what is a less than $5 part cost)

Since you offered the example.

This isn't an example of the customer being unreasonable. This is an example of a customer demanding that Tesla make good on something that was promised at delivery. Pick another example if you want to support your point, please.

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What really gets me is that I've wanted to buy it from day one, would scoop it up today if I could but for some reason they are still holding out on us up here in WA state! they need to make the price retroactive for the states that are locked out for now because of simple admin issues with applications and such!

Mail ownership about it. I already did.

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For example, the alcantara headliner issue - Tesla unilaterally changed the material of the headliner. There was nothing in the language that said alcantara HEADLINER was specifically promised. (Alcantara yes, but no specifics on which PARTS of the interior would be covered in it) They ended up having to change each and every request at no charge even though they theoretically did not have to.

Same goes for the guys going in to service demanding (for lack of a better word) that they get glass mirrors and that Tesla covers the cost under their warranty just because...

Again, please pick better examples. These examples are about honoring what people feel were promised (sometimes explicitly, sometimes not so explicitly) at vehicle delivery (and before). This isn't warranty work, this is vehicle completion / due bill work.

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Grace period is now official
Model S Extended Service Agreement Price Change | Forums | Tesla Motors

Official yet still incompatible with Washington and Florida.

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Just checked My Tesla as well......Guess waiting for 4 Years IS NOT an option anymore!

What do you mean? I read that as you can buy the extended warranty up to 3 years 11 months after you get the car. I don't know what would go wrong then that wouldn't already be a problem so am inclined to wait and see, even with the price increase.

I believe he's saying it costs you an additional $1500 to wait past July 3rd of this year, which is long before the 3 years and 11 months mark.

Also, if you take delivery of your vehicle after July 3rd you're stuck with the new price regardless of when you reserved.

 

[Volker.Berlin]

I actually read the agreement, and here is where reading it helps... You can transfer it to a new owner for a $200 fee, so even if you don't intend to keep the Model S more than 4-5 years, for $200 plus the $2,500 now, the new owner is getting an extended warranty for years 4 through 8. I would think that a Model S with the extended warranty coverage is more valuable than one without it (higher resale value, in other words)

I appreciate your comment but I fail to see how it relates to mine.

 

[Crispix]

Also, if you take delivery of your vehicle after July 3rd you're stuck with the new price regardless of when you reserved.

Not quite accurate. I finalized my order yesterday, car isn't built yet, but I do see the $2500 extended warranty option available for purchase now in My Tesla, along with the service plans. Not sure what to do.

 

[Volker.Berlin]

That stuff is being covered under the included warranty (if it is being covered). I wonder if they are extrapolating these costs to the second four years, or if they are trying to make up losses now by selling plans that cover defects later.

No, because the extended warranty (which Tesla calls an "Extended Service Agreement") doesn't cover the battery. Which makes sense, because the battery already has an 8-year warranty.

Some have speculated the costs are going up because of all the minor cosmetic fixes that people are bringing their cars in for. Current costs no doubt are, but none of that stuff is covered in the extended warranty either - there are exclusions for appearance care, corrosion, paint defects, squeaks, rattles, leaks, wind noise, brakes, suspension, wheel balancing, hoses, A/C lines, connections, fluid changes, filters, wiper blades, bright metal, sheet metal, bumpers, moldings, carpet, upholstery, paint, shocks, 12V battery and cables, bulbs, beams, glass, interior trim, seals, gaskets, plastic, framing, and vehicle transport.

And there is a $200 deductible, so that's essentially an exclusion for anything minor.

Precisely. So what exactly is so failure prone in year 5 through 8 (expected, on average) that it warrants a substantial price increase like this? Not complaining, just curious. I think I should understand this before making a decision for or against this option.

 

[irishstoutaz]

If you were even remotely thinking about getting it, I would go ahead given the $1,500 increase on 7/3. You will still have time to decide on the Service Plan and don't have to do that at the same time. We decided to just do both last night and still have 10 days to pay $1,000 more to get the Anywhere Ranger Service added.

Not quite accurate. I finalized my order yesterday, car isn't built yet, but I do see the $2500 extended warranty option available for purchase now in My Tesla, along with the service plans. Not sure what to do.

 

[Volker.Berlin]

Just read ALL the posts about owners claiming warranty for everything... It's horrifying (from a business standpoint) to imagine how much they are bleeding just from the "reported" posts on TMC... And I'm talking about all those cosmetic, mundane stuff when there's nothing structurally wrong with the car!

Those are not warranty issues. Those are due bill items and/or teething problems inherent with the first few thousand deliveries of any complex new product. They are still debugging their production line (and supply chain), which is understandable but obviously incurs additional cost until it is all ironed out. This is unrelated to issues that the mature product may need to have covered under warranty in years 5 through 8.

 

[Volker.Berlin]

Given Elon's comments about "negative margin" I'm guessing they use a 3rd party behind the scenes to handle it and the 3rd party is charging them a lot more than Tesla expected. It's entirely possible Tesla was negotiating this and had been charging $2500 based on expected fees and now it's turned out the 3rd party is charging a lot more so Telsa had to pass it on.

Makes a lot of sense to me, and certainly more than any of the other attempts at explaining this sudden and steep increase.

 

[twinklejet]

Since you offered the example.

This isn't an example of the customer being unreasonable. This is an example of a customer demanding that Tesla make good on something that was promised at delivery. Pick another example if you want to support your point, please.

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Again, please pick better examples. These examples are about honoring what people feel were promised (sometimes explicitly, sometimes not so explicitly) at vehicle delivery (and before). This isn't warranty work, this is vehicle completion / due bill work.

1) The posts were not like "I was promised glass mirrors but got plastic ones." They were more like "How can a $100k car come with plastic mirrors?! This is unacceptable and Tesla should provide glass mirrors and not charge me anything". Warranty had to cover it.

2) Those I picked were perfectly valid based on the original post about the language vs what they were doing. In the alcantara example, the language did not specify headliners. Tesla went ahead and gave the owners what they wanted despite the fact that they could have done the opposite. Did not speak about warranty.

Anyhow, since you want examples, there was another guy who had his window shattered. Tesla replaced the window under warranty regardless if it was a break-in or a manufacturing defect. In the end - it was a break-in. In dollars and cents, that should have been paid for by the customer since there was no defect.

 

[Stoneymonster]

Twinklejet,

I won't argue the merits of these specific examples, though there are many more that I can recall that do read more like due bill or QA fixes, not just customer whining. The truth is, this is a new company with a brand new unfamiliar to the market car. They absoluletly must extend as much goodwill to early customers as possible to survive. Yes, this means high service costs initially to satisfy those customers, make right on factory and marketing screw ups that are an inevitable part of the learning process, etc. They should know this, and they should hopefully have planned for it. If they don't do these things, negative word of mouth will kill them slowly.

 

[gmtom1]

Again, I'm still not seeing the value in purchasing this, either now or after the price increase. Even on a regular ICE car, extended warranties are usually not worth the price you pay, as most of what "breaks" in a normal car are items that are from wear and tear, and excluded from coverage of a "warranty" plan. Extended service plans may be worth it, depending on the upfront cost vs. eventual out of pocket cost of the items that are covered, which usually include timing belts/chains, hoses, fans, coolant tanks, etc.

With the MS, Tesla has repeatedly marketed how low maintenance these cars are - no belts, chains, hoses, oil/coolant, etc. to repair, replace or wear out. I think the only things to worry about are the HVAC system, suspension/tires, and electronics and that's what I think is what would potentially be worth buying insurance for.

Keep in mind the agreement specifically states that coverage excludes normal wear and tear:

“Failure” means the complete failure or inability of any covered part to perform the function(s) for which it was designed due to defects in material or workmanship of any parts manufactured or supplied by Tesla that occur under normal use. Failure does not include the gradual reduction in operating performance due to normal wear and tear.

Other items excluded from coverage for you to consider from reading the agreement: (all direct quotes from the agreement):
"The cost of transporting Your Vehicle is not included in this Vehicle ESA and You are solely responsible for the cost of transporting Your Vehicle to the Tesla Authorized Service Center."

Adjustments necessary to correct squeaks, rattles, water leaks or wind noise;
• Maintenance/Parts, including but not limited to the following:
o Parts and normal or expendable maintenance items and procedures such as annual service and diagnostics checks, brake pads/linings, brake rotor, suspension alignment, wheel balancing, hoses, air conditioning lines, hoses or connections, Battery testing, fluid changes, appearance care (such as cleaning and polishing), filters and wiper blades/inserts; and
o Other maintenance services and parts described in Tesla’s maintenance schedule for the covered Vehicle;

The increase in electronics and the dependence of the car to operate properly using those electronics vs. an ICE is a valid concern. Getting the warranty may be worthwhile to protect against failure of the screen, processor, etc., as these could be potentially expensive fixes, if you plan to keep your MS long term.

For me, the only reason I would buy the extended agreement is if I was planning to sell my MS in year 3-4 (which I am), and even then, I would only buy it then if I thought it would increase my selling price by more than the cost.

These services that they are selling during the ordering process - it's just a different version of what we would normally get at a normal ICE dealership when the F&I (finance & insurance) guy comes out from the back office after you finish with the salesman and tries to upsell you on all the add ons. Most car buying advice articles will tell you - just say no to these things. Same thing here, just delivered in a different way that apparently is much more effective, judging by all the people saying they bought it.

 

[smorgasbord]

With the MS, Tesla has repeatedly marketed how low maintenance these cars are - no belts, chains, hoses, oil/coolant, etc. to repair, replace or wear out.

Which is why it's disconcerting to have it priced more than the equivalent BMW ESA per mile covered. BMW's service plan is also cheaper.

Anyone got an explanation?

Only things of concern really are the HVAC system, suspension/tires, and electronics to be concerned about that you would potentially want to buy insurance against.

The 4 things that would worry me the most are:

1) PEM. This is the Power Electronics Module. There have been more than a few failures of the Roadster's PEM, and it's reportedly quite expensive (over $10K). The Model S's is water cooled and of a newer design, and I haven't heard of any failures, so maybe it's not something to worry about. But, if it does fail I'll bet it's expensive to replace.

2) Air Suspension. People here have stated that air suspensions on other cars are prone to breakage. Tesla's air suspension is reportedly made by Continental. It's also not covered in the ESA, which IMO, tells us something. So, no matter what, you're on your own unless you find a 3rd party ESA that covers it.

3) Touchscreen. The giant 17" touchscreen is very cool, but I'll bet not cheap to replace if it needs it. I guess most first gen iPads are still going strong (my wife's is), but temps in a car can get pretty high.

4) Sunroof. Big piece of glass, external mechanism.

And don't forget, whether you buy the ESA or not, you're probably taking the car to Tesla for service unless one of the Mercedes sourced parts breaks and you know that beforehand. Tesla's labor rate (at least here) is more like a dealer than an independent shop, so that can add up.