Thinking about pulling the trigger on a warranty extension Now that Tesla offers one

[davewill]

Well, I've got about a month before my 4yr 50k bumper to bumper warranty ends, so if I want an ESA, I have to pull the trigger soon. I thought a discussion of pros and cons and people's feeling on the subject in general was in order. I might as well say up front, that a lot of people, myself included at times, firmly believe that all extended warranties are a sucker bet, otherwise they would not be offered. Looked at as raw statistics, it's undoubtedly true, but we all nonetheless buy various kinds of insurance because we all have differing levels of acceptable risk.

My biggest concern is the on-board charger, which a lot of 2018 model year owners (I've got a 2019) have reported having failures of here. The cost of that repair is pretty close to the $1800 price tag of the ESA, so by itself isn't a good enough reason to pull the trigger. Add to that the fact that the most expensive items, the battery and motors already have extended coverage and it's far from an easy choice. I do find it interesting that Tesla waited until all the 2018 model year cars were safely out of warranty before offering this, suggesting that Tesla either knew they were problematic, or Tesla could have just been slow to this party.

Up to about a year ago, I was convinced I'd buy in a heartbeat if/when Tesla offered one. Now I'm balanced right on the fence. How about the rest of you?

 

[jjrandorin]

I have one of those 2018s that had the warranty expire before Tesla offered this, so the choice was taken from me. With that being said, in general, the reason to buy any extended warranty is, in general, because of fear of expensive repairs you are unable or unwilling to pay for.

Its almost always better from a financial standpoint to take the money that you would have paid on the extended warranty and put it in a savings account or something. I have no idea how much these are, but the price you are quoting ($1800) sounds suspiciously inexpensive, as far as these things go. It sounds like a 1 or 2 year extended warranty.

Since I would not have much issue financially paying to repair something on the car, I had already made the decision that I wouldnt pay for an extended warranty, I would either sell the car and not keep it outside of warranty, or I would ride it out. "Knock on wood", but my car has been pretty darn solid.

In my opinion, all one really needs to remember is that these products (extended warranties) are one of the main things that a traditional dealership tries to add on in the "finance office sweatbox" and they get frustrated if you tell them "no" and start trying to challenge you on it sometimes.

As you said, statistically they are generally a losing bet, although there are always spectacular outliers, like Doug Demuro's Land Rover, or some person who starts a thread talking about how their extended warranty saved them 10k or something. Those are outliers though, but you know that already.

I also just saw this thread by x-care, that compares the tesla extended warranty to the xcare one (which is the most popular aftermarket one). Probably worth a look if you are interested in extended warranties at all:

Vendor - Xcelerate XCare EV Protection compared to Tesla ESA

Greetings from XCare EV Protection! There’s been a lot of buzz lately about Tesla Extended Warranties so we’d like to share our comparison of the Tesla ESA (Extended Service Agreement) and XCare EV Protection. · Both provide world class coverage (XCare coverage is modeled after the ESA). ·...

teslamotorsclub.com

 

[jkdman123]

I considered it, but decided it was too steep, especially for only 2 additional years. As for XCare, I think you need to be extra cautious about *any* 3rd party warranty. Considering how flaky Tesla service can be, I don't know that I would trust that XCare wouldn't leave you out in the cold and blame it on Tesla for overcharging, misdiagnosing, etc.

 

[holeydonut]

Lol @jjrandorin is calling the stealership scripted-pain-fest a sweatbox too? What? I thought I was the only one heh.

I get flamed in car forums about extended warranties, but whatever. I worked for a short time in corporate pricing these BS extended service contracts out. I can unequivocally say they are totally crap for the vast majority of people who buy into them.

Ok so here's the challenge of extended warranties.
First, remember they prey on fear.
Second, remember that people who actually buy these warranties need to rationalize their behaviors as a smart decision.

So the Tesla extended warranty is worth 2 years and 25,000 extra miles. Let's pretend for a second that there are 10 Model 3's ever sold. 9 of them don't need new ball joints and control arms from the end of the normal warranty + 2 years or 25k miles. But one does. For 9 people, the extra repair cost is $0. But for the one unlucky soul, their cost may be $700. The average retail cost per unit for this particular warranty item is $70 (1 out of the 10).

The automakers have a ton of detail about their vehicles... they know what retail repair costs are for the periods beyond the standard warranty. They simply add up all of the likely costs by covered components, and come up with a total per-unit warranty cost. Then they slap on a massive premium and watch a bunch of people just hand them money because they're worried about out of pocket repair costs.

On the first point I asked you to remember (fear), of course auto repairs are expensive... and people love to be hedged against the scary event of paying for a car repair. So paying $ to reduce fear does have some mental value. The problem is taken at large volume, the vast majority of people simply paid money to get absolutely nothing tangible in return. There are better ways to reduce fear.

On the second point I asked you to remember (rationalizations), consider dealers usually earn at least 50% margins when they sell an extended warranty. A customer may pay $2,000 for an extended warranty... but the cost expected to be paid by the extended warranty provider is only $1,000. In my previous example population, one customer out of a ten may actually incur over $2,000 of total warranty costs during those precious 2 years and 25,000 miles. And they'll feel like the smartest MF-er alive. But 9 out of the 10 are like "dang... oh well I guess I got lucky?" Most people who buy extended warranties tend to create a false equivalency by saying "it's like when I pay for my auto insurance! I don't want a $100,000 personal liability when I crash, so I pay an insurance premium that I may never see back!"

Yes, there's always a business to be made selling peace of mind. The problem is these trash extended warranties have such huge margins. It's a total waste. If State Farm charged 100% markup (50% margins), their customers would switch carriers to USAA or Farmers. But there is no real market for these extended warranties. It's hard to cross-shop options, and the vast data is held by the seller. Buyers get massively overcharged for what little peace of mind the extended warranty provided.

Anyway, to what @jjrandorin recommended, people can simply create their own emergency savings fund and "avert fear" in a smarter way. Every time you buy something major in your house (eg appliances) or you buy a car, take whatever you would have spent on an extended warranty and save it. And even better, save a few extra bucks each month and divert it into a savings fund. Be your own provider of "weird stuff happening" insurance. You'll come out ahead about 99% of the time.

Yes, somebody out there is coming out ahead with these warranties. It's just a poor use of your money to actually think you'll be that one. Like go buy some pick 3 or scratchers... it'll be more fun than these extended warranties.

 

[XCare EV]

I considered it, but decided it was too steep, especially for only 2 additional years. As for XCare, I think you need to be extra cautious about *any* 3rd party warranty. Considering how flaky Tesla service can be, I don't know that I would trust that XCare wouldn't leave you out in the cold and blame it on Tesla for overcharging, misdiagnosing, etc.

There are definitely arguments for/against coverage, and I'm not here to convince anyone one way or the other. XCare was actually an internal product developed for our use, as a way to assist in the sale of our off-lease vehicles with the added benefit of extended coverage, as we were experiencing quite a bit of reluctance from buyers to purchase a vehicle that had little/no coverage left. We then decided to release it to the general public as a way to support our community. We are all prior Tesla execs and partners, collectively going back with the company to 2011. We all drive Teslas and we all support Tesla and our community. We are partnered with Tesla Owners Silicon Valley, Tesla Owners Club New York State, and many others, as well as Unplugged Performance, Tenet (EV Financing) this Forum and EVANNEX, to name but a few. We pay full rack-rate for Tesla Service, insist on OEM parts and include roadside assistance, trip interruption/rental assistance. Does everyone get their "money's worth?" I guess that depends on what is valuable to you. Thanks for the opportunity to address this group, and hope we can help in the future. Brent @ Xcelerate Auto/XCare

 

[mjwojtukiewicz]

I bought a 2 year XCare warranty. The Tesla service center lists labor at $205/hour alone. And their parts, although far fewer than an ICE car, are expensive as hell. Besides, the guy at XCare told me say I buy a car in 1 year., I get half the money back. Also, if sold privately they will transfer warranty to a private buyer for $50 which might make a sale of an out of warranty Tesla easier

 

[jjrandorin]

I bought a 2 year XCare warranty. The Tesla service center lists labor at $205/hour alone. And their parts, although far fewer than an ICE car, are expensive as hell. Besides, the guy at XCare told me say I buy a car in 1 year., I get half the money back. Also, if sold privately they will transfer warranty to a private buyer for $50 which might make a sale of an out of warranty Tesla easier

This isnt ment to be a moderator comment or anything, and volunteer moderators such as myself do not have any input on vendor relations here. With that being said, I have seen enough feedback from people who have actually executed on the X-care warranty product that I would encourage anyone who is considering buying an extended warranty to at least investigate them.

Whether one wants an extended warranty or not is a separate discussion, but if one is thinking about buying one, from what I have seen peoples results talking about x-care, it doesnt seem hard to execute on, seems fair in coverage, etc.

 

[XPsionic]

Never bought any kind of extended warranty for any product ever in the last 25 years. With the money I saved I could probably just buy another model 3 brand new. I've encountered so few situations where things break that would be covered. Remember no wear and tear items are covered, and accidental damage is also not covered.

@holeydonut is right, I used to sell extended warranty on cell phones, it's such a great money maker for the company. On average the customer might get 20 cents per dollar spent on extended warranties or less. Sure, you could get unlucky and need a big repair, but just do what I do and never buy any extended warranty for anything that you could afford to buy twice, invest that sum, and in the long run you'll always come out ahead.

 

[mjwojtukiewicz]

Never bought any kind of extended warranty for any product ever in the last 25 years. With the money I saved I could probably just buy another model 3 brand new. I've encountered so few situations where things break that would be covered. Remember no wear and tear items are covered, and accidental damage is also not covered.

@holeydonut is right, I used to sell extended warranty on cell phones, it's such a great money maker for the company. On average the customer might get 20 cents per dollar spent on extended warranties or less. Sure, you could get unlucky and need a big repair, but just do what I do and never buy any extended warranty for anything that you could afford to buy twice, invest that sum, and in the long run you'll always come out ahead.

Cell phones don't cost 40K and up. Cell phone repair places don't charge $200/hour in labor. Cell phones have replacement parts. EM wants to build cars but doesn't feel the need to make spare parts when said cars crash or are damaged. Also, they keep all their diagnostics secret.

 

[XPsionic]

Cell phones don't cost 40K and up. Cell phone repair places don't charge $200/hour in labor. Cell phones have replacement parts. EM wants to build cars but doesn't feel the need to make spare parts when said cars crash or are damaged. Also, they keep all their diagnostics secret.

Those arguments are besides the point and makes no sense.

Extended warranties are available for companies to make money. Like you said, Tesla have all the data to price the warranty to make it profitable. With so much data available to them, that means on average as a customer you will likely never get the $ value that you pay for an extended warranty.

What non wear, not battery, not drivetrain items are covered in a Tesla warranty that's likely to break? And how much do they cost? Your argument about $40k and up makes no sense because you'll never pay that much for repairs that would be covered by an extended warranty.

 

[mjwojtukiewicz]

Those arguments are besides the point and makes no sense.

Extended warranties are available for companies to make money. Like you said, Tesla have all the data to price the warranty to make it profitable. With so much data available to them, that means on average as a customer you will likely never get the $ value that you pay for an extended warranty.

What non wear, not battery, not drivetrain items are covered in a Tesla warranty that's likely to break? And how much do they cost? Your argument about $40k and up makes no sense because you'll never pay that much for repairs that would be covered by an extended warranty.

The guy was comparing cell phone warranties versus an expensive car. NO eqivalency

 

[tangible1]

The guy was comparing cell phone warranties versus an expensive car. NO eqivalency

quoting from above comments:

"Ok so here's the challenge of extended warranties.
First, remember they prey on fear.
Second, remember that people who actually buy these warranties need to rationalize their behaviors as a smart decision."

nuff said

 

[jjrandorin]

(moderator note)

Because I can feel that this discussion is going down the road of "debate" I will remind everyone that its ok to debate the topic, but any debate should be around the topic, and not get personal.

This is one of those topics that tends to spin up on every car forum in one manner or another, and usually ends up with "passionate" people on both sides of the debate (somewhat like "should I lease this car or buy it?" debates). In the end, its all about what value proposition someone assigns to it for themselves.

So, again, please remember to debate the topic only. I say this now to head off where this looks like its going.

 

[davewill]

(moderator note)

Because I can feel that this discussion is going down the road of "debate" I will remind everyone that its ok to debate the topic, but any debate should be around the topic, and not get personal.

This is one of those topics that tends to spin up on every car forum in one manner or another, and usually ends up with "passionate" people on both sides of the debate (somewhat like "should I lease this car or buy it?" debates). In the end, its all about what value proposition someone assigns to it for themselves.

So, again, please remember to debate the topic only. I say this now to head off where this looks like its going.

Thanks. I'm rather sorry I started the thread at this point.

 

[Adam3]

Thanks. I'm rather sorry I started the thread at this point.

I have found the information in this thread useful, have been on the fence about extended warranty myself.

 

[XCare EV]

(moderator note)

Because I can feel that this discussion is going down the road of "debate" I will remind everyone that its ok to debate the topic, but any debate should be around the topic, and not get personal.

This is one of those topics that tends to spin up on every car forum in one manner or another, and usually ends up with "passionate" people on both sides of the debate (somewhat like "should I lease this car or buy it?" debates). In the end, its all about what value proposition someone assigns to it for themselves.

So, again, please remember to debate the topic only. I say this now to head off where this looks like its going.

Well said. We're here to help, and appreciate lively discussion as it helps us to present our value to our community. We sincerely hope everyone who drives an EV has a great experience, and if we can help with that then mission accomplished. Cheers, and have a great weekend! Brent @ XCare

 

[AZAV8R]

Thanks. I'm rather sorry I started the thread at this point.

Please don't be. I'm exactly where you are right now, with 2500 miles left on the warranty on my '20 M3LR. Most of the responses are thoughtful and ultimately pointed me toward "self-insuring". Aside from a nagging condenser fan noise, HAL has been a solid car.

 

[jbiggs2]

As I've written before, ALL insurance is gambling. It's like casinos, some will win, most will lose. Tesla has the actuaries and all the data, they are the House. They price extended coverage where they are guaranteed to make a profit if X number of people choose to buy it. As with all insurance, the buyer gains some peace of mind but just know that for most, it will be wasted money. What is your peace of mind worth??

 

[bhsf]

The automakers have a ton of detail about their vehicles... they know what retail repair costs are for the periods beyond the standard warranty. They simply add up all of the likely costs by covered components, and come up with a total per-unit warranty cost. Then they slap on a massive premium and watch a bunch of people just hand them money because they're worried about out of pocket repair costs.

Sure, but there's a difference between what it costs to repair something and what service charges for it. For example, lets say you need your MCU replaced. Service will charge you 2k for it. But you buy the part for $500 on ebay, add two hours of labor ($250/hr) and it is probably $1000 cost to Tesla Service.

 

[bhsf]

As I've written before, ALL insurance is gambling. It's like casinos, some will win, most will lose. Tesla has the actuaries and all the data, they are the House. They price extended coverage where they are guaranteed to make a profit if X number of people choose to buy it. As with all insurance, the buyer gains some peace of mind but just know that for most, it will be wasted money. What is your peace of mind worth??

I would be much more comfortable going it alone if there were abundant independent repair shops who would work on these cars. Right now the choice is limited and Tesla basically has a monopoly on the price of repairs. If your motor goes bad, you're taking it to tesla and paying whatever they want to charge. You have no other option.