Thoughts on Prepaid Service and Extended Warranty

[Tam]

...we'll not be getting the extended warranty on the Model X...

Buying Extended Service Agreement (Extended Warranty) is just like buying insurance.

I have been paying for decades for my home and car insurance but no accidents has ever happened to either my home or car yet.

I could have saved lots of money if I didn't pay for my home and car insurance but i would not take that chance.

I will even further strengthen my position by trading in for Autopilot to make sure I won't ever slam in the car in front.

Like somebody said: "Buying extended warranty is for the pessimists" who are worried about zombie apocalypse.

 

[Sony SS-M7]

I don't see an option to buy it online yet. I'll ask today at the social event of it'll be up soon.

 

[ModelX+911]

 Annual Inspection – Every year or 12,500 miles ($600)

During your annual inspection, our expert service team will take your vehicle through a bumper to bumper, roof to wheel

inspection. The wheels will be removed and tires will be rotated. A wheel alignment will be performed, if necessary. Vehicle

logs will be pulled and examined, and all systems will be tested for operation. The drive unit assemblies, temperature

management system, and brakes will be inspected. Normal items, such as brake pads and windshield wipers will be

replaced as needed. Tire wear is not covered as part of the annual inspection or under the Tesla Service Plans or the New

Vehicle Limited Warranty. We recommend that you bring your Tesla in to have its tires rotated every 5,000 miles.

Prepaid service plans are available for purchase through your My Tesla account in the first 60 days after your delivery:

 Four Year Prepaid Service – One inspection per year, up to 50,000 miles ($1,900)

 Eight Year Prepaid Service – One inspection per year, up to 100,000 miles ($3,800)

 Basic Vehicle Limited Warranty – Four years or 50,000 miles (Included)

Subject to separate coverage for certain parts and the exclusions and limitations described in the New Vehicle Limited

Warranty, the Basic Vehicle Limited Warranty covers the repair or replacement necessary to correct defects in the materials

or workmanship of any parts manufactured or supplied by Tesla that occur under normal use for a period of 4 years or

50,000 miles, whichever comes first.

 Battery and Drive Unit Limited Warranty – Eight years or unlimited miles (Included)

The Tesla lithium-ion battery (the “Battery”) and Drive Unit are sophisticated powertrain components designed to withstand

extreme driving conditions. You can rest easy knowing that Tesla’s state-of-the-art Battery and Drive Unit are backed by

this Battery and Drive Unit Limited Warranty, which covers the repair or replacement of any malfunctioning or defective

Battery or Drive Unit, subject to the limitations described in your New Vehicle Limited Warranty.

 Extended Service Agreement – Adds four years or 50,000 miles beyond original warranty

You may purchase Extended Service up to 30 days prior to the expiration of your New Vehicle Limited Warranty. Extended

Service provides an additional 4 years or 50,000 miles (whichever comes first) of coverage after the expiration of your New

Vehicle Limited Warranty to cover the repair or replacement of Tesla parts due to defects in materials or workmanship

provided by Tesla.

 

[flar]

Buying Extended Service Agreement (Extended Warranty) is just like buying insurance.

Not exactly. Home and car insurance primarily cover liability for bad things happening that causes someone to want you to pay them huge amounts of money. One claim by someone with a good lawyer and you may get more value out of it than you ever put into it even though your current received value in that area may be $0.

Car insurance typically also can cover you for fixing the bad things that happen to your car (other than manufacturing defects), but that part is often optional and typically has ways to reduce its cost by raising deductibles and such mostly because it has a fixed maximum payout (the value of the car) that consumers can easily choose to accept themselves.

The extended warranty, on the other hand, covers a lot of things that will likely not prevent you from using the car and has no minimum or deductible. It's a lot more like the optional part of insurance that people often skimp on by raising their deductibles, for instance. Choosing an extended warranty would be closer to choosing a very low deductible on the collision or theft/comprehensive parts of car insurance.

 

[MSullivan]

Buying an extended warranty is a roll of the dice.
Be assured Tesla would not offer it if they were losing money on it.
They throw everyone's money into a pot, payout repairs and in the end they make a profit. That means people with lemons are subsidized by those with rock solid cars.
You are not getting eight years of coverage for $4000 ($500 a year). You are actually paying $1000 a year for coverage in years 5-8.
Don't forget the most expensive portions of this car (battery and drivetrain) are covered for those 8 years already.
Then there is the matter of the $200 deductible. Let's say you have six issues covered by the extended warranty. That is $5200 you have paid to have those fixed for "free". There is a good chance you didn't save that much money.
Buy $4000 in Tesla stock and let that be your repair fund.
Insurance is for things that would ruin you financially. Healthcare, your home, wrecking your car.
There is no right or wrong answer. If you find $4000 worth of comfort in the extended warranty then get it.

 

[HankLloydRight]

Buying Extended Service Agreement (Extended Warranty) is just like buying insurance.

Not exactly. blah blah blah blah blahh

Tam didn't say it was "exactly like buying insurance".. or "it is insurnace" he just said "it's just like buying insurance". Which is exactly what it is. It's like insurance. No need for a condescending primer on what 'insurance" really is.

 

[HankLloydRight]

The extended warranty, on the other hand, covers a lot of things that will likely not prevent you from using the car and has no minimum or deductible.

And home and car insurance also cover things that will likely not prevent me from using my home or car, so I'm not sure what your point is here. The ESA also does have a $200 per visit deductible for ESA covered items.

Home and car insurance primarily cover liability for bad things happening that causes someone to want you to pay them huge amounts of money.

Every home-owners claim I've made (or had involvement with) was for unexpected damages, like water damage or weather related events. HO insurance is not to "primarily" cover liability claims, that is just one part of it, and from my experience, not the "primary" reason people have it, or make claims on it.

 

[MSullivan]

Tam didn't say it was "exactly like buying insurance".. or "it is insurnace" he just said "it's just like buying insurance". Which is exactly what it is. It's like insurance. No need for a condescending primer on what 'insurance" really is.

I assure you I was not intending to be condescending, if it came off that way I apologize.
I consider an extended warranty insurance and as such I pointed out that insurance should be for things you can't afford to cover yourself.
Extended warranties are profit generators and no company (Best Buy, Apple, Tesla) would not offer them if they were not.
I am not a fan of insurance for things other than net worth destroying items. For example my wife and I don't buy trip insurance. That is typically 10% of the cost of a trip. We have been married 20 years and probably taken 60-70 trips together. It's gonna suck when we do have to cancel and lose the cost of a cruise but we are way ahead by now.
People will use convoluted math to justify a purchase. And saying it is only $500 a year is just that type of flawed logic.
I merely wanted to remind people of that by pointing out it is $1000 a year. That's a lot of repairs that don't involve the battery or drive unit.
Think about all the things that could happen to make your decision look bad.
Your car could be totaled in year three (yes you can apply for a refund but they have had your money for three years and there are fees associated with the refund). Tesla could introduce a model that makes this one look like a Model T and you trade in after four years, etc.
Did you know that Tesla spends $1,043 per car on warranty repairs and that they set aside $2,036 per car for future repairs?
The parts of a car that fail after 4 years are typically wear and tear items and minus them and the drivetrain there aren't a lot of expensive parts left.


Tesla Positive Cash Flow Goals Competes with Warranty Costs

 

[HankLloydRight]

The parts of a car that fail after 4 years are typically wear and tear items and minus them and the drivetrain there aren't a lot of expensive parts left.

Since there are scant few Model Ss that are more than 4 years old, we really don't have any data on what parts would or could fail between 4 and 8 years.

Just because you've decided that extended warranties do not fit your risk/reward profile, doesn't mean that it fits for everyone, or that you're right and everyone else is "wrong" to get the ESA. There are plenty of examples to show when extended warranties work, and when they don't. My g/f bought a used 2009 BMW convertible a few years ago from a BMW dealer, and bought the "platinum" extended warranty (the most expensive and most profitable one). Since then, she's had at least 3x the amount of work done on the car than the warranty cost. All the convertible top motors and sensors were replaced; both turbochargers, the clutch and shift linkage (yes, the clutch was covered due to a defect), and dozens of other things.

As for the Tesla, I look at it compared to what my costs would be compared to a regular ICE vehicle (mainly BMWs, since that's what I've owned for the last 20 years). For my Model S, plus the 8 year annual service agreement ($3800), plus the ESA ($4000), that's a total cost of $7800 over 8 years, or $975 per year for ALL maintenance and repair costs (yes, I know the factory warranty covers the first four years, but that's really besides the point). No ICE performance sports car I've ever owned cost me less than $1000 per year for ALL routine maintenance and repairs over 8 years. Except for the $200 per visit deductible (for years 5-8), I know in advance what my total maintenance and repair costs will be until 2022 (and it's all pre-paid, so no further out of pocket). Would I pay less without either the ESA or Service agreement? Possibly. Could I pay more -- probably, since we do not have long-term reliability data on the Model S.

The parts of a car that fail after 4 years are typically wear and tear items and minus them and the drivetrain there aren't a lot of expensive parts left.

No other expensive parts? If the main touchscreen and/or the instrument cluster goes, that's several thousand dollars right there, plus labor. There are dozens of other computer modules on the car which would not be cheap to replace. I've heard the smart air suspension is also going to be a very pricey repair when they start to fail. But I really don't have to worry about any of that, and there's real value in that piece of mind.

 

[Tam]

May be I should not mention the word "insurance" as it has digressed to another subject.

Functionally, "Extended Service Agreement" is an equivalent of "Extended Warranty" but legally, they are different.

Some states demands that Tesla must legally be registered as an Insurance provider in order to be able to sell "Extended Warranty."

To bypass that legal terminology, Tesla calls that as an "Extended Service Agreement."

Whatever it is, it is still a tool if you want to buy or skip it according to your risk assessment.

As whether Tesla is reliable or not, Consumers Report says no.

If it is not, why Consumers Report also said 97% of owners are happy with Tesla?

That's because Tesla has serviced all problems for free during the warranty period and owners don't have to go to court to sue like GM 32-cent ignition switch.

As whether the repairs are affordable after 50,000 miles, here are a summary from Model S:

----
Uncoiled | April 29, 2016

Windshield: $900
Windshield wiper motor: $500+
Headlight,: $1000 - has to be replaced as a next higher assembly even if just the bulb fails.
Side mirror: $390
MCU (17" touchscreen): $4,000
Door handle: $1000-$1200
Rotors, full set of 4: $1400
Sunroof seal: $1800(?)
Leaky cabin(?): $2500
Front end suspension work(?): ~$1000
---

It's ridiculous that a burned light bulb replacement would cost $1,000 or a 12V battery that costs more than $300 but it seems to me, repair costs seem to be expensive.

By the way, it is true Tesla is a profit company so its programs including "Extended Service Agreement" is not a charity.

However, I do think that to have the ability to buy "Extended Service Agreement" is a privilege.

Consider those who do not have the privilege to purchase one:

1) Certified Pre-Owned: If you buy a Tesla directly from Tesla pre-owned selection, you are not allowed to buy Extended Service Agreement.

2) Third-party Pre-Owned: If you buy a used Tesla from non-Tesla source such as private owner or another company/dealership, you are not allowed to buy Extended Service Agreement either. However, if previous owner already bought it, you can have that owner to transfer that to you for a small fee.

So it is up to an individual to take in the data and decide for themselves.

And so far, from this forum, it is clear that there are 2 decisions after considering all the data:

1) No, it is not worth it.

2) Yes, it is worth it.

 

[Az_Rael]

1) Certified Pre-Owned: If you buy a Tesla directly from Tesla pre-owned selection, you are not allowed to buy Extended Service Agreement.

While this is true, you do get a 50k CPO warranty with a CPO purchase that starts on the date you buy. So if you purchase a CPO with mileage close to 50k, you will get a very close equivalent to the extended warranty mileage wise.

 

[Tam]

...you do get a 50k CPO warranty...

Indeed. Thanks for the clarification that everyone, whether new or used from Tesla sales, does get basic warranty regardless of what's the outcome for "Extended Service Agreement" discussion in this forum.

 

[flar]

I apparently went awry in my previous post as it seems to have come across in a manner that I wasn't intending.

This thread is about reasons to consider getting the prepaid service and/or the ESA. Relating to that purpose I would say that I agree that many reasons for getting the ESA are similar to the reasons you get more or less coverage for the comprehensive (theft and repair) part of your insurance policies.

When you get insurance, though, there is typically another component as well, the liability component, and that component has some dramatically different reasons for getting it compared to the thought process behind getting an ESA. So to compare getting the ESA to getting insurance without qualifying it beyond that word runs the risk of dragging in concerns about losing an uncapped amount of your financial well being to a good set of personal injury lawyers that don't really apply to a service policy whose maximum value is "keeping your car/keeping it running well".

Comparing ESA to, specifically, the comprehensive component of insurance - that's a fairly straightforward comparison, though.

 

[HankLloydRight]

Right, which is why I posted above that people have asserted the ESA is like insurance, not that it is insurance.

There's absolutely no need to drag this liability nonsense into the discussion at all.

 

[Oloron]

Getting back to the original topic, I'm planning on buying the prepaid service (4 year) and likely the extended warranty.

Given that I'll be getting a first generation X: (some of this wouldn't be as big a factor if I were getting an S)

1. It will discipline me to get the annual service done as recommended (you should see how long I go between oil changes on my current car due to negligence/laziness),
2. Similar to #1, it will make sure any early model issues that arise like recalls/replacements get taken care of regularly.
3. It will mostly be my wife's car, so a set schedule means everything is taken care of for her
4. Since it's a first year model, the inherent risk and range of issues that can arise are greater. I'd rather push the downside risk onto Tesla, even if that means they may make a little more profit off of me.
5. Reliability looks good, but even the S is so new, we don't know how things will hold up out in years 5-8. I'd rather just push as much contractual (and guilt-based) obligation to Tesla as possible.
6. The more Tesla is on the hook for long term service/repair costs, the higher their incentive to increase initial quality.

So - could Tesla make a few extra profit dollars off of me? Sure, but the net difference vs. paying directly is worth it to me for the above reasons.

 

[X Fan]

Leasing so extended warranty a non-issue.

Will get 3 yr prepaid service.....

 

[TaoJones]

Let's be very clear:

1. An ESA as defined in writing by Tesla is NOT, has never been, nor is likely to be equivalent to a warranty, extended or otherwise. There are significant holes in the ESA when compared to the warranty or to the implied concept of "extended warranty".

2. A pre-purchased annual service bundle has exactly zero relevance with regard to the level of service you receive throughout a given year. There are differences between legacy bundles and the written word when it comes to whether an alignment will or will not be done at additional $210 cost. Complicating *that* matter is the fact that SvCs may or may not disregard the new written policy altogether.

3. The $4,000 ESA, available *only* for miles 50,001-100,000, is priced pretty much as a casino's sports book might publish an over/under, and for much the same reason, given Elon's revenue-neutral edict for Service.

However, consider the following (all estimated costs include labor @ $175/hour:

MCU (17" touchscreen) replacement: ~$4,000
Headlight, each - even if just the bulb fails: ~$1,000
Door handle, each: ~$1,000
Rotors, full set: ~$1400
Control arm bushings: ~$TBD

I include the last entry just as a reminder, as iirc, the ESA does not cover suspension parts. Nor does it cover rattle and squeak resolution except at $175/hour whether resolved or not. Of course, if there's a service bulletin/defect/recall, that's another matter entirely (see relevant threads concerning various suspension problems) - but Service may still initially claim wear and tear before escalation.

So as with many things, there is no one-size-fits-all answer here. I drive. A lot. Not as much as livery, to be sure, but I didn't buy the car to be a garage trophy or weekend joyrider. So the ESA, anemic as it is, or even if it was the best ESA ever, would only last me about 18 months. Curiously, that's when my GRV agreement window occurs.

My choices are pretty much:

1) to sell the car at 50,000 miles and to transition into a CPO until my Model 3 reservation is ready, at which point one compares new M3 versus used MS, which will be the same price, or
2) to pay for the ESA despite the numerous holes and call it a day, or
3) to take that $4,000 and buy TSLA (or other) shares instead.

I lean toward option 1 or option 3 at the moment. However, paying the $4K in about 6 weeks when I hit 50,000 miles is the epitome of insurance - EXCEPT the best analogy is continuing to pay the premium and getting MUCH less for more money one year and for years hence.

I simply find it disingenuous at best that the ESA is so much NOT like the first 50,000 miles, yet is constantly referred to as "just the same as the first 50,000 miles". Holes like swiss cheese, folks.

 

[ohmman]

Buying Extended Service Agreement (Extended Warranty) is just like buying insurance.

I have been paying for decades for my home and car insurance but no accidents has ever happened to either my home or car yet.

And generally speaking, both are bad ideas if you can afford to self-insure or self-pay for service. They're psychological safety nets, but unless you know something the insurance/service company doesn't, they probably have the statistical edge on you.

I don't have prepaid service, ESA, etc. I've gotten excellent service from Tesla. There are enough occasional warranty or minor recall items (recently the Model S seatbelt) which get me a look-over. My S has been great, and I don't plan to extend the warranty - but then again, I plan to trade it in for my Model 3, assuming that's an attractive trade.

 

[Tam]

...both are bad ideas if you can afford to self-insure or self-pay for service...

Agreed!

 

[Sony SS-M7]

I'm definitely leaning toward pre-paying for the 8 years because I plan to keep the car for at least 8 years and I can't see (personally) trying to save $ by skipping any of these annual checks. I don't mind spending $500/yr on servicing and saving the average of $100/yr by prepaying - interest rates are negligible now. As stated earlier, I tend to think the service cost WILL go up over this 8 year period, so the savings should be greater than the current $800.

As for the ESA, I'm less sure about that. I'm thinking the cost of that is bound to go up as well, but I'm likely to wait until closer to the expiration of the 4yr/50K original warranty before making that decision. I need to study more about the loopholes mentioned above and how much weaker it is than a true extension of the original 4-yr/50K warranty.