California Dealers Say Tesla Using Deceptive Advertising To Sell Model S; Wants Probe

4 years ago by Jay Cole 18

California Dealers Look For A Little More Transparency From Tesla In Its Pricing

California Dealers Look For A Little More Transparency From Tesla In Its Pricing

While we might simply chalk this request by the California New Car Dealers Association for the state to probe Tesla’s advertising practises when it comes to understating the monthly payments on a new Model S to sour grapes.

Unexpectedly, they might actually have a point this time.   (We can’t express the pain it causes us to say that)

When You Click "Order" On Tesla's Website To Purchase A Model S, You Are Met With This $579/month "Effective Monthly Cost" - Not The $916 Month, $10,660 Down (15%) 72 Month Estimated Payment Deal That Shows Up Later

When You Click “Order” On Tesla’s Website To Purchase A Model S, You Are Met With This $579/month “Effective Monthly Cost” – Not The $916 Month, $10,660 Down (15%) 72 Month Estimated Payment Deal That Shows Up Later

In promoting the car, Tesla prominently touts the “effective monthly cost” which takes into account all the available credits available on the Model S, plus the savings of using electricity over gas (assuming a rate much higher than the national average at 15,000 miles per year), along with some interesting other math, like the value of Tesla’s guaranteed resale level on the car – which says you will receive  “cash back in three years that exceeds the principal remaining on your loan” if you chose to sell the car back to them at that point.

Tesla’s application also has settings to lessen the month cost by discounting the ‘value of your time’ saved by not pumping gas and being able to drive in the HOV lanes as a single rider. (see graphic below)

California Dealer Association Doesn't Like This Kind Of Math And Wants The DMV To Step In

California Dealer Association Doesn’t Like This Kind Of Math And Wants The DMV To Step In (click to enlarge)

Again, these all may be worthy points in determining if the Tesla Model S is the right car for you, but this might not be the most appropriate place to highlight them.

It should be noted that Tesla already has back-peddled a little from how the calculations where made when the first of the financing ‘deals’ was announced, and has added a guaranteed re-sale valuation on the car as well as longer term financing options since it debuted.

“We appreciate the feedback from a number of journalists and customers that the first version of our financing product wasn’t quite right,” said Tesla Co-founder & CEO Elon Musk. “They were right, so we are fixing it and, moreover, upping the ante by providing the best resale value guarantee in the automotive industry.”

But not good enough for the California dealer association, which has now sent a letter to California’s Department of Motor Vehicles asking the agency to “investigate and remedy several egregious violations and  advertising and consumer protection laws” by Tesla that include “packed external  savings.”

Part of the complaint also centers on the $7,500 federal credit that they say is “completely irrelevant” to the Model S pricing, as it can only be fully utililzed by 20% of potential tax filers in the US when purchasing a car, and that by advertising the purchase financing less this amount Tesla is effectively “misleading 80% of the population.”

When asked if perhaps the California New Car Dealers had an axe to grind against Tesla, Brian Mass – who is president of the association said:

“We don’t have any quibble with Tesla’s ability to sell cars, it’s how they are  selling cars that is the problem.”

Jonathon Morrison, director of legal and regulatory affairs for the association added in the letter to the California officials (as reported by the Automotive News) said that even though Tesla is free to make and sell cars directly to consumers, it still must follow advertising guidelines that apply to all dealerships.

“The general thrust is that Tesla is misleading consumers into thinking the monthly cost that you’re going to pay for one of their vehicles is substantially lower than the actual money” they’ll have to pay out of pocket.

“It’s misleading,” Maas added. “If you checked every box on their true cost  of ownership series of inquiries, they claim you can get a Model S for $114 a  month, which is lower than the cheapest car available in the United  States, the Nissan Versa – which would cost you, with a lease deal, about $139 a month.”

Tesla decline to comment on the matter.

Quotes added via Bloomberg and the Automotive News (sub)

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18 responses to "California Dealers Say Tesla Using Deceptive Advertising To Sell Model S; Wants Probe"

  1. kdawg says:

    I thought Elon apologized for this and they fixed it. Is it back again?

    1. kdawg says:

      Oops, I see you mentioned that in the article. 🙂

  2. ItsNotAboutTheMoney says:

    Hahahahahahahahahahahahahahaha.

    How many times have you seen the following on a dealer flyer?:
    nn mpg!!!!* (see footnote)

    Basically, they’re arguing that it’s illegal for Tesla prominently to advertise the cost of ownership. They’re misleading consumers who might hit Order and completely fail to notice the actual price.

    I think this is just a mud-slinging public complaint being made to try and damage Tesla’s image.

    * Highway. Which of course far less than 20% of the population will achieve.

    1. Alaa says:

      I agree

      1. Assaf says:

        Yup, it is definitely a cold day in Hell when a car-dealership association accuses someone of misleading customers and misrepresenting facts.

  3. kdawg says:

    “Part of the complaint also centers on the $7,500 federal credit that they say is ”completely irrelevant” to the Model S pricing, as it can only be fully utililzed by 20% of potential tax filers in the US when purchasing a car, and that by advertising the purchase financing less this amount Tesla is effectively “misleading 80% of the population.”
    ————

    I guess they didn’t check, but many auto companies besides Tesla are doing this. Check out Nissan’s website. http://www.nissanusa.com/electric-cars/leaf/ And read the fine print:

    “As low as $21,300 Net value after federal tax savings*”

    1. Huffster says:

      You’re right. Go to Chevrolet.com and click on “Cars” in the upper left corner, then click on “Volt”. Clearly shows “Net Price” after Tax savings too. Don’t even need to go to the fine print.

      1. kdawg says:

        At least they put the MSRP next to it. Nissan’s website doesn’t even list the MSRP and the “net value after tax savings” is in the smallest mouse print.

        Looks like Ford is listing MSRP on the Energi’s.

        And GM is using advertising the net tax savings price for the Spark EV with the mouseprint. Not good IMO. Should show both prices like the Volt at least.

        1. kdawg says:

          ergh.. bad typing, but I think you can decipher.

  4. David Murray says:

    While I don’t agree with Tesla’s tactics on this.. I think this is a simple case of the pot calling the kettle black. I mean think about this for a moment. Car dealers are worried about Tesla using misleading advertising? Seriously?

    Every month I get some junk mail from a car dealer telling me my used car (which I usually don’t even own anymore) is in high demand and they are willing to offer me a great price for it.

    Every month I get junk mail from a car dealer with a special scratch off telling me that if it matches a certain number, then I have won a car. When I scratch it off, it ALWAYS says I’ve won.

    Then what about all of those extended warranties, and other crap they try to sneak into your loan?

  5. Josh says:

    When was the last time the CADA filed a complaint about deceptive advertising to sell automobiles? I am guessing never. Do they really want to California DMV to start cracking down on shady dealership practices? I think their members may end up being more hurt by this than Tesla sales.

  6. MDEV says:

    Dealer fees anyone?

  7. evnow says:

    I’ve to say I’ve never seen a dealer advertisement that is deceptive. Really.

  8. Wow. Talk about shooting yourself in the head. This is red meat to Tesla. They love it! Telsa’s most prominent accomplishment is not that they make the finest car in the US, probably the world. It’s not even their jaw dropping stock price.

    Tesla’s most impressive accomplishment is that they outsell all of the other comparable luxury brands – $2 billion dollars worth – with an advertising budget of $0. Zero.

    Every time another new car dealer association takes a poke at them, the embers flare and Tesla gets more free press. Elon doesn’t even have to do an interview or announce any loopy ideas. His competition are his best advocates. Yes indeed, lets start that TCO debate raging.

    Very likely more people will buy Teslas as a result of this sham accusation. I’m pretty sure that the people capable if laying down $100k for a car are sophisticated enough to understand if their income is high enough to qualify for a $7,500 tax credit.

    And I’m pretty sure that more than 20% of the people who can afford a Tesla do in fact qualify for the full credit.

  9. zilm says:

    Oooohhh what a great lie!!! They should immediately add * to it!

  10. MrEnergyCzar says:

    I would guess that 90% of Tesla buyers can utilize the tax credit, not deceptive at all…

    MrEnergyCzar

    1. GSP says:

      Yes. I don’t believe that only 20% of buyers have more than $7500 in tax liability. Most people have more than $7500 withheld from their pay, and almost everyone in the market for a $70,000-$100,000 car does.

      GSP

  11. Tesla Fan says:

    that is the cost of a model s with no options so…… salty ass dealers