Tesla No Longer Allows Extended Warranties/Service Plans To Be Transferred When Reselling (Update)

1 year ago by Eric Loveday 40

Tesla Service Center

Tesla Service Center

In a rather bold move and without an official announcement, Tesla Motors has eliminated transferability of extended warranties and prepaid service plans.

No Transfer Allowed

Update (below): Tesla’s ‘Accidental’ Change of  Service Plan/Extended Service

This move means that when a Model S/X owner sells their vehicle as used, the new buyer won’t be able to take advantage of either the extended warranty or prepaid service plan that the original buyer opted for at the time of purchase.

UPDATE: February 15th 6:00    Tesla says “Whoops”.  Most likely as a response to owner outrage on the change, Tesla has publically made a statement that they accidently changed the wording in a recent site update.  Here is Tesla’s statement….probably a smart move:

“A change to Tesla’s Extended Service Agreement was posted with an error. Tesla owners can indeed transfer the unused portion of their Extended Service Agreement with the sale of their Tesla. Our practice of refunding the unused portion of the Extended Service Agreement also continues. In addition, Tesla owners can transfer the unused value of their Extended Service Agreement towards an Extended Service Agreement for a new Tesla Model S or Model X.”

Additionally, The Verge points out that “Tesla has raised prices on its after-sales service options.”

Tesla Extended Warranty Info

Tesla Extended Warranty Info

According to The Verge:

“By far the biggest change, at least as far as the impact on Tesla buyers, is the ban on transferring Tesla’s extended warranty and prepaid service plans to a new owner when selling a used Tesla. Owners of those plans can cancel and get a pro-rated reimbursement when selling the car, but they can no longer transfer it when selling the car. Previously, transferring those warranty and service plans to a new owner cost $100.”

Tesla Service Plan Info

Tesla Service Plan Info

Service plan pricing increased by $200 across the board.

Of note is that if you purchased the extended warranty or service plan prior to Tesla eliminating transferability, then those plans can still be transferred when the car is sold to someone else.

Source: The Verge

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40 responses to "Tesla No Longer Allows Extended Warranties/Service Plans To Be Transferred When Reselling (Update)"

  1. Sublime says:

    This is another attempt to control the used Tesla market. Tesla has a huge vested interest in keeping used prices up, because of their lease/guaranteed price model. With “cheap” 200 mile cars on the way in a year, this is coming to a head.

    1. 2013VOLT says:

      Would this cause used prices to go down as the warranties do not transfer to the new owner?

      1. Zach says:

        This.

        I think it is two fold, they want to make money selling the cars CPO and their service center costs are out of control.

        1. sven says:

          Per the last line in the Tesla Extended Service Agreement above:

          “Extended Service Agreements are not available for Qualified Pre-Owned vehicles”

          What is not mentioned in this news story but is clearly stated by Tesla above is that Tesla will not sell an extended service plan (warranty) for any of CPO cars that it sells, even CPO cars that still have time and mileage remaining on their new car bumper-to-bumper warranty, which is 4-years/50,000 miles (whichever comes first). This stands in sharp contrast to the original owner of a Tesla, who can purchase the extended service plan (warranty) at any time up to 30 days before the 4th anniversary of the purchase date and before the car has reached 50,000 miles on the odometer. Even if the CPO car that Tesla is selling is only a month old and has only 100 miles on it, the CPO purchaser can not purchase an extended service plan (warranty) for the CPO car. That sucks and blows.

          This new policy will negatively impact Tesla’s CPO sales.

          http://insideevs.com/wp-content/uploads/2016/02/extended.jpg

          1. sven says:

            I checked again, and the bumper-to-bumper warranty on CPO Teslas runs 4 years or 50,000 miles from the date of purchase of the CPO Tesla, but the powertrain warranty runs the balance of the 8-year/unlimited mileage from the date of the new car purchase. I originally misread Tesla’s CPO warranty, and thought the 4-year/50,000-mile bumper-to-bumper warranty ran from the date of the new car purchase as it does for all the other car companies.

            http://www.autotrader.com/car-shopping/cpo-program-review-tesla-239862

        2. Jack says:

          service center cost are out of control…I totally agree with you Zach. My 4 year lease of my BMW X3 have a 4-year free or included service plan and the SUV price don’t come close to any Tesla. Tesla were always saying that their car need almost none service since almost no fluid is in the car. How come a second year service cost almost 1K? It’s ridiculous. Tesla service prices matches BMW M series or MB AMG……

    2. Ed says:

      It can’t have any effect on the used car market now or service centers now, as it only applies to new purchases. The effect won’t start to be seen until 4 years from now when warranties on these cars start expiring. It doesn’t apply to the cars sold from 2012 to last week.

    3. IvoAroso says:

      So, when you buy an “extended warranties and prepaid service plans” are you acquiring it for yourself or for the car?

      I don’t know what is the standard position but, this Tesla decision makes no sense to me…

  2. DonC says:

    My guess would be the warranty costs are far higher than expected — since the cars are not reliable — and this is Tesla’s way to trying to control these costs.

    Does make owning less attractive for some and probably does affect resale. Does make buying directly from Tesla more attractive.

    AFAIK other manufacturers allow you to freely transfer extended service plans though there is a small fee.

    1. Pushmi-Pullyu says:

      DonC spouted some anti-Tesla FUD:

      “My guess would be the warranty costs are far higher than expected…”

      The anti-Tesla short-selling trolls keep trying to convince us this is true, but nobody has offered any actual evidence of it. Even Tesla extending its warranty to cover the entire powertrain, in response to a lot of bad press about some drive units being replaced (mostly as preventative maintenance, rather than fixing a reported problem), only resulted in a slight increase in the next quarter’s estimate for in-warranty maintenance costs.

      So I’m pretty sure this is just the same ol’ same ol’ FUD.

      Numerous perfectly logical and sound reasons have already been given in these comments for why Tesla is making this change; none of them suggest Tesla is having unexpectedly high costs performing in-warranty service.

      1. Omar Sultan says:

        +1

        From the Q4 shareholder letter: “The cost of first year repair claims on cars produced in 2015 was at about half the level of cars produced in 2014, and about one quarter the level of cars produced in 2012.”

        1. zzzzzzzzzz says:

          It is meaningless with specifying what exactly time period they are talking about. Older cars typically have higher yearly repair costs, nothing new here.

          Tesla announcement speaks by itself, dear fanboys.

      2. Stimpacker says:

        For once I don’t agree.
        I am a huge EV proponent and Tesla supporter.

        However, I can only view this move as a desperate need for additional profit (or lower losses).

        Why would you not want to give your customers (whether they are buying new or used Teslas) peace of mind? EVERY other automaker and even 3rd party providers are greedily pushing extended warranty plans because they are nearly pure profit. For Tesla to deny this implies something else.

        Also the increase in the service plan is a joke. Tesla fanboys – please note that it is not a service at all. It’s just an annual inspection covering a few basic parts. If your Tesla is found to need additional work, you bet your butt you’ll be paying for it.

        I have been planning to buy a used CPO Model S soon (instead of waiting for Model III) but now I am thinking otherwise. Don’t want to spend $50K and then be saddled by a $10K drivetrain repair later on.

        1. floydboy says:

          I seriously doubt the annual service inspection is merely “covering a few basic parts”. I double-doubt that if Tesla finds issues with your ‘warrantied’ car, that they’re going to charge you 10k for anything.

          By the way, an annual service inspection IS a service.

  3. ffbj says:

    Aimed at re-sellers.

  4. Steve says:

    I can understand the business decision behind this move. They want a greater share and a higher price in the secondary market. It would seem to me if they want to build a good reputation they should offer 5/100k bumper to bumper and allow it to be transferable.

  5. Josh Bryant says:

    Sounds like the new CFO is on a mission to clean up warranty costs.

    1. ffbj says:

      Likely.

    2. Michael Will says:

      +1 which is important as they ramp up for mass production

    3. pjwood1 says:

      Also agree. New CFO, Jason Wheeler, is probably on board with this smart move, IMO. Otherwise, future new Model E sales are slowed by competition with transferred warranties, on Model S.

      Now, fewer people will go for a better car, private sale, because that MS will not have any factory warranty (unless CPO).

    4. Jack says:

      Beware Tesla annual service cost is WAY to high for a car that supposedly didn’t need to much of maintenance. It’s only a matter of time before customers says…enough is enough. If they do the same with the model 3 (hourly cost will be the same for any Tesla) it could kill it…

  6. Boris says:

    So is that 8 year battery warranty transferable or not?

    1. Tim says:

      The initial manufacturer’s warranty, which includes the drivetrain warranty, is transferrable. I’m not sure if Tesla even has the option to change that condition.

      1. Nix says:

        Tesla can change their warranty just like any company. Like when they went to 8-year, infinite miles:

        “Tesla Motors increased the warranty coverage on the Tesla Model S sedan on Friday, saying the drive unit warranty has been increased to match that of the battery pack.

        The Model S now has an eight-year, “infinite” mile warranty on both the battery pack and the drive unit.

        The warranty extension will apply retroactively to all Model S vehicles ever produced, Tesla said. There is no limit on the number of owners during the warranty period.”

        http://www.edmunds.com/car-news/tesla-model-s-gets-improved-warranty-coverage.html

        Although I believe there are minimum warranty requirements for Tesla to still earn ZEV credits in California. So if they cut their warranty, they could lose future ZEV credits.

        They can also increase coverage retroactively to previous transactions, but they cannot decrease coverage after the transaction.

  7. Paul says:

    It could also have something to do with the nearing of Model III. Maybe it’s not wise, financially, for a car maker to have it transferable for a mass market car. I’m just guessing; does somebody have expert knowledge of such thing?

    1. Pushmi-Pullyu says:

      I think more immediate factors are at play; factors already detailed in comments here.

      If it was a change to deal with the expected volume of Model ≡ sales, then Tesla would have waited until actual sales (not just reservations) of that model begin before making the change.

  8. Khai L. says:

    my take is that this is due to used car purchasers taking their car in for warranty service that might’ve been a result of the previous owner’s neglect.

    Note to Boris, this applies only to the “Extended Warranty” and prepaid service plans, which do NOT include the powertrain and battery warranties.

    The extended warranties had to be purchased before delivery. A while ago, they had already removed the ability to purchase an extended warranty after driving the car for a while. This move is just closing the loop on a loophole.

  9. Goodbyegascar says:

    Pulling up this drawbridge only means that Tesla knows it has strong market leverage.

    Consider this as a price increase on Tesla’s CPO cars, it just isn’t shown in the nominal price of the car.

    1. ffbj says:

      I would think that that is indicated.

    2. Taser54 says:

      So in other words, the consumer is getting less value. Nice use of market leverage.

  10. AtlantaCourier says:

    Maybe this is a prelude to switching to a dealership model.

  11. Andrei says:

    I think this decision will hurt Tesla on the long run, because it’s sending the message that Tesla cars are not as reliable as they wanted and will only have a depression efect on SH cars and that because the new buyers will have to pay for Tesla reliability issues. If the company is not willing to take this risk then the new owner will have to take it and he/she will want to pay less for the car.
    This decision leaves me with the impression that the company will be “sold” in 4-5 years time. This a good bargaining chip because by then only a few cars from the total number of cars sold will have an extnded warranty and the cost for servicing them will not be an issue worth mentioning in the “sale”.

    With the next model I expect the SuperCharger to be extended to other manufacturers and maybe becoming an independent business all together by the timeof the “sale”.

    1. ffbj says:

      I think that is a lot from a little. Building a mountain out of a mole-hill, as the saying goes.

  12. Pushmi-Pullyu says:

    I’ve seen at least one claim that Tesla service centers are getting busy, with the wait period between requesting service and when service is scheduled growing. If so, that would be at least one reason for the change.

    But as has already been said or suggested, another reason is probably so Tesla’s CPO (Certified Pre-Owned) program can make more money, by selling service plans for used Tesla cars.

    My guess is that one effect Tesla expects is to see more used Teslas sold to their CPO program, rather than sold from owner directly to buyer, since the buyer won’t be able to take advantage of the existing warranty. If I’m right, that will also give Tesla more control of market prices for a used Tesla car.

    * * * * *

    2013VOLT asked:

    “Would this cause used prices to go down as the warranties do not transfer to the new owner?”

    Common sense says “Yes”, altho my guess is it won’t impact prices that much, with demand for even used Tesla cars being so high.

  13. Nix says:

    Oddly, this could actually work out to benefit the majority of folks who might buy the extended warranty.

    Extended warranty’s are actually a bad buy, and if some folks actually get the benefit of peace of mind while they own the car, plus the benefit of getting a partial refund, they will come out ahead of most buyers:

    “In 2013, the Consumer Reports National Research Center conducted a survey and found that 55 percent of the people who bought an extended warranty never used it during the lifetime of the policy. The center also found that people who purchased such plans spent more for the coverage than what they received from the plan. Specifically, Consumer Reports found that purchasers spent an average of $1,214 on extended warranty plans, but only saved $837 on repairs. That’s a net loss of $377 for those who used their extended warranties.”

    1. sven says:

      It all depends on the number of repairs needed and the cost of the repairs. Tesla parts are expensive. The door handles are $1,300 a pop plus labor to replace. Replacing all four door handles would cost $5,200 for just the parts. Likewise a charger for the Tesla costs $2,300 plus labor to replace. Bjorn Nyland has dual chargers and needed to replace both of them. That would have cost $5,600 for just the parts. I forget how much the center screen costs to replace, but I remember that it wasn’t cheap.

      1. Nix says:

        The number I heard was $6,000 for the screen and associated parts, as a unit.

        That is all absolutely true. And if you have a 3 year extended warranty and none of those things happen DURING those 3 years, the warranty doesn’t pay out a single penny on it.

        This report found that overall, this was the case for 55% of people who bought extended warranties. They made no claims.

        Now if you sell the car 2 years into that 3 year warranty, Tesla will give you back a prorated amount of money, whether you had claims or not.

        So the cost of those repairs to the Model S you mentioned may or may not mean anything to individual owners. One person may need every single one of those repairs done, and then some. The next guy might not have a single repair in the extended warranty period. Either way, both get back a pro-rated amount of the money they paid.

  14. Nix says:

    It looks like Tesla is following the leads of Hyundai, Kia, and Chrysler who offer long warranties to the original owner, but also are not always transferable.

    1. sven says:

      Those long warranties are the original new car warranties (ie powertrain warranty), and not a separately purchased extended warranty. Dealer extended warranties on Hyundais, Kias, and Chryslers are transferable.

      1. Nix says:

        While you are correct in your statement, it as also not central to my point.

        My point is that other companies have already put limits on transferability of warranties (whether extended or OE), so there is already precedent out there for making warranties (in general) non-transferable.