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