Carvana CEO Says Tesla’s Return Policy Is Enormously Powerful

MAR 8 2019 BY VANJA KLJAIC 43

With the current Tesla return policy, you might enjoy your car for up to a week before returning it

When Carvana CEO Ernie Garcia went on CNBC’s Squawk Alley to discuss Tesla’s new sales strategy, he was full of praise for the electric carmaker. The interview centered around the electric car maker’s move to a new, online-centric sales model. Consequently, the whole procedure of customizing & ordering your vehicle will be a much easier and more pleasant experience. And Garcia praised that decision completely.

However, it’s Tesla’s vehicle return policy that will most likely be a deciding factor for some of the customers. And this is especially true when you take into account their recently improved sales and delivery track record.

“I think every business has its challenges, but they’ve done a pretty good job overall. I wouldn’t be betting against them. I think when you buy a new car, questions are different, but the return policy is enormously powerful like it is on the used side. A customer knows they can return it,” the CEO said.

Currently, Tesla employs a standard return period of one (1) calendar day after delivery. However, some owners might take delivery of their vehicle without even taking it on a test drive or having a demo with some of Tesla’s salespeople. In that case, the company understands that you might require some extra time. After all, you need more time to get to know your vehicle. Hence, in that case, Tesla will grant you a return period of seven (7) calendar days after delivery to return your vehicle. Naturally, subject to the terms and conditions of their return policy.

And for most would-be Tesla owners that might purchase the vehicle online, they will essentially get a grace period of a whole week before making the decision on whether they like the car or not. And we aren’t familiar with a lot of car makers doing the same.

This is a powerful advantage Tesla has against their biggest rivals. And for Tesla, the company might not be at a loss in any case. After all, their vehicles are a highly coveted item. In turn, some of the returned Model 3, Model S or Model X, might find their new home rather quickly. On the other hand, this just shows us in what technologically advanced age are we living in. With a move like this by Tesla, ordering a vehicle is getting as easy as it is ordering a new mobile phone. Or a toaster. You go online, pick your specifications, change the colors and add personal items, and that’s it. You get it delivered in a certain amount of time. You don’t like it? You return it back, no questions asked. And that will make ordering a car a great and an easy to do experience.

And when Tesla decides to offer financing through their website in a similar and easy to do way, the rest of the automotive industry will be hard pressed to make some rather difficult decisions. However, for the most part, there’s nothing wrong with that.

Source: Teslarati

Categories: Tesla

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43 Comments on "Carvana CEO Says Tesla’s Return Policy Is Enormously Powerful"

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The desirability of a Tesla vehicle makes this practical. There would be no shortage of discount seekers for the ones that do get returned. Also, the costs savings are likely to be much greater than the discounting.

Might not work for a Yugo, but that’s a different story.

Of course there will have to be a few constraints to prevent abuse, like disallowing people from buying and returning a car every month. Should be manageable.

I wonder if test drives are available at any of the galleries that will remain open and if any of the stores will be converted to galleries or service centers. I have a store about 5 miles from me and wonder what will happen there. I am sure the ICE dealerships on either side of the Tesla Store will be happy if it left. Really expected it to become a Gallery or service center….it has a large lot.

I also read where if you had a trade in, you don’t get your care back, just the appraised value applied to the purchase and if you upside down, then you would have to pay the negative balance to return the car. Which all makes sense.

Pretty sure the plan is for the remaining galleries to become “look & drive” locations. Might have to go further for the first look, but once you decide and order, the vehicle is delivered to you.

The paperwork is pretty simple to buy a car, dealers make it harder because they want to upsell you on useless stuff like fabric protection and down value your trade in. As long as you have the money or loan, it’s sign and drive.

We’ve yet to hear the plan for trade ins, but it could as simple as going to a designated wholesaler who determines the credit, then off it goes to the auction house.

There are still some loose ends, but I’m optimistic the final process will be smooth and simple. Because that the way Elon wants it.

Additional issue I’ve been wondering about. Sure, just give appraised value for the trade in and ship the thing off to somewhere else. But what about trade in vehicles that are Teslas? I’m sure that’s a small number right now but it will certainly grow substantially. CPO second sales are a cash cow for most OEMs. They get to sell the same vehicle twice effectively doubling the ‘lifetime’ margin.

There definitely will be a shortage of discount seekers…the returned car will not qualify for state and fed credit on the second owner. Is Tesla really going to eat that?

No

Which would you rather have: a $3750 tax credit that you have to wait a year to claim or an instant $3750 discount because the car is no longer entirely “new”? I’d take the second in a heartbeat.

To avoid having to wait a year, you can lower the tax withholding on your paycheck or lower/eliminate your estimated tax payments, until you reach $3,750 in federal tax savings. It’s not that complicated or inconvenient.

I had to Google who Carvana was, it would have been helpful to have mentioned it in the story. I then clicked on the linked Teslerati story where it’s made clear that they are an online used car dealer, which gives a lot of context to this story. Maybe Carvana are well known in the US, so it’s assumed that readers already know that, but they’re not really known outside (UK here).

Not well-known in the US…

Indeed. The mention in a comment here on InsideEVs just a day or two ago was the first I’ve heard of it. But perhaps Carvana will become well known in the USA before long!

Carvana advertises really heavy in the southeast and has lost huge amount of dollars as they have yet to be profitable as they keep growing and expanding.

But their car vending machines are kinda cute, put in the token and the car pops out.

They put up one of their car vending machines not far from me last year. That was the first I’d heard of them.

Carvana CEO Garcia is hoping Elon will load those Carvana vending machines with shiny new and CPO Teslas because the used VWs and Chevys just aren’t making the bottom line any fatter.

Their commercials are in constant rotation in the Philadelphia area. But then they have one of their “vending machines” within sight of I-95.

It’s not a substitute for a test drive though, because a test drive doesn’t involve buying, registering, financing and trading in a car, which is just a lot of steps to go back on if one does decide the car is not for them after all. A car is just a big and long term commitment which is why I don’t really believe the ordering one could be like ordering a toaster hypothesis, even if there is a compelling return policy.

Tesla will figure out how to loan you a car for a day if it’s important.

Right. Which is why I wonder if Tesla will arrange test drives thru Tesla Service Centers, altho since Tesla can’t offer test drives at Tesla Galleries in some States, it may be that laws will prevent such test drives in some States.

Hopefully local Tesla owners clubs will take up at least some of the slack in such States?

Or, Tesla Could just Rent the cars, for 3-7 day segments, at a fixed price per car, time segment! 30 Minutes of instruction, plus a DVD for more info to study, and off you go!

You guys need to read the verbiage carefully. In the article above it says if you haven’t taken IT on a test drive – implying the test drive is of the specific car you are buying, but that’s not the policy. Tesla’s verbiage (from the link in the article) states: “If you have taken delivery of your vehicle without ever having taken a test or demo drive with us, we understand that you may want additional time to get to know your vehicle” – Basically, if you have EVER test driven ANY Model 3 then the 7 day window doesn’t apply. So, if you have taken a demo drive of some other car, get yours, and 2 days in you discover a bunch of stuff you don’t like, well, it’s like most car purchases – you are SOL.

That’s interesting, I always assumed it was if you had test driven any model 3. I thought they all came straight from the factory after you purchased it.

It’s good to have a caveat, but let’s wait and see how Tesla enforces the fine print, or doesn’t, before chastising them for misleading advertising.

Don’t yell before you’re bit.

I know my local Chevy dealer has a 7 day policy on any vehicle purchase, so this isn’t “new” to the industry. The new part is you won’t be able to test drive “your” car before you sign on the line.

But is that Chevy, GM, or just your dealership’s policy?

So now Tesla is freezing their store closings til the end of the month?

Wow, there really is a bit of chaos going on in Tesla World, anybody here know what’s really happening?

Anybody who interpreted the announcement as “all stores will be closed immediately” just didn’t read properly. Most, not all to be closed over the next few months. Doesn’t make sense to close stores whose lease has not run out and terminating leases takes time.

Well since you asked: Yes, I have a clairvoyant insight into Tesla’s plans… 😉

…which I got by actually reading Tesla’s press release, which very specifically rules out closing all Tesla Stores as soon as you’re suggesting, Bunny.

“Over the next few months, we will be winding down many of our stores, with a small number of stores in high-traffic locations remaining as galleries, showcases and Tesla information centers.”

Tesla has already closed a couple of stores. I can personally verify that Tesla closed the store near me in Brooklyn, next to the Brooklyn Bridge, and the store in Washington D.C. on H Street.

Tesla has been quietly scrubbing the stores that it has closed from the “Locations” link on their website. In the links below, you can compare an archived version of their store list from October 18, 2018 to the current version found on their website.

WayBackMachine internet archive – October 18, 2018:
https://web.archive.org/web/20181018221701/https://www.tesla.com/findus/list/stores/United+States

Tesla store location list:
https://www.tesla.com/findus/list/stores/United+States

For each and every store Tesla closes, it is going to have to pay a hefty termination fee for breaking the lease. Tesla might have delayed most store closings to push these hefty termination fees to the second quarter and/or third quarter in an attempt to show a slight profit in the first quarter.

They already said they no longer expect a profit in Q1…

Tesla should have a VR test drive solution developed. This would let customers “drive” the car around their local streets while operating the various gadgets in the car.
The ride, noise levels and handling of electric cars are generally excellent, so those aspects of the car should not be a concern for potential owners.

A computer simulation of a test drive isn’t going to give anybody that famous “Tesla grin”, the visceral reaction to a test drive which is one of Tesla’s biggest selling points.

Ironic you called out ride and noise level here since, on TMC, those are two areas oft criticized by owners. The road and wind noise levels are often higher than comparably priced cars at freeway speeds (where it matters most) – engine noise is rarely an issue in most cars at freeway speeds these days. This is an area where traditional ICE manufacturers still have an edge. The ride quality seems to have been a challenge since day one for the Model 3. The earliest cars in particular were very rough, but Tesla appears to have modified the struts multiple times over the last year. Heck, when aftermarket suspension companies are offering “comfort” coilovers (vs. the normal “sports” coilovers you typically see from aftermarket companies) for the Model 3 as an option, I think it’s fair to say the standard suspension tune on the Model 3 is a bit too sporty for a lot of people. As a comparison, BMW offers their base, sport, and adaptive suspensions on the 3 series. I look forward to the day when Tesla does the same. The “air suspension” option was supposed to come to the Model 3 when dual motors were released, and… Read more »

Yea, I want to go through the entire finance process to test drive a car. What a great idea.

You will have other options such as test drive from one at a service center.

I hope so, but so far as I know,Tesla hasn’t said so.

Not sure wtf those stupid thumbs down are…,

But regardless, yes you’ll be able to set up a test drive and test drive at any service center location.

Yes indeed !!!

You don’t have to,,, that is just a story you are telling yourself…

I guess you currently have no “Tesla Owning Friends”, either!
😀

Or, you could call them up, and go for a nice run!

As soon as Tesla’s brings out sweet leases on Model3 they will pull clean ahead of the rest of the industry.

Nobody knew who Carvana was until Garcia did this interview. Now everyone knows!

Move along people, nothing to see here, just a used car salesman.

Sorry, I’m just being cynical. He probably makes a valid point.

Tesla has allowed some form of return for quite some time now; what happens if you get into an accident, are you still able to return it?