Can you imagine how the big shock hit thousands of unsuspecting customers? In what has come as a surprise to many automotive industry pundits, Tesla has abruptly slashed its four-year warranty (for used cars), reducing it to just a year! Observers interpret the automaker’s latest move as an attempt to tighten the belt ahead of a crucial financial report for the third quarter.
Interestingly, a recent report by the widely respected auto-industry analyst, Electrek, gives us a peek into Tesla’s apparent mindset. Electrek notes that for years Tesla’s used Model S and X were safely protected by a limited warranty for used vehicles that had covered 50,000 miles or four years (whichever comes first, counting from the date of delivery). This offer is now void.
Nevertheless, Tesla’s customers will gladly learn that the limited warranty for the original Battery and Drive Unit balance remains in force.
Tesla’s New Warranty Deal is a Mixed Bag
Curiously, in the surprise move, Tesla decided to offer a one-year warranty (which translates to 10,000 miles) over its original policy. This means that if you buy a Tesla Model S (made in 2017 and which has covered 40,000 miles), the used vehicle warranty will cover 1/5 of the mileage. Note that this is just ¼ of the period the previous warranty covered.
In this case, it makes better sense to go for a used 2019 model with its bulk of warranty still intact. It’s little wonder that analysts feel this is a raw deal compared to the previous package that Tesla customers enjoyed.
Tesla plans to offer the used-car warranty above its new-car package. Behind every cloud, there’s a silver lining- consider this: in the last four years, Tesla hasn’t produced its most affordable Model 3 and Y cars. Thus, the new warranty might benefit those who buy Tesla’s newer used vehicles.
On the flip side, if you planned to acquire any of Tesla’s used vehicles made in 2016 or earlier (such as Model S and X), you’re in for a big shock. Why? Compared to the previous deal, you stand to lose. Therefore, it might be wiser to consider approaching third-party dealers-rather than pitching Tesla directly- if you want to make a few savings. Generally, third-party agents are likely to sell you an older Tesla at a considerably lower cost.
Tesla Brings Down the Roof on Customers’ Warranty Benefits
In its report, Electrek did not reveal the reasons for Tesla’s sudden move on the used-car warranty. However, Electrek notes that the activity will diminish customer faith in Tesla’s used cars. Instructively, this development comes hot on the heels of the automaker’s recent action to cancel an audacious return policy.
Under the canceled plan, new Tesla customers could return purchased vehicles within seven days for a full refund. Observers further noted that Tesla released the controversial changes soon after selling a record-breaking 139,000 vehicles. For Tesla, this was a third consecutive quarter of consistent performance.
When asked to comment, Tesla failed to respond. Electrek subsequently revealed that Tesla had dissolved its public relations department. This action undoubtedly, made it challenging to direct further inquiries. On a brighter note, analysts expected that Tesla’s CEO, Elon Musk, would possibly shed some light on these decisions during the company’s scheduled third-quarter earnings meeting.
Many consider Tesla’s latest move, curious. Overall, most customers seemed to view the company’s used car warranty and 7-day return policy as a useful confidence-builder in the automaker’s range of vehicles. They felt these initiatives put Tesla way ahead of competitors. With the new changes, the ground is bound to shift significantly.
Tesla’s latest announcement on warranty changes come as disappointing news for customers who hoped to save by buying a slightly older car model from the world-leading electric vehicle manufacturer.
Some customers also feel that with Tesla’s scraping off the warranties, its products will now be par with the competitors’. While this is not bad, it pushes customers to choose to either stick with Tesla or go for the competition.
The jury’s still out on how the new changes will eventually impact Tesla’s used-car sales. Moreover, observers are waiting to see how customers will react to the company’s unexpected announcement.