After all the anticipation and delivery of Model S comes the period of pure enjoyment and lots of grinning. But there is another timeline and dealing looming for those that want to take advantage of that — selecting a service plan. You have 60 days from the time of delivery to select a pre-paid service plan and the clock is ticking.
You get access to the choices through the MyTesla portal on Teslamotors.com under a section titled “MODEL S SERVICE SIGN UP.” Clicking into that currently provides options for pre-paid service and for an extended warranty. This post focusses on the pre-paid service plans only. You have plenty of time to consider the extended warranty if you just purchased.
According to Tesla, a standard annual service (not pre-paid) is $600. There are two choices for the optional pre-paid service plans:
- 4 year plan – Tesla Service for four years/Up to 50,000 miles. Cost: $1,900. This represents a base 21% discount.
- 4 year plan + 4 year extension – Tesla Service for eight years/Up to 100,000 miles. Cost: $3,800. This represents a base 21% discount.
Both plans plans include annual inspection, or an inspection every 12,500 miles. In the early days there were different options available and some options may vary depending on location. For instance if you don’t live too close to a Tesla Service Center, Ranger Service options may be available or even included. For my area service is described as follows:
You can bring it to a Tesla Service Center, or have your car picked up in exchange for a loaner at no charge with our valet service.
I can personally vouch for the valet service being available as i’m scheduled for one next week. The valet service is provided at no extra charge and is a really nice offering.
With regards to service, Tesla makes this bold statement:
Even if you never bring in the car, your warranty is still valid.
For these plans the main decision you face is whether you want the pre-payment discount or not. Unless you’re a rebel, you’re going to have some kind of annual (or more often) service/inspection on the car done. This is all about how much you pay for that.
On the surface it looks like you’re getting a 21% discount by pre-paying, but that doesn’t take into consideration what you could do with your money if you weren’t pre-paying. Lets first look at the basic 4 year pre-paid service plan and assume you can earn a relatively risk-free 5% APR on an investment. Pre-paying $1,900 now looks like $2,309 in future dollars 4 years from now. Paying $600 each year starting a year from now on the first service for 4 years adds up to $2,586 in future dollars. So even accounting for the time value of money the pre-paid plan is about 11% less expensive with the assumptions above.
Even accounting for the time value of money the 4 year pre-paid plan is about 11% less expensive
Now doing the same exercise on the 8 year pre-paid service plan we get a bit of a different picture. A $3,800 pre-pay is worth $5,614 at a 5% annual rate in the future. Paying $600 per year at the time of service adds up to $5,729 in future dollars. So the 8 year pre-paid service is only a 2% discount over paying as you go.
The 8 year pre-paid service is only a 2% discount over paying as you go.
Naturally these results will vary based on your actual investment return as well as on the inflation rates. In times of high inflation the pre-pay option is much more attractive. But if you can get a 10% return on your investment (buy TSLA stock!) the pre-pay option is less attractive. Either way you’re essentially looking at about a 10% discount by handing over money now. Some people may not have the money for the prepay thanks to their recent Model S purchase and for the most part that just means they won’t get the 10% discount off service, not a big deal. And it never makes sense to put pre-payments on a credit card and make payments!
It never makes sense to put pre-payments on a credit card and make payments!
Both the service plans above presume an average annual mileage of 12,500 miles and that number is based on some US averages. Personally, I drive a lot more miles than that annually. Since I bought my Model S i’m averaging at a rate of 32,000 miles per year which is consistent with the mileage I put on my previous car. This means the service plans are not 4 or 8 year plans but much shorter. The 4 year plan is more like a 2.5 year plan and the 8 year plan is more like a 5 year plan. Since the shorter plans reduce the timeline for investment returns, the value of the plans is actually higher with higher mileage if you need maintenance at the same intervals.
The value of the plans looks higher with higher annual mileage if you need maintenance at the same intervals.
The major assumption here is that you would still have your “annual” inspection/service every 12,500 miles if you’re a high mileage driver. The reason for this is the language in the service plan agreement from Tesla:
“Notwithstanding the date this Agreement is purchased or becomes effective, maintenance inspections must be performed within 1,000 miles or 30 days of the specified maintenance intervals for Your selected Plan. Any scheduled maintenance not completed within such time will be excluded and no maintenance inspections will be added as a replacement for any such excluded maintenance inspections.”
This means you have to do the inspections at the frequency they specify in the plans. But going in for an “annual” inspection every 4 months or so on a car where annual maintenance isn’t required to maintain the warranty didn’t make sense. I reached out to Tesla service to get some clarification. My question was: “If i’m a high mileage driver at 32K miles per year do I need the major/”annual” service every 12,500 miles?” They answered that it wouldn’t make sense to come in every 12,500 miles if I drive a lot more than that in a year. Their suggestion was that I have the “annual” inspection/service done every 24,000 miles and that the pre-paid service plans really don’t make sense for a high mileage driver. I’m not sure where they came up with the 24,000 number from but twice the normal would be 25,000 which makes more sense to me and the difference is minimal so thats what i’m going to work with.
The math for this stands out. Lets say I plan on driving 100K miles in my Model S. If I go pre-paid, i’m going to have to pre-pay $3,800 for the 100K miles worth of services which I must perform every 12,500 miles or so. If I pay as I go and pay $600 every 25,000 miles its going to cost me $2,400. Not even considering the time value of money, paying as you go is a clear winner for high mileage drivers if you follow something closer to a true annual service.
Pre-paid service plans don’t make sense for a high mileage driver
I was curious what other owners did in terms of service plans and fortunately someone had already created a poll online on the forums with results:
- Buy shortest term pre-paid service contract
- Decide later on extending that for a longer term (its not obvious but if you pre-purchase only the 4 year you may be able to later extend that to the 8 year plan)
- Waiting until 30 days before standard warranty expiration (4 years/50K miles) before deciding/buying extended warranty.
With most drivers driving significantly less miles than I do the average choice above makes a lot of sense. Get the discount that makes the most sense and then make the other choices much later.
The 4-year pre-paid service plan makes a lot of sense for most people that have annual mileage at or under the 12,500 miles per year number. It’s a fairly low upfront cost and you’ll definitely save money with it. The other plans have different timelines and may or may not be worth the investment, so i’d recommend a “wait and see” approach on those.
If you have average mileage, the 4 year pre-paid service plan makes sense and will save you about 10%.
So, with my high annual mile what did I do? The answer, thanks to Tesla service’s recommendation, is nothing. I intend on getting the extended warranty, but thats more than a year away before I have to worry about it. Meanwhile i’ll pay as I go for the “annual” check ups which don’t need to be nearly as often as i’d be tied to thanks to the wording in the plans.
If you have much higher than average mileage, don’t buy a pre-paid service plan.
The outstanding question to me and one that service wouldn’t be able to easily answer is why Tesla chose to write the plans such that they’re 4 years/50K miles with a set mileage interval for the service versus a simple “4 years and annual service”. Then the plan would apply equally to high mileage drivers as lower mileage drivers and neither would encourage violation of the warranty. Only the lawyers can answer that one.
This post first appeared on Teslarati.