The Tesla S is getting great reviews from Consumer Reports and a 5-star rating from the National Highway Traffic Safety Administration (NHTSA). It made sense to me that if I wanted a great car I should investigate how much a Tesla would cost. I knew there were three models, a 60 kWh battery, an 85 kWh battery and an 85 kWh battery performance edition. I thought Tesla had stopped selling the 60 kWh battery model, but there it was on the website, so I clicked on Tesla, then order and there it was.
What a shock it was to find that a Tesla 60 kWh battery edition was not only for sale, but also in my price range – $129 per month! Sure, this was not the most expensive souped up edition, but it was well within my reach as I had budgeted $350 a month for payments. I figured this included the $7,500 federal tax credit because even the Chevy website showed the MSRP with and without the federal tax credit. I was okay with that.
The Chevy Volt listed their monthly finance at $521/month for 72 months at 5.9% APR for Well-Qualified Buyers. Amount Financed would be $31,496 with $3,499 down payment. Tesla was looking even better.
I dug a little deeper, clicking on cash and noticed that the price to buy the Tesla outright was $63,570, after the $7,500 federal tax credit. How could the monthly payment be so much less than that for the Chevy Volt – priced at $34,185?
I went back to finance and clicked on calculate and that is where I found the reason the California New Car Dealers Association (CNCDA) has asked the DMV to investigate Tesla for advertising violations.
The actual cost of the Tesla I was pricing is $71,070. If you put 10% down and can get a 3.3% financing rate (which is what Tesla calculated) you can pay $980 per month for 72 months.
It turns out that $129 per month is an “effective” cost, calculated after one takes into account the difference between the price of gasoline and the price of electricity over 15,000 miles on a sedan that averages 20 miles to the gallon at $4.90 premium fuel. Tesla takes $261 a month off the actual cost of the car in this calculation. Another $272 comes off for a business tax benefit, take off $167 for commute savings and $39 for a 3-year guaranteed resale value (even though you have a 7-year loan) and last, but not least, $33 for time savings.
Usually if I go to a website that says “Explore the true cost of ownership” it talks about the true cost of ownership that includes taxes, depreciation, insurance and repair costs. Typically, it increases the cost of owning a car. Tesla doesn’t include any of these in their “true cost of ownership.”
I’ll give Tesla the 15,000 miles annually; I would live in my Tesla if I owned one. But Tesla’s competitors, Audi A6, Mercedes-Benz E-Class, BMW 5-Series, and Lexus GS have increased their fuel economy to 26 miles per gallon, not 20 mpg.
The price of premium gasoline has also gone down. According to gasbuddy.com, yesterday’s highest premium gasoline price was $3.97 in Southern California. That’s .90 cents cheaper than what Tesla’s website says. Even on their own website they use different numbers in different locations to calculate savings.
Not only does the CNCDA say the advertising is deceptive, there are also reasons to be concerned. Some of these are: using finance rates that don’t say how they are annualized; using tax credit’s that aren’t applicable to everyone; decreasing payment amount by the resale value guarantee; decreasing the amount of the payment by gas savings; and using incorrect numbers in those gas savings calculations.
Both Ford and Hyundai have come under fire lately for misrepresenting their miles per gallon. Ford made goodwill payments following the C-MAX relabeling as well as sending checks to all 32,000 2013 C-MAX owners who purchased their vehicle before the label change. Retail customers who bought their vehicle will receive $550; retail customers who leased their vehicle will receive $325. The amounts reflect the average estimated fuel costs of the difference between the two labels. The payments only went to C-MAX customers. Ford also changed their C-Max label from 47 mpg to 43mpg.
The Hyundai and Kia fleet fuel economy level was reduced by an average of 3 percent “ from 27 to 26 mpg.
I asked Hyundai how much it would cost them and they gave me a glimpse into figuring it out. “Heres an example of how it might play out: A typical Hyundai owner in Florida who drove 15,000 miles last year after buying a car in January and experiencing the 27 to 26 mpg difference results in 21.4 gallons of gas at a cost, then, of $76.71. We added on 15 percent, an additional $11.32, for the inconvenience, meaning the customer would get a gas card for $88.03.
“About 35 percent of Hyundai and Kia cars were impacted, approximately 900,000 total vehicles. Since reimbursements are due for as long as the customer owns the car, and the variables of mileage and gas price are almost infinite, there is no way of determining how much will be paid. Some customers have received more than one gas card while others have not asked for one. We took so many steps to alert customers, including a dedicated program website, prominent link on our consumer web site, advertising in 26 major, national papers (including The Washington Post), through a dedicated customer call center, a video conference call with our dealers the day the program was announced, owner mailings, email blasts and additional mailings, a continuing dedicated web site, and ongoing dealer participation and warranty reimbursement.”
Tesla has sold a little more than 12,000 unit’s Jan-Aug, 2013, about half of them in California.
CNCDA says this is not a matter of whether or not Tesla is allowed to sell their vehicles in California. “It is whether Tesla can advertise the way they advertise. Tesla Motors, Inc. (Tesla.) is licensed by the Department of Motor Vehicles as both a Manufacturer (OL # 63277) and dealer with 13 locations operating under a single dealer license (OL # 68106). Tesla’s primary source of advertising is it’s own webpage (www.teslamotors.com), which includes several deceptive and misleading statements in violation of state and federal law.”
The CNCDA says that, “Pursuant to Vehicle Code Section 40000.11(a), this violation is a criminal misdemeanor. Pursuant to Vehicle Code Section 11705(a)(10), the Department may seek to suspend or revoke Tesla’s dealer license for this violation.
California’s DMV said they do not comment on open or possible investigations. They would not confirm whether this was an open or possible investigation.