Prepaid vs. Pay-As-You-Go Service Plans: The Financial Analysis

Wow, that's quite some analysis there, well done... I chose the pay as you go as I plan to skip the first service and start with year 2. I know it's probably statistically insignificant, but another assumption to your analysis would be that the car is not wrecked (totaled) during the first 4 years. If it's totaled, the money paid into the service plan is lost and not covered by insurance. But again, statistically insignificant I would think...

Very, very nice assessment and analysis. I am a long term owner, quite long term. So I did cough up the service plan. And honestly, based on it being such new tech, I simply don't know how worthwhile it will be. I have not upped for the extended warranty and am still trying to figure if I should.

Any advice would be awesome!

You leave out the mileage questions. I drive 40,000 miles/year so obviously the extended warranty is not cost effective for us. For low mileage longterm owners I agree it would be in there interest to get it.

Two intangible things you left out. Up until about 6 or 9 months ago, when signing up for the pre-paid plan, it was advertised to include "Hardware Upgrades" which still to this day remains nebulous as to what that added. My DS wrote this to me when I asked him:

That is a good question. Hardware upgrades refer to changes we make to components that are already installed on your Model S. Through the program, you would be eligible to receive any of the upgrades that we come out with at no extra charge.

For example, when the production team created a better defroster vents for the Model S last year, even older Model S equipped with the previous defroster vents could receive the upgrade. If you had the service plan, this was included. This is distinct from the warranty, which would cover replacement the vents with the same components if they were defective or failed.


Almost every car sold has a warranty to protect against defects in workmanship. Offering hardware upgrades means you are entitled to the latest and greatest version of each part of your vehicle, even if they are not defective.

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But most people have reported getting these "hardware upgrades" without buying the pre-paid plan. Under my DS's definition, I should be eligible for the "upgraded" turn-signal and cruise control stalk module, but that's never going to happen. Except for the vents, I'm not sure there are any other examples of people getting these upgrades that non-pre-paid people also didn't get.

They've since removed this wording from the pre-paid plans.

Also, the pre-paid plan was said to include free "Valet" service where they would come get your car and leave a loaner. I think this was also removed. So now it's just pre-paying for the annual inspection that costs $600 if you don't prepay.

I was going to buy the 4-year pre-paid plan, but in a moment of insecurity and weakness, I bought the 8 year plan. At least that should be worth something if/when I go to resell the car in the future (I know, it has no value if sold back to Tesla).

I like knowing I can take my car in annually (regardless of mileage) and it gets a through work-over and and TSBs, etc, for a fixed price of $475. When my 2002 BMW goes in for any repair, it's $1k minimum. :/

If I were to do it again, I still like the $125/year savings of the pre-paid plan, but I'd only go for 4 years. To me, calculating the opportunity cost of $125/year over four years is essentially inconsequential.

Can you prepay for 4 years and then add the additional 4 years later? Or do you need to make a decision for 4 or 8 upfront?

The biggest issue I have with the Tesla yearly services prepaid or not is that they do not differentiate between minor and major services where they actually do something significant. The service you do on odd numbered years mostly amount to new wiper blades and a key fob battery and you are charged $600 for that. The service that you do every 4 years is a bit more major with coolant and brake system flushes and that service is also $600. Makes absolutely no sense.

That is why I skip the plan, skip every other yearly service and change wiper blades and FOB battery myself.

MsElectric said:

The biggest issue I have with the Tesla yearly services prepaid or not is that they do not differentiate between minor and major services where they actually do something significant. The service you do on odd numbered years mostly amount to new wiper blades and a key fob battery and you are charged $600 for that. The service that you do every 4 years is a bit more major with coolant and brake system flushes and that service is also $600. Makes absolutely no sense.

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Partially-- you're also paying for their time to do a very thorough inspection to find anything that might need attention/adjustment/alignment, etc. When I took my car in for the first annual, they found several small items that needed attention, as well as resolved several issues that I brought to their attention. So it's really different that an ICE's 25,000/50,000/100,000 mile service that you are describing. If I took my ICE into a dealer with several minor items that needed to be fixed/addresses/adjusted, I'd be paying hourly for them to fix anything above and beyond *exactly* what's covered in the mileage interval service package.

Makes perfect sense. For Tesla.

HankLloydRight said:

Partially-- you're also paying for their time to do a very thorough inspection to find anything that might need attention/adjustment/alignment, etc. When I took my car in for the first annual, they found several small items that needed attention, as well as resolved several issues that I brought to their attention. So it's really different that an ICE's 25,000/50,000/100,000 mile service that you are describing. If I took my ICE into a dealer with several minor items that needed to be fixed/addresses/adjusted, I'd be paying hourly for them to fix anything above and beyond *exactly* what's covered in the mileage interval service package.

Makes perfect sense. For Tesla.

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When we take our Mercedes in for service for the "small services" we are barely charged $175. And that is to do al the little checks and maintain a vastly more complex ICE engine that includes an oil and filter change and "checking everything." IMHO this whole checking and lubing everything that they claim to do for the Tesla odd year services is a bit overrated and is not worth the $600. It really makes me question their whole statement about service not being a profit center and why I'd never own one of these cars out of warranty. Both our local Mercedes dealer and our local independent Mercedes place would gladly check our car over for free with the intention that whatever they find wrong will be covered by us or the factory warranty so they'll get paid to fix whatever they find at fault. About every 6 months I get invitation post cards from our Mercedes dealer to bring the car over for a complimentary check up.

The fact that Tesla charges $600 for the "small service" where you are essentially getting new wipers, a key fob battery, and a bunch of "checks" IMHO is vastly over priced and unreasonable. I am sure we both agree that the odd year service covers vastly fewer items than the service you do every 4 years so it makes absolutely no sense for those two services to be the same cost. Our annual service bill for the odd year services at the Mercedes dealer is less than $200 so I think it is pretty bad when the Tesla pricing structure makes a Mercedes a dealer look pretty darn cheap and reasonable by comparison

I am not unreasonable and I understand they give out loaners for services or offer valet service and such but perhaps for the odd year services they should have the option where they charge $200 and do those service items while you wait to reduce expenses and overhead on their side. I bet it doe snot take them 30-45 minutes to do the odd year checks and replace the wiper blades. $200 is about what I think the "small services" are worth and if Mercedes can manage with that for an ICE car, Tesla should be able to manage that as well.

The money wasted on the odd year services is a lot more than any comparison between prepaying the services or not IMHO...

I disagree -- the Tesla annual service doesn't take 30-40 minutes.. my car was in for TWO DAYS getting everything inspected and addressed. They really do a through inspection. If you don't believe me, go ask your Service center what the annual inspection entails. Also, I'm only paying $475 PER YEAR for all services to my car. That's it. No ICE I've ever owned only cost me $475 per year to maintain. These are very complex cars, and have dozens of computers and hundreds of sensors, servos, and switches that could break. They really go over the car to make sure everything is in perfect working order. A Benz dealer probably spends 30 minutes on a cursory inspection of fluids and brake pads, and then most likely finds half a dozen things to charge you to fix -- that's why the "inspection" is free (either you or MB-USA pays them for the repairs. I have owned MB and BMWs, so I know very well how those dealers work). Tesla is a different kind of company. If you want to project what every other ICE dealer does onto Tesla's practices, I can't stop you, but I don't think it's appropriate to slam the annual service just because you don't *think* they spend enough time doing it in the "odd" years. I'm sure they are losing money even at $600 per year per inspection. It's definitely NOT a profit center.

Zarwin said:

I know it's probably statistically insignificant, but another assumption to your analysis would be that the car is not wrecked (totaled) during the first 4 years. If it's totaled, the money paid into the service plan is lost and not covered by insurance. But again, statistically insignificant I would think...

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Actually, this isn't correct. If there is any unused credit for services yet to be performed and the car is totaled, Tesla will (and legally must) refund that unused portion. This actually has happened before to another TMC member (from memory someone who is very senior to TMC), and he/she reported success in getting a refund. It will take a call if not an email to Tesla, but they will do the right thing, so this isn't a risk at all to be factored into the analysis of whether to buy the pre-paid plan or not.

All I have to say is that if it actually costs $600 a year to maintain a Model S, even for the "small services," That's vastly more than what our local Mercedes dealer charges to maintain an even more mechanical and complex vehicle... Mercedes has A, B, and C services and their A service is less than half of what tesla charges.

Anyway I am glad you feel you got your money's worth for your service @Hank. Perhaps some of what they repaired would have been covered by the warranty. I am just going by the actual worksheet for what is involved with the services and for the odd years I really could not find what they do to be of much consequence especially for us as we will be driving less than 10K a year. We expect to spend less in maintenance for an EV so we'll be skipping the odd year services and replacing the wiper blades and the key fob batteries on our own.

Took my Acura MDX in for annual service yesterday, total cost $82. Included everything Tesla does plus tire rotation and synthetic oil change. I have never owned an ICE that cost anywhere near even half of what Tesla chargers to maintain. But I have never owned a Ferrari or Bentley

MsElectric said:

When we take our Mercedes in for service for the "small services" we are barely charged $175. And that is to do al the little checks and maintain a vastly more complex ICE engine that includes an oil and filter change and "checking everything." IMHO this whole checking and lubing everything that they claim to do for the Tesla odd year services is a bit overrated and is not worth the $600. It really makes me question their whole statement about service not being a profit center and why I'd never own one of these cars out of warranty. Both our local Mercedes dealer and our local independent Mercedes place would gladly check our car over for free with the intention that whatever they find wrong will be covered by us or the factory warranty so they'll get paid to fix whatever they find at fault. About every 6 months I get invitation post cards from our Mercedes dealer to bring the car over for a complimentary check up.

The fact that Tesla charges $600 for the "small service" where you are essentially getting new wipers, a key fob battery, and a bunch of "checks" IMHO is vastly over priced and unreasonable. I am sure we both agree that the odd year service covers vastly fewer items than the service you do every 4 years so it makes absolutely no sense for those two services to be the same cost. Our annual service bill for the odd year services at the Mercedes dealer is less than $200 so I think it is pretty bad when the Tesla pricing structure makes a Mercedes a dealer look pretty darn cheap and reasonable by comparison

I am not unreasonable and I understand they give out loaners for services or offer valet service and such but perhaps for the odd year services they should have the option where they charge $200 and do those service items while you wait to reduce expenses and overhead on their side. I bet it doe snot take them 30-45 minutes to do the odd year checks and replace the wiper blades. $200 is about what I think the "small services" are worth and if Mercedes can manage with that for an ICE car, Tesla should be able to manage that as well.

The money wasted on the odd year services is a lot more than any comparison between prepaying the services or not IMHO...

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Wow our Mercedes has never been treated like that. We cant wait to get rid of it. The regular maintenance and repairs have been a huge money pit. We have a 2007 R320CDI.

thx1139 said:

Wow our Mercedes has never been treated like that. We cant wait to get rid of it. The regular maintenance and repairs have been a huge money pit. We have a 2007 R320CDI.

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I never said the repairs with our Mercedes has been affordable We've had over $12,000 of warranty work done on our Mercedes. And thankfully they were all covered by the warranty/extended warranty and this is why Tesla or Mercedes I will never own premium car out of warranty.

But the cost of servicing our Mercedes has been 1/3 to 1/2 to about the same as what Tesla charges for each service depending on the actual service performed. The only difference is our Mercedes dealer charges us different amounts for the services performed depending on what type of service is done. For the "A" services it is around $180 the "B" Services are about $400 and the "C" services are around $600-800. The other way we keep service costs reasonable is by going with exactly what the owners manual claims we have to do. They like to load up the services with a bunch of nonsense but we always tell them go with what is on the owner's manual service schedule.

The other thing we did is do things like the cabin filter replacement on our own. They wanted to charge $75 for that and we bought the part for $25 and put that in ourselves. With how tesla not breaking down the individual service items you can't do that. It's odd to think that in this case the service department of our Mercedes dealer is more transparent and less expensive than Tesla.

With Tesla whether they only replace the wipers and key fob battery and perform a bunch of "checks" or do a full brake system and coolant system flush and a whole bunch of other things, the service is $600. That's just wrong IMHO.

Rather than prepaying for the services I think customers are better off doing the service every 2 years and the odd year you are not doing the service to replace the wiper blades and the fob battery on your own. Obviously if there is a covered service bulletin or something is wrong with the car you can take it in for repair but unless you put tens and thousands of miles in your car each year I don't see anything wrong with this approach and Tesla themselves are saying "servicing" the car has no effect on the warranty. Performing the $600 service every 2 years makes sense to me and I feel it is as it should be because otherwise we'd be paying more to maintain our EV than our Mercedes.

I agree with MsElectric. Over the past 25+ that I've owned cars, I can only recall one routine service visit that cost more than $600. That was when I had the timing belt replaced proactively at 100,000 miles. I have had several repair bills which exceeded $600 but routine service visits were always much less.

With the VW TDI, I considered myself lucky to get out for under $700 (usually it was well over $1000) for regular service ($22K total for the five years I had it. I'll never touch anything that has to do with VW ever again). The Prius' actual maintenance cost was $600 per year, same as the Model S. And with the Prius you have to bring your own measured oil or else the dealer will overfill it--very annoying.

MsElectric said:

For the "A" services it is around $180 the "B" Services are about $400 and the "C" services are around $600-800. The other way we keep service costs reasonable is by going with exactly what the owners manual claims we have to do. They like to load up the services with a bunch of nonsense but we always tell them go with what is on the owner's manual service schedule.

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That is a huge difference. Our A and B services were both over $500 and the C service over $1000. Even when we went to a 3rd party Mercedes Service center the prices were only like $100 cheaper. I do agree that the Tesla service charge is high. Our 2012 Volt has had one scheduled maintenance. Just a $32 oil change at 52K miles. The couple of inspections have been on the house. Funny thing is I get solicitations from the dealer in email for other services for systems a Volt doesnt even have.

The price of the pre paid plans for a equivalent Mercedes (CLS550) are basically the same price as a Tesla. Tesla should just not market that maintenance is cheaper than an ICE.