DETROIT (Reuters) – Auto leasing and financing company Xcelerate said on Thursday it has launched the first U.S. third-party extended warranties for electric vehicles, including those of market leader Tesla Inc, filling a void for used vehicles that have so far lacked such coverage.
FILE PHOTO: A Tesla logo is seen at a groundbreaking ceremony of Tesla Shanghai Gigafactory in Shanghai, China January 7, 2019. REUTERS/Aly Song/File Photo – RC1BB6CDF460
The warranties will be sold in partnership with Endurance Warranty Services LLC and insurance company AmTrust Financial. Frisco, Texas-based Xcelerate already specializes in leasing Tesla vehicles to commercial customers.
A vehicle warranty acts like an insurance policy to cover vehicle repairs. Third-party policies are commonplace for traditional internal combustion engine vehicles.
As electric vehicles age and enter the used-car market, dealers have complained customers often refuse to buy them without this coverage, said Xcelerate vice president for sales Milad Davoodi, who previously worked as Tesla’s global manager for trade-in and used vehicle operations.
“The only way to get an extended warranty agreement from Tesla is if you buy the vehicle new from Tesla,” Davoodi said. “If you bought a car from a dealer, you’re not qualified.”
“This was a problem that had to be solved.”
The product, X-Care EV Protection, covers all fully-electric vehicles on the market, such as Nissan Motor Co Ltd’s Leaf and General Motors Co’s Bolt, and will be sold through dealers plus directly online.
Xcelerate’s product comes as Tesla has ramped up production of the Model 3.
Tesla delivered 145,610 Model 3s in 2018 and has promised to build 7,000 per week at its Fremont, California, factory by the end of 2019.
Davoodi said as the Model 3 is relatively new, it is hard to know what long-term problems it will experience, but so far some vehicles have had issues with suspensions, trunk latches, camera sensors and harnesses, he said.
Repair bills for some items could be high. The replacement cost for the unit controlling the 17-inch touchscreen in Tesla models is $3,000, Davoodi said.
The cost for a four-year, 50,000 mile extended warranty on a Model 3 if bought before the car hits the 5,000 mile mark is $3,200.
A warranty on a comparable passenger car with an internal combustion engine would generally be higher because it has more moving parts that are subject to wear and tear, industry analysts said.
The new warranty covers most major components, but does not include the drive battery pack or motor. Davoodi said Xcelerate is looking at the possibility of add-on coverage for the battery and motor.
Reporting by Nick Carey; Editing by Phil Berlowitz