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Tesla customers describe maddening problems with returns, refunds
Tesla can be sloppy and inconsistent in the way it handles returns and refunds, leaving some customers stressed and others stranded with no car and no means to buy another until they get their money back.
In the fourth quarter of 2018, as Tesla exerted itself to achieve profitability, CEO Elon Musk urged people to place their orders before year-end, when a tax credit for electric cars would become a lot less valuable. He touted the company's lenient return policy as part of his sales pitch.
Musk emphasized the refund and returns policy in a series of tweets, saying: "full refund if Tesla can't deliver your car this year," and "If you order a car without a test drive you get 3 days to return for a full refund vs 1 day if you do get a test drive."
In reality, getting a refund hasn't been simple for some Tesla customers, as the company has struggled with growing pains that Musk has described as "delivery logistics hell."
CNBC interviewed more than a dozen people who have recently sought refunds from Tesla, and reviewed their correspondence with the company along with relevant financial records.
These people returned their cars for allowable reasons, or decided to cancel their reservations with Tesla rather than move an order forward.
In extreme cases, Tesla left customers waiting for months beyond the date when sales or customer service personnel had originally promised to repay them, they say. In one case, a refund check for a $1,000 reservation fee bounced. In another, Tesla did not refund the $1,000 reservation fee, but instead sent a $40,000 check for a car that the customer never took possession of. In both cases, Tesla says it is now working with the customers on a resolution.
Even in cases where payment was prompt, some customers recounted that they received no information notifying them that Tesla had paid them back.
A Tesla spokesperson said, "Anytime we get a refund request, we work to process it as quickly as we can," and noted that most refunds are sent within 30 days. But the spokesperson said fraud prevention and processing delays with certain financial institutions may lengthen the response.
Unhappy returns
In the most extreme cases, some Tesla customers have waited weeks for refunds of tens of thousands of dollars after returning or rejecting shipment of their cars for allowable reasons.
On Dec. 7, Shawn and Indu Chhabra bought a Model 3 for $61,700 from Tesla in St. Louis. While they had the money to buy it outright, they took out a loan to pay for the vehicle because they wanted to keep cash on hand for expenses at their small business, Laptop Universe.
When they drove the car back to their office, they couldn't turn it off. It sat running in their driveway for hours before Indu Chhabra drove it back to the Tesla store.
Tesla offered a loaner while they serviced the car, but the Chhabras found the issues with it so alarming, they asked to return it and swap it for a fresh one.
When they went to pick up the replacement car a couple weeks later, they say, the sales team asked them to pay for it in full on the spot and assured them a refund for the first car would appear in a day or two. The Chhabras agreed.
As December went by, the refund never materialized. Shawn Chabbra asked what was going on in a series of worried calls and emails to Tesla.
On Dec. 31, employees from the Tesla store visited the Chhabras' office, imploring them to sign a legal document. The agreement said Tesla would refund the money only if the customer returned the car in good condition. Among other things, it asked them to promise not to sue Tesla over poor customer service.
Outraged, Shawn Chhabra began videotaping the interaction. His wife had already returned the car, he said. He wouldn't sign the document. Eventually, Tesla relented and Chhabra signed a modified agreement that promised not to sue Tesla if they refunded his money within 30 days, among other things.
Finally, on Feb. 5, eight and a half weeks after they bought the first car, the Chabbras got part of their refund in a check Tesla mailed to them. The company sent the remainder of the refund to their bank, which closed out their loan on the car. They say they had paid interest on the loan for months for no reason, as their cash had been spent on the second car and couldn't be used to cover expenses at their business.
Chabbra says he and his wife are very happy with their Model 3 but do not appreciate how they've been treated. CNBC has reviewed their correspondence with Tesla and the video, which support their story, and Tesla has not disputed it.
In another recent case, Tesla left Kerem Ozguz waiting for almost a month on his refund of $56,500 after a salesperson promised it would come the next day.
Ozguz flew home from a vacation in Mexico to take delivery of his Model 3 on Dec. 31, 2018, the last day a $7,500 U.S. tax credit for the car was available. By Jan. 2, he realized Tesla charging stations near his office didn't work for the Model 3. He also saw that Tesla had dropped the purchase price of the vehicle by $2,000. He says he felt rushed and bamboozled.
Tesla can be sloppy and inconsistent in the way it handles returns and refunds, leaving some customers stressed and others stranded with no car and no means to buy another until they get their money back.
In the fourth quarter of 2018, as Tesla exerted itself to achieve profitability, CEO Elon Musk urged people to place their orders before year-end, when a tax credit for electric cars would become a lot less valuable. He touted the company's lenient return policy as part of his sales pitch.
Musk emphasized the refund and returns policy in a series of tweets, saying: "full refund if Tesla can't deliver your car this year," and "If you order a car without a test drive you get 3 days to return for a full refund vs 1 day if you do get a test drive."
In reality, getting a refund hasn't been simple for some Tesla customers, as the company has struggled with growing pains that Musk has described as "delivery logistics hell."
CNBC interviewed more than a dozen people who have recently sought refunds from Tesla, and reviewed their correspondence with the company along with relevant financial records.
These people returned their cars for allowable reasons, or decided to cancel their reservations with Tesla rather than move an order forward.
In extreme cases, Tesla left customers waiting for months beyond the date when sales or customer service personnel had originally promised to repay them, they say. In one case, a refund check for a $1,000 reservation fee bounced. In another, Tesla did not refund the $1,000 reservation fee, but instead sent a $40,000 check for a car that the customer never took possession of. In both cases, Tesla says it is now working with the customers on a resolution.
Even in cases where payment was prompt, some customers recounted that they received no information notifying them that Tesla had paid them back.
A Tesla spokesperson said, "Anytime we get a refund request, we work to process it as quickly as we can," and noted that most refunds are sent within 30 days. But the spokesperson said fraud prevention and processing delays with certain financial institutions may lengthen the response.
Unhappy returns
In the most extreme cases, some Tesla customers have waited weeks for refunds of tens of thousands of dollars after returning or rejecting shipment of their cars for allowable reasons.
On Dec. 7, Shawn and Indu Chhabra bought a Model 3 for $61,700 from Tesla in St. Louis. While they had the money to buy it outright, they took out a loan to pay for the vehicle because they wanted to keep cash on hand for expenses at their small business, Laptop Universe.
When they drove the car back to their office, they couldn't turn it off. It sat running in their driveway for hours before Indu Chhabra drove it back to the Tesla store.
Tesla offered a loaner while they serviced the car, but the Chhabras found the issues with it so alarming, they asked to return it and swap it for a fresh one.
When they went to pick up the replacement car a couple weeks later, they say, the sales team asked them to pay for it in full on the spot and assured them a refund for the first car would appear in a day or two. The Chhabras agreed.
As December went by, the refund never materialized. Shawn Chabbra asked what was going on in a series of worried calls and emails to Tesla.
On Dec. 31, employees from the Tesla store visited the Chhabras' office, imploring them to sign a legal document. The agreement said Tesla would refund the money only if the customer returned the car in good condition. Among other things, it asked them to promise not to sue Tesla over poor customer service.
Outraged, Shawn Chhabra began videotaping the interaction. His wife had already returned the car, he said. He wouldn't sign the document. Eventually, Tesla relented and Chhabra signed a modified agreement that promised not to sue Tesla if they refunded his money within 30 days, among other things.
Finally, on Feb. 5, eight and a half weeks after they bought the first car, the Chabbras got part of their refund in a check Tesla mailed to them. The company sent the remainder of the refund to their bank, which closed out their loan on the car. They say they had paid interest on the loan for months for no reason, as their cash had been spent on the second car and couldn't be used to cover expenses at their business.
Chabbra says he and his wife are very happy with their Model 3 but do not appreciate how they've been treated. CNBC has reviewed their correspondence with Tesla and the video, which support their story, and Tesla has not disputed it.
In another recent case, Tesla left Kerem Ozguz waiting for almost a month on his refund of $56,500 after a salesperson promised it would come the next day.
Ozguz flew home from a vacation in Mexico to take delivery of his Model 3 on Dec. 31, 2018, the last day a $7,500 U.S. tax credit for the car was available. By Jan. 2, he realized Tesla charging stations near his office didn't work for the Model 3. He also saw that Tesla had dropped the purchase price of the vehicle by $2,000. He says he felt rushed and bamboozled.