Tesla customers describe maddening problems with returns and refunds

Key Points
  • Tesla CEO Elon Musk frequently touts the company's refund and return policy when encouraging people to buy his company's electric vehicles.
  • Today, some Tesla customers say the company left them stressed and stranded, waiting months to be paid back for returned cars or canceled reservations.
Consumer Reports no longer recommends the Tesla Model 3

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

Indu and Shawn Chhabra, co-founders of Laptop Universe, drive a Tesla Model 3.

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.

The existing reservation list for new Tesla Model 3 electric vehicles is more than 400,000 people long.
Stephen Lam

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 the charging stations near his office didn't work for the Model 3. (He originally thought they were Tesla charging stations, but discovered later they're not.)

He also saw that Tesla had dropped the purchase price of the vehicle by $2,000. He says he felt rushed and bamboozled.

Since he was still within the three-day window that Musk had promised for returns, he brought the car back. He said a sales rep told him to check his account online to see a record of his return and refund, and that he'd have his money the next day.

When his return and refund information didn't materialize, Ozguz e-mailed and called Tesla customer service several times, then visited the sales center to get his refund details in writing. They sent him a follow-up email with a vague promise that a refund could take up to six weeks after his return was finalized, which itself could take 30 days.

During that time, he had no car and no money to buy one, and borrowed a family member's car instead. Finally, he got his money back on Jan. 29. CNBC reviewed his correspondence with Tesla, which supports his account of events, and Tesla has not disputed it.

Although Tesla returned his money within the 30-day window that the company strives for, Ozguz says the Tesla employees he interacted with seemed uninformed, and griped about how Musk could change anything with a tweet.

"It feels like a bunch of college kids running the company," Ozguz said. "They're selling this amazing product but nobody has a clue how to do anything in customer service. Which means I probably won't buy from them any time soon even though I love the cars."

Even after Tesla took his car back, Ozguz said, he still had access through the Tesla drive app to see where the car was located and remotely engage features from the entertainment system to air conditioning. Tesla did not comment on this aspect of Ozguz's account.

No reservations

Tesla was not only slow to refund the full price of cars that some customers returned, but it has also been slow to return reservation fees on canceled orders, according to customer accounts and documents reviewed by CNBC.

In one case, Ramiz Babar paid $1,000 to reserve a Model 3 in August 2017, making his payment by credit card. But before the version of the Model 3 that he wanted was available, he bought a Model S instead from an individual seller and sought a refund for his reservation.

A Tesla support specialist e-mailed him on Sept. 12, 2018, promising a refund check would be sent to his mailing address in Georgia in 30 to 60 days. In fact, Tesla didn't issue his refund check until Jan. 23, 2019, more than four months later.

Babar deposited it, then found the next day that his bank had charged him a $12 fee. The bank confirmed to Babar that Tesla had stopped payment on the check.

He is still sorting out his refund with Tesla.

CNBC has reviewed documentation that supports Babar's story. Tesla blamed payment processing issues and miscommunications for the delay, and says it sent a new check, including the amount of the $12 fee, in February.

In a similar case, Dennis Hegstad, a self-proclaimed Tesla fan and shareholder based in Los Angeles, says he's waited more than 100 days to get his money back for a canceled reservation.

He reserved a Model 3 in the spring of 2016 when Tesla first hyped the forthcoming electric sedans. When he went to pick up the car in mid-October 2018, he said, he found air bubbles in the paint. He rejected the delivery and requested a refund.

Hegstad bought a different Model 3 in November 2018, but says Tesla still owes him the $1,000 reservation fee on the vehicle he rejected earlier. Tesla says it is looking into the matter.

"I wish I could have just put that $1,000 into shares of the company," Hegstad said, "because we both would have benefited, and I wouldn't be dealing with this hassle to get my money back." Tesla's stock has increased almost 30 percent since April 1, 2016.

The dispute may be a result of poor record-keeping on Tesla's part. In a strange turn of events, Hegstad says Tesla sent him a check for $40,000 in December 2018, after he accepted delivery of the second Model 3 — money he says he's been trying to return for weeks. Apparently, they thought he had taken possession of the Model 3 he rejected in October. He never did. But they were mistakenly sending him money for that car, which he had financed with a loan. Hegstad says when he sent the check back to Tesla, it got returned.

CNBC has reviewed documentation that corroborates Hegstad's communications with Tesla and the company's response. Tesla confirmed they had made mistakes with Hegstad, and are looking into what went wrong and how to fix it.

Tesla CEO Elon Musk attends the Tesla Shanghai Gigafactory groundbreaking ceremony in Shanghai, China, January 7, 2019.
Aly Song | Reuters

No communication

Other customers said Tesla refunded their money in the promised time frame, but criticized the company's poor communication around the refunds.

For instance, William Longua canceled his reservation for a Model 3 in July 2018, according to documentation that CNBC has reviewed. He was expecting the money to go back to the AmEx credit card he used for the reservation but never saw it come in. He says he spent hours on customer support calls and sending emails to Tesla through the end of 2018, seeking details about the status of his refund.

Confusing the matter, in December 2018, Tesla customer support sent him a note that said:

"Thank you for contacting Tesla. We apologize for the delay with getting your refund to you. A case has been submitted to our Processing Department for the refund status and is still under review."

Finally, after talking to CNBC for this story, Longua went back to check his old bank records and found out that Tesla had deposited the money directly into his bank account, rather than back to his AmEx card, back in July. Tesla did not comment on Longua's story.

He was surprised that Tesla service personnel weren't able to tell him that the money had been refunded.

"This all could have been resolved with a better customer portal that showed the transaction details, instead of blank space like I never held a reservation in the first place," he said.

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