Ask for a replacement, 500 mtrs wrong is just ridiculous.
I complain a lot here because my iPhone 7 (including original and all three replacement phones) is not suitable for running because of subpar GPS. But even if it's significantly less accurate than my iPhone 5 or 6, it's almost never more than 50 meters off, usually much less.
Yesterday I discovered that the newest version of Runkeeper seems to be much better at adapting to the subpar GPS than earlier versions and other running apps, so I might simply solve this problem by starting to run with Runkeeper.
Did anyone else have more luck with recent Runkeeper versions? I remember someone posted terrible tracks with Runkeeper earlier in the thread.