As featured in The Wall Street Journal, Money Magazine, and more!
     

Chrysler’s $2.99 Gas Guarantee: A Bad Deal

This article was written by in Consumer. 16 comments.


Lately I’ve noticed commercials for a special car buying incentive offered by Chrysler: a gas credit card that guarantees that you will pay no more than $2.99 for a gallon of gas for three years. The offer, good between now and June 2 on most Chrysler, Jeep and Dodge vehicles preys on our fear and anticipation of higher gas costs this coming summer.

But the numbers don’t work out all that well. First, in order to qualify for the $2.99 gas card, which is good for regular unleaded gasoline, diesel, or E85, you must relinquish your option to take advantage of any other purchasing incentive. Assuming the average gas price over the next three years is $3.99, and it could be lower once the political environment changes, one might save a couple hundred dollars a year. But how is this worthwhile if you have to give up a $2,000 (or more) cash back deal to qualify? A quick search of Chrysler incentives shows that dealers are offering up to $3,000 cash back. In other locations offering you can find incentives offering $5,000 cash back.

Additionally, according to the rules of this “Let’s Refuel America” incentive, your gas savings would be limited to 12,000 miles a year. After that limit, you would have to pay full price.

chryslerIt makes no sense to give up a $5,000 discount in return for the *possibility* of saving a few hundred dollars a year. Keep in mind that three years from now, the price of gas may be much less than $2.99. You would have given up a significant incentive for very little benefit.

The perceived savings on the cost of gas is higher than the numbers reveal. Chrysler is simply seizing the opportunity to present a deal that looks nice to customers concerned about rising gas costs, but this deal is much better for the dealer than for the buyer.

If you’re concerned about gas savings and you’re in the market for a new car, opting for a vehicle with just a little more fuel efficiency compared to the Chrysler cars and trucks will be a better option for saving money on gas. Just a 3 mpg improvement will save $3,000 in the first three years, and then would continue saving money long beyond the expiration of the terms of this deal.

Photo credit: joebeone

Updated January 16, 2010 and originally published May 14, 2008. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

Email Email Print Print
avatar
Points: ♦127,550
Rank: Platinum
About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 16 comments… read them below or add one }

avatar Chad

Good catch. Whenever you see this type of special there is always a catch. The company is always going to limit their loss, or it could potential bankrupt the company. On top of the 12,000 mile limit, uou know Chrysler went to some investment bank and had them set up hedges. This will allow Chrylser to determine the cost of this program to within 5-10%. Take the other incentives and save the hassle of having another credit card in your wallet.

Reply to this comment

avatar David

Please show your math for the 3mpg improvement saving $3000 in 3 years.

Reply to this comment

avatar KC

That’s always the case with these sorts of incentives. They give you a break somewhere, but take it away somewhere else. Like cheap financing – if you’d pay cash you could finagle a better overall deal.

But perhaps the worst part of this incentive package is in the end…you are driving a Chrysler.

Reply to this comment

avatar UH2L

Environmental and economic aspects aside, this is good marketing. You want to appeal to people so that they buy your product and right now what’s preventing some people from buying some of these trucks/SUVs is gas prices. Most people aren’t financially savvy which is also why they go for the lowest monthly payment regardless of overall financial impact. I agree that people should buy more fuel efficient vehicles, but if you work for Chrysler and are in the company’s position, you have to do something to move product.

And as for the comment about driving a Chrysler, their products are not bad. Have you actually driven one? I’ve driven a recent 300 and a Sebring and they’re both pretty nice, would rather drive one of these than a Toyota or a Honda.

Reply to this comment

avatar Llama Money

Flexo – you might want to change the title to: Buying a Chrysler: A Bad Deal.

I’ve never met someone who purchased a Chrysler ( Dodge included ) who actually didn’t regret the purchase. Horrid vehicles, terrible quality, generally terrible mileage, ridiculous resale value. Etc Etc. I don’t care if they guarantee gas at $0.99 per gallon, I wouldn’t buy a Chrysler.

Reply to this comment

avatar Mike

I agree that this is good marketing. The big lesson seems to be that retailers will take advantage of people’s anxieties (in this case about high gas prices). The benefit they’re offering isn’t really much of a benefit, but it strikes right at what people are worried about these days. That’s smart… and it’s our job to be smarter! Thanks for the analysis!

Reply to this comment

avatar Justin

Whenever a company has some kind of “deal” like this it should always be looked at with a fine tooth comb. Of course they are going to play off of whatever the new “fear” is. DIY bomb shelters in the Cold War rings a bell.

Reply to this comment

avatar Kevin

The “have to buy a Chrysler” caveat is an important one. Current Chrysler products get 2+ worse mpg than competitor’s products across the board. In some cases the spread is more extreme. If Flexo’s numbers are right then you’d save just as much on gas by buying a competing product.

Given Chryslers’ terrible resale value you’re probably better off buying used anyway. A new stripped-down Sebring is $19.3k after incentives, and 1 year old rental Sebrings are selling for $14k. It would take a lot of $2.99 gallons to accumulate $5,300 in savings.

Reply to this comment

avatar Aryn

I agree that this is a bad deal, but how are you figuring that gas is going to call below $2.99/gallon in three years? It’s not as if China and India are going to reduce their s some, but I think high prices are here to stay.demand for oil in the next three years. We certainly won’t be seeing a large enough increase in fuel efficiency to reduce US demand that much.

Reply to this comment

avatar Mrs. Micah

I like your point about the other incentives. I was thinking, too, of used cars and how much less a 2-year-old car costs than a new one. That’s years and years of extra money for gas!

Reply to this comment

avatar KC

Yes, I have driven a Chrysler (well it was a Dodge Intrepid). It was an 02, and it was a friend of mines. It’s now in his backyard with a blown out engine because of the incredible sludge build up problem those cars have. It was still under warranty when the engine blew, but Chrysler wouldn’t honor it because they said he didn’t do proper maintenance eventhough he had it serviced at the dealership.

My father-in-law was a judge for 30 years and went through cars like candy because of all the mileage. The worst car he had was a mid-90s LeBaron – got less than 120k miles before it died. He usually put over 200k miles on his Toyota’s and Nissan’s before experiencing any problems.

Reply to this comment

avatar Angelo Georgini

$2.99 per gallon is alright for me. in my country the gas is $4-5 per gallon

Reply to this comment

avatar j4311

Chrysler knows that many Americans can’t do math. Fools and their money (should they ever come across any) are soon separated.

Reply to this comment

avatar Milford

Just for the record you use an existing credit card. No additional credit card is required if you already have one. I thought it interesting that you probably can’t do this program if you dont have a card or cant qualify for one.

Reply to this comment

avatar Milford

On another point I think we all better get used to paying 2.99 or more per gallon. Too much talk of keeping the prices up to drive down demand. By the way, Gas is just $ 1.49 in China. (yes that is US Dollar).

Reply to this comment

avatar Laughing

Hmmmmm Gas has been under $2.00 for quite some time now.

Reply to this comment

Leave a Comment

Connect with Facebook

Note: Use your name or a unique handle, not the name of a website or business. No deep links or business URLs are allowed. Spam, including promotional linking to a company website, will be deleted. By submitting your comment you are agreeing to these terms and conditions.

Notify me of followup comments via e-mail. You can also subscribe without commenting.

Previous post:

Next post: