Chrysler is touting a new promotion that promises to make $2.99 gas available to Americans who buy a new car from them. The timing couldn't be better. With gas averaging over $4.00 in my area of San Francisco, I can personally say that I've witnessed some concerned people. So is Chrysler's promotion a good deal?
Chrysler's 2.99 Gas Offer in Detail
Chrysler is offering a gas credit card. Use the card where you buy gas and your statement will reflect the $2.99 rate (Chrysler pays the difference so the gas station still gets their money). The offer is only for the first 12,000 miles a year for three years. It excludes some vehicles like gas guzzler Dodge Viper, the popular Chrysler Crossfire, and some others. If your gas requires premium, the $2.99 cap becomes $3.29.
Math of Chrysler's Offer: Two Examples
- Great case - Let's try to make a compelling case for this offer. Assume that you live in San Francisco and pay an average of $4.25 gas over the next three years. While gas could always jump to $6.00 a gallon, I think this may be realistic given how much it's already jumped. Let's assume that you get 20 miles per gallon in the car that you choose to buy. This is low for many of the models, but I'm being conservative. Let's assume that you drive the full 12,000 miles each of the three years. Given this scenario you'll use 600 gallons of gas a year or 1800 gallons. Saving $1.26 a gallon leads to $2,268 in savings
- Average case - BusinessWeek offers a good average case example. It assumes you drive a more average car, use all the gas, and that gas prices stay at the national average, $3.61. It's not exactly an average case as you aren't likely to use the full benefit and gas prices aren't likely to stay at today's national average for three years. Those two may cancel each other out. BusinessWeek's scenario says that it will save you $858 over the three years.
Buy or Don't Buy
I imagine very few people will be able to take advantage of the best case scenario. There's also the risk that if gas prices somehow drop, the benefit goes down greatly. On the other hand, what if this Goldman Sachs analyst's $200 oil prediction is right? In that scenario, Chrysler may regret it's offer. I think too many factors have to fall into place for this to pay off. I'd rather negotiate for cash savings at the time of the car's purchase than take this gamble. However, if this does sound enticing to you, maybe you should also look at Suzuki's free summer of gas promotion.
Two Better Plans
If you are really worried about gas prices, I would suggest buying a depreciated used car. Saving $2,000 when you are spending $30,000 is not something to celebrate too much. Buying a $30,000 car a couple of years old is still a better deal in my mind. If it has depreciated 30%, you'll have saved around $10,000.
Five months ago, Generation X Finance told you how to make money with high gas prices. If you read the article and bought Powershares DB Oil Fund (DBO), you'll notice that your investment has grown about 30%. If you invested $10,000, you'll have $3,000 in gains - which buys a lot of gas. In my opinion, this is the best way to guarantee yourself low gas prices.
I would suggest that your best plan is combine these two ideas. Buy a used car and use the money you save to invest in oil and other gas related stocks. Oil may seem expensive now, but 10 years from now, we'll look back at the good old days when we only paid $4.00 a gallon for gas.
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