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.
The deal is a good one to entice new purchasers but I agree with you about buying a used car and investing the money you just saved you might end up making money in the long run. Not to mention buying a new car isn’t a great option unless you have money to burn.
Maria @ Financial-Tip says
I think buying a used car for half the price as new would save me much more than getting the gas card deal with a newly purchased car. Thanks for doing the math … I am lazy today.
I saved money by selling my car. :)
I’m with you… it’s fun, sounds like a good deal, but in the long run, not the best way to save money while buying a car.
And plus, I’m sure they’ve done their research, but still, Chrysler’s gotta be sweating this one out!
Might be fun to watch!
“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.” If you’re in Europe now, you’re thinking about remembering back to the good ol’ days when gas was under double digits per gallon. The US has it easy right now I’d say… All the more push to get hybrid and electric cars cooking. If they had one that was suburban sized (I need a lot of room for kids and kid related things to go anywhere) I’d be on it ASAP… The one hybrid that GMC has out now for the Denali is mediocre at best…
Mrs. Micah says
Well, a clever ad campaign lets the company get the best deal while leaving the customer thinking that they got the best deal. I’d say that sounds about right here. Unless gas hits $200/barrel. But even then, buying a lightly used car for maybe $13,000 means a $17,000 difference to spend on gas.
Monty Loree says
Gas prices are scaring people which means that the publics psyche will change finally. They’ll start to accept alternatives, and ask for them.
This shift in demand will make the big suppliers move to give us better, non-oil guzzling products.
When people are this angry, it means a significant move in the market place.
The rumors I’m hearing is that you give up the instant cash rebate when you sign up for this deal, which makes it $500 to $5000 worse for the consumer.
Tight Fisted Miser says
All of Chrysler’s vehicles have a lousy mpg average. You’re much better off getting a used vehicle that gets high mpg. My 94 Corolla’s 30mpg is looking better every day.
What’s to stop you from selling the rest of the gas to others, or just letting others in your family use your card? Now you’re saving more like $5000 – $7500 a year.
Lazy Man says
I erroneously said 12,000 gallons a year, but it’s 12,000 miles a year. Presumably they know the gas mileage of their cars and allow you only so many gallons a year.
Personal Loan Portfolio says
That is an interesting promotion that I had not seen. I wonder if Chrysler hedged their risk?
Take the Goldman oil price estimates with a grain of salt. They hold a large speculative long position in the oil futures market.
Llama Money says
No one else seems to have pointed out the real problem with this deal – you would have to purchase a Chrysler vehicle! Me, I’d rather drive a Kia if it came to that.
Rob O. says
Far better idea would be to avoid a gas-guzzling Chrysler and go for a vehicle that’s really fuel efficient.
And people have got to really begin rethinking their vehicle needs. I still see far, far too many boneheads using big honkin’ SUVs & trucks as single-occupant commuter vehicles. We’re still being snookered by the marketing wizards who sold us on the “bigger is better” and “small cars are for people who can’t afford a ‘real’ car” rationale.
We’ve got to get back into the mindset of buying the appropriate vehicle for the needs at hand. Horsepower is largely irrelevant. And what does a car’s “0 to 60” performance matter when the speed limit in most areas is 35 or 40? Even if you do a lot of highway driving, you don’t need a car with rocket-like acceleration – you just need to hone your driving skills and be a tiny bit more patient. Does it really matter how many seconds you shaved off of your commute by gunning it to merge into freeway traffic if, by doing so, you put yourself and lots of others at risk? How much later for work are you going to be when you’re dead?