By on May 5, 2008

gas_pump.jpgDesperate times lead to desperate measures, and Chrysler is about as desperate as they come. Or is that deceptive? First, the facts as we know then: ChryCo's just announced a new sales incentive program in "response to direct customer feedback citing the prospect of rising gas prices as a top concern." So now, anyone buying a "new and unused" Chrysler product in the U.S. can enroll in the "Let's Refuel America" promotion. They'll receive a gas card that lowers their price for gas to $2.99/gallon for three years. Participating customers will receive a card (with a PIN number) for deployment "at an eligible gas station." The card's good for regular gas, E85 or diesel fuel. After fueling is complete, the customer's personal credit card is billed at the rate of $2.99/gallon. The promotion runs until June 2, 2008. There's more fine print, but here's the big kahuna: Chrysler buyers get the card in lieu of "other incentives." Do the math, compare gas cash saved over three years vs. money not saved by discount, and, as the bard once said, "things are not always what they seem; milk can masquerade as cream." Anyone want to make any guesses on how much this deal will end-up costing Chryslerberus? Oh, and don't forget depreciation. Once ChryCo files for C11 the cards will be worthless. Of course, at that point, trade-in values won't be anything to write home about either…

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32 Comments on “Buy a Chrysler, Get $2.99 A Gallon Gas for 3 Years...”


  • avatar
    BlueEr03

    So, lets say you drive 20K miles at around 25mpg with a fuel cost of $3.40. That will cost Chrysler about $330 per vehicle. So over the three year period they will spend roughly a grand per car sold. That’s not too bad when you look at some of the other incentives going around. All they would need to do is hedge against the price of gas going up, and consumers will think they are getting a great deal. The only problem is going to be when the dealerships give thousands of the invoice price on top of this offer.

  • avatar
    N85523

    Murphy would say that as soon as this promotion gets underway, gasoline prices will drop below $3.00 per gallon.

  • avatar
    hwyhobo

    The promotion will run until June 2, 2008 and can be chosen in lieu of other incentives

    So I suppose one could not get it together with the US $13K promotion discounts on Dodge Rams?

  • avatar

    # hwyhobo :

    So I suppose one could not get it together with the US $13K promotion discounts on Dodge Rams?

    That would depend on how much of the $13k discount came from cash back incentives and how much is the dealer taking it in the shorts off the invoice.

  • avatar
    solo84

    does the $2.99 price apply to diesel as well?

  • avatar
    blowfish

    to buy regular gas, E85, or diesel fuel.

    It does apply to Diesel.

    I dont think the gas price wll go down n a hurry, probably the contrary.

    Is a good incentive, at least the new buyers are protected by this measure. Or u can take another $1200 discount but God only knows what a gallon of go go juice will end up?

  • avatar
    eh_political

    how do they limit usage to the vehicle they have sold? is there a monthly gas limit?

  • avatar
    jkross22

    Too bad they can’t get this creative with auto design, ride quality, interior materials, etc., etc., etc.

  • avatar
    jaje

    Chrysler – hardly anyone buys their cars for the merit (well the lack thereof) – just the best deals. Seems the hedging expertise from Cerebus is trickling down.

    If prices drop below $2.99 customers can use their standard credit card.

  • avatar
    jthorner

    In financial circles this is equivalent to lending long while borrowing short. Chrysler is taking on an unknown and unlimited future liability in return for a one time sales promotion. This could make BMW’s recent lease residuals value write-off look like small potatoes.

    Perhaps Chrysler has limited their liability in the fine print????

    Also, how does the fuel pump know it is a covered Chrysler product the $2.99/gallon fuel is being pumped into?

  • avatar
    timd38

    I wonder if Nardelli will pump it for you?

  • avatar
    Sid Vicious

    Just like the unlimited miles powertrain warranty or a presidential candidates promises – cross that bridge when they come to it. In all cases there’s a good chance they won’t even make it to the bridge.

    Desperate time call for desparate actions.

  • avatar
    jaje

    @ jthorner: It mentioned you need to register a standard credit card with them then they issue the Jeep gas card which is what you use to pay at the pump and on the back end your credit card is only charged the price of the fuel up to $2.99. I haven’t read the fine print but I’d bet it does not include taxes or any other charges/fees – just the core price of the fuel.

  • avatar
    windswords

    From Autoblog:

    “The card can be be used to fuel any car and if the car is sold within the three years, the owner can keep the card and continue buying fuel at the discounted price. This is one hell of a deal, if it doesn’t drive Chrysler into bankruptcy, which is a distinct possibility. Because there is no way of knowing what fuel costs will be over the next three years, Chrysler can’t estimate the cost. However, Steven Landry, Executive Vice President – North American Sales said the company is doing some hedging to protect themselves. If the price of fuel dips below $2.99 customers can just pay with another card or cash. The program kicks off on Wednesday May 7, 2008.”

  • avatar
    AlmostFamous

    I’m going to be lazy and quote someone else’s response from a forum I frequent. He had a great response to questions about the $2.99 of gas program from Chrysler.

    This is a great business decision for Chrysler, they will be able to spread the cost of what is essentially a rebate of some thousand dollars or so, over a period of three years.

    When you consider that many people will forget to use the card several times, and other externalities, it will probably end up costing Chrysler a lot less money than that. And it avoids the $3000 on the hood that customers are always expecting to see now, and in many ways not be as effective as it once was.

    Also, in avoiding discounting prices on the front end, it will make Chrysler look better financially, as it will have higher revenue today, and that will look good to stock holders, which is really who Cerebrus is trying to impress at the moment anyway.

    With the card, if you buy mid-grade or premium gas you get charged an extra 15 or 30 cents a gallon respectively. If mid-grade or premium unleaded fuel is purchased, the customer will be billed for the $2.99 plus $.15 per gallon for mid-grade (88-89 octane) or plus $.30 for premium (90-94 octane).

    All other grades of fuel higher than 94 octane are not covered under this program and the full pump price will be billed through to the customer plus a $2 service fee per transaction with no gallon usage penalty. If customer purchases unleaded gas (including E85) on a diesel card, or diesel fuel on an unleaded gas card, the customer will be billed the full pump price plus $2 service fee per transaction with no gallon usage penalty.

    The release states that the customer simply needs to swipe the card and type in their PIN, just like using a normal credit card at the gas station. So, making a few assumptions, I’m guessing that when you register the card, you’ll be required to choose a personal credit card that you wish to have linked to the discount card. So, your purchases will be charged to the chosen credit card but you’ll swipe the discount card to get the correct price. Plus, you’ll choose a PIN number so that if you lose your discount card, it can’t be used w/o the proper PIN.

    So, there won’t be any haggling with the gas station clerk about whether or not they want to honor the $2.99 price. Chrysler worked with Pricelock to make this happen, there’s no need to negotiate with anyone at the gas station. They’ll still be getting their retail price, Pricelock and Chrysler made a deal to work out the rest. To the customer and the gas station, it’s no different than any other customer who pays with a credit card.

    Plus, yes they do have a yearly allotment of fuel (12,000 miles/yr) that you can use. So, feel free to fill up as many of your friend’s vehicles as you wish, you’ll just burn through it that much more quickly.

    I think it’s an awesome deal for the diesel vehicles. Well really all of them, but especially the diesels, since you still get the $2.99 price even though they charge you $0.30 more for Premium and diesel is priced even higher without the same markup. Makes vehicles like the Grand Cherokee Diesel that more attractive.

    It will be interesting to see how this affects their sales, but it’s at least good to see them thinking slightly outside the box to get the best out of what they have currently while they work towards the future.

  • avatar
    Threader

    Just saw a TV ad for this and it’s 700 gallons maximum charged per year.

    do the math and no big deal. Rather save money up front (rebate or discount) then have to spend money buying gas to get a feeling of saving money.

  • avatar
    i6

    I wonder if Nardelli will pump it for you?
    -timd38

    HAHAHAHAHA!!!

  • avatar
    iNeon

    Taking the “oh, dear.. what price is gas today?!” out of the ownership experience for the length of factory warranty will for sure put a few people’s concerns to rest.

    By the time these people are coming off of this program, fuel will be terribly expensive(anyone care to do the math based on the last 6 months?) and Chrysler will be waiting with fancy refreshed Mid-Sizers, the Versa clone, massaged Belvedere cars, a new Ram, the RWD coupe and a new 300 to sell them.

    It’s a new day, ya’ll :)

    Oh yeah, the Grand Cherokee is ready for a redesign, isn’t it?

  • avatar
    picard234

    I fill up my 300C about every 2 weeks (yes, I have a short drive to work). The last fill-up cost me about 60 bucks. For a 17 gallon tank, this deal would let me fill up for about 50 bucks. That would save me $780 over the life of my 39-month lease.

    Now say they removed the $3,000 discount they applied before calculating my lease price and I signed the lease thinking this gas card was a fantastic deal.

    It IS a fantastic deal…for Chrysler.

    Now the problem is, what prevents me from saying “excuse me while I whip this out” (pardon the Blazing Saddles reference) for my friends fill-ups?

    700 gallon limit? No problem. At 17 gallons each tank, I can fill up every 5 days. If I put less than 22,500 miles on my car per year, I won’t reach that limit.

  • avatar
    AlmostFamous

    iNeon, it’s great for all Chrysler’s vehicles that get less than 20mpg. It’ll definitely put people at ease who want to purchase such a vehicle. I won’t be surprised if GM or Ford comes out with a similar program. Remember when everyone copied GM’s Employee Pricing program the other year.

    Picard234, You’ll have a yearly allotment of fuel (12,000 miles/yr) that you can use. So, feel free to fill up as many of your friend’s vehicles as you wish, you’ll just burn through it that much more quickly. Your absolutely right though, it’s a great marketing ploy by Chrysler. The averaged consumer will think they are getting a huge savings when in actuality, it’s not a great deal unless your getting a Diesel powered vehicle with high $4+ gas prices or a Hemi powered vehicle that gets low 10’s mpg.

    The amount of gallons of gas you receive varies per vehicle. Whatever is the average CAFE mpg your vehicle receives, divide that by the 12,000 miles/yr allotment, and that’s how many gallons of gas you’ll receive.

  • avatar
    picard234

    AlmostFamous:

    So it’s not a fixed 700 gallons per year? Would I get less, or more, gallons because the 300C is a gas whore? I based my calculations on 20 MPG which is generous for my hemi-powered 300C (granted, I drive with a heavy foot).

  • avatar
    davejay

    Actually, I have to hand it to ’em — this time they have a winner of a promotion.

    I was personally surprised to find that, at the measley 5500 miles a year I drive, I was better off buying a $19,000 car getting 21mpg than buying a Prius, as it would take years before the price difference was made up.

    In short, gas mileage isn’t as impactful as up-front costs, which is why a cheap AND fuel-efficient car is best.

    However, if you’re looking at an expensive Chrysler and thinking “bah, the gas mileage is terrible”, doing the very math you folks are doing to back up your comments of how little this will cost Chrysler will cause consumers to realize how little of an impact the gas mileage has on their wallets.

  • avatar
    ryanelliot

    Guys, Guys, Guys,

    You are all missing the point. Even if you get discounted gasoline, you are still driving a Chrysler!

  • avatar
    nocaster

    Sounds like Cerberus is selling call options on gasoline at a $2.99 strike price and paying full MSRP is the option premium.

  • avatar
    rudiger

    I thought GM tried the same gimmick a few years ago not long after the first big run-up in gas prices after Katrina.

    IIRC, GM’s timing was pretty bad since not long after they began the program, gas prices began dropping, as well.

  • avatar
    jar527

    Here’s the math on the incentive. If you purchase a Chrysler vehicle that has a CAFE rating of 20mpg then you can purchase 600 gallons of fuel per year at the 2.99 a gallon price. That’s the 12,000 mile allotment divided by 20. Surely some people will use this incentive to justify purchasing a Hemi powered “fill in the blank”. A Hemi powered Ram has a CAFE rating of 14, so they would be limited to the 700 gallon cap. Although I can not find any information confirming these numbers. The odd thing is the math penalizes you for getting a more fuel efficient vehicle, ex. 12,000 / 25 = 480 gallons per year. Then again the incentive is designed to move the less fuel effecient vehicles off the lot.

  • avatar
    Geotpf

    Let’s assume an average of $5 a gallon over the lifetime of the promotion (not unreasonable, especially since more expensive diesel is covered). So $2 a gallon x 700 gallons a year x 3 years = $4,200. If it’s in place of a $3,000 incentive, that’s about a wash (because future money is worth less than money right now). Of course, that assumes that gas averages $5 a gallon over three years, instead of $10 or $3, and it also assumes you drive enough to use the full 700 gallons a year (which is probably not the case for most people). I’m sure Chrysler was smart enough to do fuel hedging so it won’t cost them much more even if the price of gas skyrockets.

  • avatar
    Busbodger

    jar527: The odd thing is the math penalizes you for getting a more fuel efficient vehicle.

    Detroit has penalized us for buying small cars since I was a kid in the 1980s. Nothing new here… GRIN!

    I give them a big thumbs up for creative thinking though.

  • avatar
    hltguy

    it makes more sense to take the rebate (up to $5,000 or more on some vehicles) put the money in a savings account and then buy fuel cards at a couple of hundred dollars a pop. There again where I live diesel is $4.59 a gallon……

  • avatar
    Domestic Hearse

    Rudiger, you are correct.

    GM’s program was called “Gas Price Protection” and it featured guaranteed $1.99 gas for one year.

    One had to purchase a new GM vehicle in key markets, primarily FL and CA. It was limited to certain models, and the vehicle needed to have OnStar (the customer’s new car was pinged each month, mileage recorded, estimated mpg calculated, number of gallons you must have purchased estimated, the price of gas in the market where the customer lives researched and averaged for the month driven, and a monthly check cut and mailed back to the consumer as a rebate).

    To say the least, the algorithms needed to arrive at the final check amount for each new customer were mind bending. And nobody short of a rocket scientist had the ability to explain to a customer on the showroom floor how it all “worked.”

    Not that a customer could understand, anyway.

    In short, GM’s “Gas Price Protection” was so smart, they cut themselves on it.

    Program never worked and was killed before the national launch.

    Which is a good thing, because the press on the Left Coast was going absolutely berserk, to the tune of, “GM is a bad environmental neighbor and their vehicles are so economically challenged, they need to subsidize gas prices to get customers to buy their products!”

    A PR nightmare.

  • avatar
    rudiger

    Domestic Hearse: “GM’s program was called “Gas Price Protection” and it featured guaranteed $1.99 gas for one year.

    A PR nightmare.”
    Yeah, I didn’t think GM’s program went over too well, which is why it’s odd Chrysler would try a similiar version of the same unsuccessful stunt. They must really be desperate.

  • avatar
    Busbodger

    OnStar=Big Brother…

    No thanks and seriously if I bought a newer GM that had one I’d be looking for ways to disable the damn thing.

    If somebody wants to sell me a useful gadget, give me a cellphone/vehicle interface that allows me to do the same kind of stuff without a subscription plan. Some sort of short range affair based on Bluetooth. Hands-free talking, remote locking/unlocking, auto dial by the car using my cellphone in case of emergency tying a GPS module to the cellphone for upload to 911.

    Oh wait… I down own a cellphone. Never mind…


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