$2.99 gas from Chrysler—Deal or no deal?

Americans are feeling pain at the pump, with gas prices continuing to soar. To adjust to the challenges posed by the rising cost of living, consumers are putting off vehicle purchases or buying smaller cars instead of more profitable trucks and SUVs. As a result, automakers are experiencing decreased sales and profits.

One of the biggest losers: Chrysler. The company is trying to rebound from a disappointing April (sales were 23-percent below the same period last year) with its own economic stimulus plan: fixed-rate gasoline for new-car buyers. But is this really a good deal for the consumer?

Chrysler is not the first to use gasoline as an incentive, and it isn't the last, as Suzuki has stepped up to offer free gas for the summer along with zero-percent financing. Discounted or even free gas speaks to consumers' hearts and purse strings. On the surface, it may seem a pretty good deal, considering the national average is $3.61/gallon. But some Chrysler vehicles don't excel at fuel economy; Chrysler doesn't currently even offer a small hybrid or an efficient subcompact car in their fleet.

For now, let's forget about the environmental or energy independence concerns of burning more fuel. Given that (generous) assumption, is $2.99 gas enough to make up for Chrysler’s lackluster fleet fuel economy when it comes to ownership costs? As you might guess, it depends on how long you keep the vehicle:

The first three years
Given current gasoline prices of $3.61, you would need to buy a car with 21 percent better fuel economy than a Chrysler product to have equal fuel costs during the three years of discounted gas. That’s a big difference, but here are some examples (all fuel economy figures are from CR's tests, and are "overall"—mixture of city and highway driving—mpg):

Instead of this Chrysler:	You could buy this car and have lower fuel costs over three years, even without discounted gas.
Dodge Durango 5.7L, 4WD (13 mpg)	Toyota Highlander AWD (18 mpg) or Honda Pilot AWD (17 mpg)
Dodge Caliber SXT FWD (24 mpg)	Honda Fit (32 mpg)
Dodge Nitro SLT AWD (16 mpg)	Honda CR-V AWD (21 mpg) or Toyota RAV4 4-cyl., AWD (23 mpg)

Six years
But let’s say that you keep a car longer than three years. After that time’s up (whether you’ve consumed your allotted quota of discounted gas or not), you go back to paying the same fuel prices as everyone else. Here the difference lessens: you would need to buy a car with about 9.5 percent better fuel economy than the Chrysler product to equal things out.

Instead of this Chrysler:	You could buy this car and have lower fuel costs over six years, even without discounted gas.
Dodge Charger 3.5L V6 (19 mpg)	Toyota Avalon (22 mpg)
Dodge Caliber SXT FWD (24 mpg)	Nissan Versa (28 mpg)
Chrysler Pacifica AWD (16 mpg)	Toyota Highlander AWD (18 mpg)
Dodge Caravan 3.8L V6 (16 mpg)	Toyota Sienna (19 mpg) Honda Odyssey (19 mpg)

Ten years
The difference grows to be less and less—you only need to get a vehicle that gets about 5.5 percent better fuel economy.

Of course, these percentages will differ if gas prices keep on climbing. But after the three years of cheap gas are up, you could wind up having to pay to fill up a 13 mpg Dodge Durango or 16 mpg Dodge Nitro—and you'll then be paying just what everyone else is shelling out.

Beyond that, there are a lot of extenuating circumstances:

Chrysler restricts the number of gallons of gas covered by the deal to what they expect you to consume in 12,000 miles. (That’s the average annual number of miles driven in the U.S.) To do that, they use an average mpg figure for each model. That combines all of the model versions available: big engines and small engines, two-wheel drive and four-wheel drive.

If you combine that calculation method with the disparity between CR's fuel economy testing vs. the revised 2008 EPA overall estimates, you might not get all of your fuel covered:

Vehicle

CR overall fuel economy

Using CR overall, gallons used in 36,000 miles

Average MPG calculated by Chrysler

Gallons of fuel Chrysler will discount

Is annual fuel use covered?

Chrysler Sebring Touring (4-cyl.)	23	1,565	21	1,714	Yes
Dodge Charger (3.5L V6)	19	1,895	18	2,000	Yes
Dodge Caliber SXT (2.0L, FWD)	24	1,500	24	1,500	Yes
Dodge Nitro SLT (AWD)	16	2,250	18	2,000	No
Jeep Patriot AWD (2.4L 4-cyl.)	20	1,800	23	1,565	No
Dodge Durango 4WD (5.7L V8)	13	2,769	15	2,400	No
Chrysler Pacifica AWD	16	2,250	17	2,118	No
Dodge Ram 2500 (6.7L turbodiesel)	13	2,769	15	2,400	No
Dodge Grand Caravan (3.8L V6)	16	2,250	19	1,895	No

On the other hand, if you buy the more efficient version in a model lineup (say a four-cylinder Chrysler Sebring, when the average was calculated including V6 Sebrings), you can get more quota of free gas than you'd consume. (You can use that extra on another car that you own, assuming it takes the same fuel type.) Same goes if you drive more highway miles, where fuel economy is better. The gas deal reduces the amount of the cash-back incentives. Often the savings calculated above can make up for the difference in the incentives, but sometimes it doesn't—particularly for vehicles with big initial incentives.

Change in incentives

Cash-back without gas plan

Cash back with gas plan

Loss in incentive

Gallons of discount fuel

Fuel savings

At $3.61, do fuel savings exceed incentive loss?

Chrysler Sebring Touring	$500	0	$500	1,714	$1,083	Yes
Dodge Charger	2,000	$500	1,500	2,000	1,240	No
Dodge Caliber	750	0	750	1,500	930	Yes
Dodge Nitro	1,250	0	1,250	2,000	1,240	No
Jeep Patriot	500	0	500	1,565	970	Yes
Dodge Durango	2,500	1,000	1,500	2,400	1,488	No
Chrysler Pacifica	2,500	500	2,000	2,118	1,313	No
Dodge Ram 2500 diesel	4,500	2,000	2,500	2,400	2,784 @ $4.15 diesel	Yes
Dodge Grand Caravan	2,500	500	2,000	1,895	1,175	No

Keep in mind that cash-back is money instantly off of the price of the car. It reduces the loan price, thus reducing interest payments. Plus you know you’re getting the money—you don’t have to make sure you fit the rules of the discount gas deal.

On the other hand, the gas deal requires you to pay for gas with your credit card. That's no problem if you pay off your balance each month, but otherwise you’ll be paying interest on your purchases, eating into the savings. Same goes for if you would have paid cash for fuel rather than charging it as required by the deal.

One somewhat esoteric buyer category who can really benefit from this plan—someone buying a diesel heavy-duty pickup truck. Given that diesel prices are averaging $4.15 per gallon, fixing the price at the same $2.99 as gasoline is a big difference. And the Dodge Ram 2500 diesel we tested gets the same 13 mpg fuel economy as a Chevrolet Silverado/GMC Sierra heavy-duty diesel. (Then again, the 2009 Ram truck is redesigned with notable improvements over the 2008, so you might want to wait anyway.) A diesel Grand Cherokee would also benefit, but the Dodge Sprinter van isn't included in the program.

Yes, you may save some money on gas, at least in the short term. But our owner cost data shows that, even with growing fuel costs, depreciation remains the biggest chunk of vehicle ownership costs. The competitors' vehicles listed in the chart have lower depreciation than their Chrysler counterparts, saving thousands over the life of the car and erasing the savings from the cheap gas deal. Also consider that, in general, vehicles sold with hefty discounts see more rapid depreciation than those that sell for closer to retail price. After all, it has essentially depreciated BEFORE you drove it off the lot, and it will continue to drop in value soon as it leaves the dealership. A model with better fuel economy (not to mention test scores and reliability) will likely hold its value better and be cheaper to refuel, possibly negating the benefit of the gas card.

Finally, you do more with a car than put gas in it—you drive it. You want it to be comfortable and perform well. Most of the Chrysler products listed (except the now-discontinued Pacifica) score near the bottom of our Ratings, while the competing cars listed score near the top.

It's interesting that in the same week that Chrysler announced this plan, Ford announced the widespread use of six-speed automatic transmissions to improve fuel economy. Most car companies, including Chrysler, are moving to technologies like this to improve efficiency.

Of course, Chrysler has to move its current inventory now. Discount gas is a way to promote their cars. But that doesn't mean you should be swayed by cheap(er) gas to buy a vehicle that gets so-so fuel economy, loses a lot of resale, or doesn't perform well in our Ratings. As with any car purchase, it pays to do your homework, looking at the complete purchase and ownership picture, and not be swayed by advertising.

—Tom Mutchler

For tips on saving gasoline and alternative fuels, see our fuel economy guide. 

Comments

[timbo]

What is this, a Japanese Car Company Ad? Where are the GM & Ford autos in the comparision? Unbelieveable@

[Derrick]

Where are the Ford and GM vehicles? Well, they're at the lower end of the fuel economy scale. Many are better than the competing Chrysler vehicles, but only by 2-3 MPG in many cases, meaning the difference wouldn't be enough to offset the cheap gas offered by Chrysler in the short term. And those were the vehicles Tom was trying to illustrate.

[Adrian]

Derrick, that is completely not true. In the Dodge Caliber category, you could cite the Chevy Cobalt or Pontiac G5 as a competitor (36 mpg hwy/26 city), and that would be better on fuel mileage than the Honda Fit. Instead of a Nissan Versa at 28 mpg hwy, you could consider a Saturn VUE Green Line at 32 mpg. Even a standard Saturn VUE gets a competitive 26 mpg hwy. You are correct that many American models get horrible gas mileage, but the ones that do fare well on gas mileage are just as competitive as any import car. Japanese and Korean manufacturers are no longer the patron saints of fuel economy either, as many of their models plain suck at fuel economy just as much as their American counterparts (Honda Pilot, Honda Ridgeline, or Kia Sorento).

[Cale]

Here's my take on the numbers...

Dodge Dealers in WA (33)

Bellingham
Bremerton
Centralia
Davenport
Ellensburg
Kennewick
Longview
Mount Vernon
Oak Harbor
Olympia
Omak
Port Angeles
Seattle (14)
Shelton
Spokane (2)
Walla Walla
Wenatchee
Yakima (2)

Toyota Dealers in WA (22)

Bellingham
Bremerton
Colville
Kennewick
Longview
Moses Lake
Olympia
Seattle (9)
Spokane (3)
Walla Walla
Wenatchee
Yakima

There are many places in rural Washington where you might feel that Toyota doesn't even know you exist.

That might be reason enough to buy a Dodge...

[Mike]

Not sure where you got the dealership info. I bought my my last car (a Scion) at a Toyota dealership in Everett, WA. And before that, my last two Dodges (a Durango and a Caliber) at the Chrysler dealership in Monroe, WA. Neither of those cities on on your list.

[farmrt88]

The classes of vehicles compared aren't even related. Chrysler and other automakers all have vehicles that compare more closely, and in cases have better fuel economy than that of the Toyota and Honda alternatives listed. The Jeep Compass/Patriot, should be compared to a Honda CRV or Toyota Rav 4 instead of the truck based Nitro.
Furthermore,based on EPA ratings:
Dodge Durango 5.7L, 4WD (13 mpg) : 2008 Toyota Sequoia 4.7L, 4WD (13MPG)
How can the Dodge Durango be compared to a Highlander?
The point is, a car buyer can always find a vehicle with better fuel efficiency, especially when its a completely different EPA class.
I am beginning to question CR fuel economy observed ratings, based on others real world gas mileage. Are driving styles completely similar across different vehicles when testing? I prefer EPA ratings, because they are based on exact testing specs across all cars.This article should present the comparisons more equivalently.

[Chris S]

Adrian,

CR only got 23 mpg out of the Cobalt (worse than the Dodge) and 18 mpg out of the (V6) Vue. And the hybrid Vue hasn't been tested by CR. So those wouldn't have been options in the comparison with the Chryslers.

[Antonio311]

It's quite obvious you guys are biased against Chrysler! Instead of listing the best in class on fuel mileage Dodge Journey to compete against the Honda Cdr-v and the Toyota Rav-4, you list the Nitro? Why don't you just compare a Hummer to a Honda Civic? And you start the article "One of the Biggers losers: Chrysler", just shows that you Hate Chrysler and are probably owned by an Asian shareholder! This bias just shows how incredibly uncredable your magazine and articles are!

[Jeff Bartlett - Consumer Reports]

The Dodge Journey was not included because we have not tested one. We only compared models we have our own fuel economy numbers for.

In terms of bias, we test all brands, all products without fear or favor in a standardized way that ensures repeatable test data and scores. To see how Chrysler compares against other brands, read "Who makes the best cars?"
http://www.consumerreports.org/cro/cars/new-cars/buying-advice/which-companies-make-the-best-cars/overview/0407_best_cars.htm

[Pro-American]

Consumer reports is helpful, but I think they seem to be anti-american when it comes to cars. They don't give GM and Ford ANY credit most of the time and are bias to foreign cars.

[Streamline]

It might just have something to do with the fact that foreign cars ARE better. Japanese cars consistently rate better in fuel economy, reliability, and general quality. You can't blame CR just because they tell you when a car isn't good. If you want to hear fluffy happy things about American cars, go read their websites. And by the way, there are actually a decent amout of good American cars (new chevy malibu) and crappy Japanese ones (toyota yaris) that CR reports on.

[Reality]

They don't give GM and Ford ANY credit most of the time and are bias to foreign cars.

They don't give GM and Ford much credit because they don't deserve much credit. If American automobile manufacturers had spent more time and money on engineering and properly manufacturing their vehicles and less on tacky designs, byzantine financing schemes and building gas gulping behemoths they'd have earned the kind of notices Toyota and Honda vehicles almost universally get (and not just from Consumer Reports). Reality has a pro-quality bias.

GM and especially Ford do seem to have closed the quality gap in the past few years - it's certainly less of a chasm than it was a decade or so ago - but they still seem incapable of building small, efficient, inexpensive, quality vehicles. Which is bad news for Detroit, since that's the only segment where demand is really picking up.

[Richard]

This article is missing the point. It's not about comparing MPG and gas savings. This gimmick is simply another ploy that builds the cost of the "giveaway" into the cost of the vehicle. It's just like the 0% financing or $5,000 cash-back game. If you choose 0% financing, the car costs $5,000 more. In this case, tell the dealer that you are not interested in the $2.99 cash deal and they will drop the price of the car by a couple thousand dollars (about the same value as the gasoline discount). It's all a shell game and shame on CR for not pointing it out.

[Tom Mutchler]

Richard, that exact point was made above. The discounted gasoline is a different form of incentive. As the table in the blog shows, it reduces the amount of the cash back incentive you would otherwise get. At current prices, sometimes you'd do better taking the gas card (if you meet all of the rules), but sometimes you don't.

A Journey is a lot bigger than a RAV4 or CR-V - it's nearly as long as a current Honda Pilot. That best-in-class fuel economy is for a front-wheel-drive four-cylinder version; that version will likely make up less than 10% of all Journeys sold. All of the other SUVs listed above are all-wheel-drive.

Interior-space-wise, a Nitro is comparable to a CR-V or RAV4. It isn't particularly good off-road (unlike a Liberty), so it doesn't offer that advantage. Indeed, the Patriot does get better fuel economy than the Nitro (20 vs 16 in our tests.) But that 20 doesn't compare too well to the 23 mpg of a RAV4 four-cylinder.

[Tim]

Many posters here are very quick to dismiss and ignore what CR is attempting to do, which is educate the buyer.

My personal opinion is that this deal is environmental nonsense. Not to mention the fact that market is now overloaded with used gas guzzlers that educated and cost-conscious customers have no interest in buying now. Add to that the fact that the trade-in price of the gas guzzlers are taking a huge hit for those that wish to downsize.

If Ford and GM follow Chrysler's 'lead', this is going to become an economic nightmare for the Big 3.

[Joshua]

That's great news that gas prices are frozen at $3.61 for the next 3 years. I filled up this week at $3.78.

Anyone who is buying a car that gets 13 or 16 MPG either isn't worried about the cost of gas (or isn't able to read, anyway).

It's an interesting concept, but when you project costs 3 years out, let's use the past 3 years of increases/inflation to project instead of assuming a fixed cost for 3, 6, or 10 years.

[John]

I agree with the comment about the $3.61 gas. You cannot assume that gas is going to be $3.61 for the next 3 years. It is already $4.00 in my area and I believe it will be $5.00 by the end of summer. So when you factor in the rising cost of gas over the next 3 years the $2.99 may not be such a bad deal. If this incentive was offered by Honda or Toyota I wonder what CR's take would be on it.

[Map40]

The note compares gas prices really low, which is unreal. Also the comparison after 3 years does not apply either, as this program applies to lease vehicles also. The article is misleading against Chrysler, and it is missing the point. Is it a different way to offer incentives? Yes. It is simple. If you are worried about Gas prices, Chrysler assumes the risk for you. How much is the risk worth? Certanly the article minimizes it with unreal assumptions. The article should be re-written with an objective point of view.

[Dino]

CR failed to mention that the Chrysler brands also get the LIFETIME POWERTRAIN WARRANTY along with the Guaranteed gas @ $2.99. With what the "Experts" are saying, enjoy paying the $6 to $7 a gallon by summers end. Here in the Midwest, gas is already above $4/gallon (and thats in the sticks). If you average the gas savings of $2.50/gallon over the allotment you could virtually save between $4,000 and $6,000 depending on the model. What happens if that average is higher? Couple that with the Lifetime powertrain warranty and puting back money in to the country is pretty strong. Jeep products have a high resale value (exclude the commander). Not sure about resale on the Chrysler and Dodge products though. In my humble opinion, I like what Jeep is offering as a whole.

[Bernard Siegal]

I think the article and responders may have missing one major important point. Will Chrysler LLC still be a viable business in two or three years. From what I gather, the massive discounting of up to 60 percent of MSRP (2008 Dodge regular cab truck), a lifetime power train warranty and a promise of cheap gas, I doubt Chrysler is making any money on a majority of its products.

I suspect if was not for contracts obligating Chrysler to purchase the parts to manufacture certain cars and trucks and labor contracts, Cerberus and Daimler would be better off shutting down at least 50 percent of its manufacturing operations.

There is no way they can continue selling almost all of their
products at an average of 25 percent or more off the MSRP. Unless Chrysler has several very innovative products in the pipeline the prospects look grim. A friend heard CEO Nardelli speak at the Detroit Auto Show and was not very impressed with his automotive knowledge in regard to new innovations.

[KVR]

I think there are a couple of points made here:

1 -- Chrysler's deal for gas is not necessarily the best deal to be had and can cost you money.

2 -- Consumer reports has possibly become BIASED towards foreign cars.

I say #2 because the comparison does not say you could purchase these Top Rated Cars, nor does it give ANY American car alternatives, thereby leading the the casual observer to believe that Consumer Reports ONLY recommends foreign cars.

It is a nice write up on gas price incentives.

[CB]

on a pt cruiser 1640 max gallons per year at $ 2.99 for 3 years for essentially $1000 less in incentives seems like a resonable gas price hedge. 8yr 80k powertrain, 3yr 36k bumper to bumper warranty. so fixed costs of owning the car are pretty well covered for 3 years. main worry is company survival?