Chrysler $2.99 gas deal—Calculating the owner costs

With the much-publicized Chrysler $2.99 Gas Guarantee program being extended, we took another look at this program to help car shoppers understand its value. To see the complete financial picture, we compared eligible, Consumer Reports-recommended Chrysler models against competitors using our new-car owner cost data. We found that in these cases, it cost less to accept the full rebate as an incentive than the gas card, even when combined with a partial rebate. But even still, the Chrysler models typically cost more to own than their peers in the long run.

How we analyzed the Chrysler $2.99 Gas Guarantee
Consumer Reports Auto Price Services analyzed the data on how much the vehicles will cost to own for three and five years based on the fuel savings and cash-back rebate available for Chrysler vehicles compared to similar models from other manufacturers. We looked at the data for the only four eligible vehicles recommended by Consumer Reports: the Chrysler PT Cruiser, Chrysler 300C, Dodge Charger SXT V6, and Charger R/T V8.

Naturally during the three years of the $2.99 deal, annual fuel costs shown are usually less than the other vehicles listed. However, if you look at the fuel cost combined with the overall owner costs for the first three years and then for five years, you see that there isn’t much savings after all. In fact, three models—the 300C, PT Cruiser, and Charger R/T—cost more to own in five years than all the other models compared, even when factoring the Chrysler gas card and cash incentives.

Large sedan Make & model

2008 MSRP

CR's MPG

Cash back incentive

Fuel costs years 1-3

Adjusted owner costs years 1-3

Fuel costs years 1-5

Adjusted owner costs years 1-5

Dodge Charger SXT V6	$24,655	19	$1,500	$5,612	$28,362	$10,612	$47,862
Dodge Charger R/T V8	$28,725	17	$2,500	$6,451	$32,451	$12,098	$55,348
Chrysler 300 C Hemi V8	$33,415	16	$2,500	$6,758	$32,008	$12,758	$56,258
Toyota Avalon XLS	$32,285	22	N/A	$6,500	$30,500	$11,000	$44,000
Hyundai Azera 3.8 Limited Auto	$26,745	19	$2,000	$7,500	$29,250	$12,750	$43,250
Ford Taurus Limited FWD	$26,420	18	$2,000	$8,000	$27,250	$13,250	$40,500
Mercury Sable Premier FWD	$26,525	18	$2,000	$8,000	$26,750	$13,250	$40,000
Buick Lucerne CXS V8	$35,945	17	$1,000	$8,500	$36,250	$14,000	$52,000

Wagons & hatchbacks Make & model

2008 MSRP

CR's MPG

Cash back incentive

Fuel costs years 1-3

Adjusted owner costs years 1-3

Fuel costs years 1-5

Adjusted owner costs years 1-5

Chrysler PT Cruiser Limited Edition	$22,100	20	$2,000	$5,212	$22,712	$10,012	$40,012
Audi A3 2.0 6MT	$26,705	25	N/A	$6,000	$27,250	$10,000	$40,250
Mazda3 2.3S Auto Grand Touring	$21,895	25	N/A	$5,750	$23,250	$9,500	$34,250
Volkswagen Rabbit 2.5L 6AT S	$17,325	24	N/A	$6,000	$21,500	$10,000	$32,500
Chevrolet HHR LT	$17,150	23	$1,500	$6,250	$22,000	$10,500	$33,000
Mazda5 2.3 Auto Grand Touring	$23,000	23	N/A	$6,250	$25,250	$10,500	$37,250
Scion xB AT	$17,220	23	N/A	$6,250	$21,000	$10,500	$31,750
Subaru Impreza 2.5 Auto Outback Sport	$21,640	23	N/A	$6,250	$23,500	$10,500	$34,750
Subaru Outback 2.5i Auto	$23,640	21	$1,500	$6,750	$26,250	$11,500	$39,000

The data in the charts is based on the fixed $2.99 gas price for three years and driving 12,000 miles annually. During that period, we compared the 2008 EPA overall mpg estimates and CR’s overall gas mileage, applying the costs covered by the program. Where the Chrysler program did not seem to cover the projected annual fuel costs based on our testing, we added the additional, estimated fuel costs to provide a real-world picture. The remaining two years and all competing models strictly reflect fuel consumption based on our test findings and $4.00 a gallon for gas.

Our cost of ownership data factors in depreciation, fuel costs, interest on financing, insurance costs, maintenance and repair and sales tax. (Full, comparable owner cost information is available for new cars in the model pages, along with pricing data, to ConsumerReports.org subscribers.)

Besides the "gas card plus rebate" option, buyers can choose a cash-back incentive or 0 percent financing instead. According to Chrysler, the cash back has been more popular with buyers as it affects financing and lowers monthly payments. We ran the numbers to see the savings if consumers choose only the cash-back incentive and not the gas card deal, plus lesser cash incentive. As you can see in the chart below, the adjusted owner cost numbers for the first three years are within the price range of the other models listed. The savings for Chrysler car buyers is greater choosing the rebates, rather than the gas card option. However, buying an incentivized Chrysler is not necessarily cheaper than competing models in the long run. Plus, these four Chrysler models all perform in the lower half of the CR Ratings chart for their car type. For competing models, we factored rebates when available nationally. Of course, all brands offer periodic, regional deals, especially as the end of the model year approaches.

Large sedan Make & model

2008 MSRP

Cash back incentive

Adjusted owner costs years 1-3

Adjusted owner costs years 1-5

Dodge Charger SXT V6	$24,655	$3,000	$28,000	$42,500
Dodge Charger R/T V8	$28,725	$4,500	$31,500	$48,000
Chrysler 300 C Hemi V8	$33,415	$5,500	$30,750	$47,250
Toyota Avalon XLS	$32,285	N/A	$30,500	$44,000
Hyundai Azera 3.8 Limited Auto	$26,745	$2,000	$29,250	$43,250
Ford Taurus Limited FWD	$26,420	$2,000	$27,250	$40,500
Mercury Sable Premier FWD	$26,525	$2,000	$26,750	$40,000
Buick Lucerne CXS V8	$35,945	$1,000	$36,250	$52,000

Wagons & hatchbacks Make & model

2008 MSRP

Cash back incentive

Adjusted owner costs years 1-3

Adjusted owner costs years 1-5

Chrysler PT Cruiser Limited Edition	$22,100	$3,000	$23,000	$35,500
Audi A3 2.0 6MT	$26,705	N/A	$27,250	$40,250
Mazda3 2.3S Auto Grand Touring	$21,895	N/A	$23,250	$34,500
Volkswagen Rabbit 2.5L 6AT S	$17,325	N/A	$21,500	$32,500
Chevrolet HHR LT	$17,150	$1,500	$22,000	$33,000
Mazda5 2.3 Auto Grand Touring	$23,000	N/A	$25,250	$37,250
Scion xB AT	$17,220	N/A	$21,000	$31,750
Subaru Impreza 2.5 Auto Outback Sport	$21,640	N/A	$23,500	$34,750
Subaru Outback 2.5i Auto	$23,640	$1,500	$26,250	$39,000

Currently, just under 10 percent of buyers are choosing the gas card program, according to Chrysler. They have seen some sales improvements from April to May, but still lag behind the industry due to a product lineup that includes a number of large, gas-guzzling vehicles. The gas promotion is in effect until July 7th. Since this analysis was performed, Chrysler reportedly announced a 2 percent price increase. This plan is definitely a moving target, and in this case it is becoming less favorable.

Bottom line
With the gas prices reaching new heights, manufacturers are looking to lure buyers into their dealerships by offering attractive promotions and incentives. While the deal may look enticing at first glance, it is important to look at the full picture, because it may not be a good deal after all. With the Chrysler deals, accepting the rebates can lower the owner costs and add appeal if you are drawn to these models. However, we would recommend you consider all vehicles in the segments, as there simply are better choices available based on our testing and analysis.

In choosing your next ride, look for a model that performed well in Consumer Reports tests, has average or better predicted reliability, a good overall safety Rating, fuel economy at the top of its class in our testing, and average or better estimated owner costs. All this information is readily available at ConsumerReports.org. The New Car Selector tool can help you quickly narrow a list of contenders down to the few that most closely match your needs and budget.

—Liza Barth and Mike Dempsey

$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. 

Workplace incentives for fuel-efficient cars

Reading The Wall Street Journal over breakfast a while back, I noticed an interesting article titled "Workers Get Incentives to Live Greener" that mentioned employers who give workers financial reasons to buy fuel-efficient cars. Clif Bar, makers of energy bars, give forgivable loans if you buy a car that gets at least 40 mpg. NRG Systems, who makes wind-measurement equipment, gives a $1,000 bonus to employees who buy a Toyota Prius. And, although it wasn’t mentioned in this article, Google gives $5,000 to workers who buy a car that achieves 45 mpg. (Hybridcars.com has a list of employers who offer such fuel economy and hybrid incentives.)

Another company that offers incentives is Topics Entertainment, a Washington software publisher. Their incentive program is considerably wider-ranging. To get those above incentives, based on what’s on the market today, you’re essentially limited to buying a new Toyota Prius. Not bad, but not for everyone.

Topics’ program covers other ways to improve fuel economy. Employees get $1,000 to trade in their current car for a new one with a smaller engine and additional money for going from a V8 to a four cylinder or buying a hybrid. That gives employees a wider range of vehicles from which to choose.

For the most part, this is a great idea. You don’t need to go all the way from a Suburban, Expedition, or Land Cruiser to a Prius to get considerable fuel economy improvements. For example, trading in a Jeep Commander for a Saturn Outlook would save 3 mpg (13 vs. 16 mpg, overall, in our tests).

As a general rule of thumb, an engine with a lower displacement or fewer cylinders typically consumes less fuel, thus creating less carbon dioxide emissions than a bigger engine with more cylinders. (This is discussed in my earlier blog "You coulda had a V8... but who needs it?' Indeed, some European nations have taxes based on vehicle engine displacement.

But there are some exceptions to the rule:

If you trade this...

For this...

…you can save this many mpg (based on CR's overall fuel economy)

2000 Subaru Outback (2.5-liter, four-cylinder)	2008 Toyota RAV4 V6 (3.5-liter, six-cylinder)	2 mpg (20 vs. 22)
2004 Volvo S60 2.5T (2.5-liter turbo, five-cylinder)	2006 BMW 328i (3.0-liter, six-cylinder)	2 mpg (22 vs. 24)
2005 Chevrolet Cobalt LS (2.2-liter, four-cylinder)	2008 Volkswagen Jetta (2.5-liter, five-cylinder)	1 mpg (23 vs. 24)
2007 Mazda CX-7 (2.3-liter turbo, four-cylinder)	2008 BMW X3 3.0i (3.0-liter, six-cylinder)	1 mpg (18 vs. 19)
2006 Hummer H3 (3.5-liter, five-cylinder)	2008 Volvo XC90 V8 (4.6-liter, eight-cylinder)	2 mpg (14 vs. 16)
2004 Mazda RX-8 (1.3-liter rotary, zero cylinders)	2008 Ford Mustang GT V8 (4.6-liter, eight-cylinder)	2 mpg (18 vs. 20)

Why do some of these disparities exist?

A manufacturer can improve fuel economy in the same engine with continued development. A new Subaru Outback 2.5i, for example, gets 1 mpg better than the 2000 Outback did on our tests.

Typically, the more gears in the automatic transmission, the better the mileage. Cars like the Outback, Cobalt, and H3 only have four-speed automatics.

Small engines pulling heavy vehicles (H3 and CX-7) can struggle, reducing fuel economy.

Rotary engines (RX-8) are very compact, building impressive horsepower per liter, but they aren’t particularly fuel efficient or low in emissions.

To sum up, if you want to improve fuel economy, you usually can’t go wrong by buying a car with a smaller engine. But take a quick look at the fuel economy numbers to make sure.

—Tom Mutchler

Visit our fuel economy hub, and see our list of best cars for fuel economy.

Automotive resolutions

The end of 2007 is fast approaching and that means it’s time for New Year’s resolutions. Many people make resolutions to lose weight, get into shape, or save money—while all good goals, what is the fun in that? Being the CR Cars blog, we thought we would invite readers to share their automotive resolutions.

Some suggestions are to resolve to be a safer driver by stopping distractions such as not talking on the cell phone or texting while driving. The New Year could be the time to finally indulge in your driving fantasy and buy the dream car you’ve always wanted, or “go green” and buy a hybrid or more fuel efficient vehicle. The year 2008 could be the time to break in the new portable GPS you received for the holidays and take a road trip. Thinking big: If each motorist vowed to improve their driving behavior and reduce fuel consumption, together, we could make the automotive world shine brighter one driveway at a time.

Whatever your resolutions may be, we invite you to share your ideas and thoughts in the Comments below.

Have a safe and healthy New Year!

—Liza Barth

The Big Apple is turning green

New York City taxi officials have unanimously voted to move forward with a plan to make their city’s taxis the “cleanest, greenest large city taxicab fleet in the world” in the words of Taxi and Limousine Commissioner Matthew Daus. Under the new regulation, first announced by Mayor Michael Bloomberg last spring, all new taxis put into the fleet beginning October 1, 2008 must be able to achieve 25 miles per gallon in city driving according to Environmental Protection Agency standards. One year later, all new cabs must be capable of 30 mpg. An exception will be made for handicap-accessible cabs.

Since Mayor Bloomberg’s announcement, timed to coincide with Earth Day on April 22, taxi operators in the city have begun adding electric-hybrid taxis to their fleets, and, at 627, it is now the largest hybrid fleet in the United States. Most hybrid taxis are Ford Escape SUVs. Expect that number to grow and to see fewer and fewer of the ubiquitous Ford Crown Victoria cabs prowling the streets of New York.

According to the TLC, in addition to environmental benefits, the new regulation will save as much as $140 million in fuel costs annually once fully phased in. That’ll be a bonus for fleet owners, who are reportedly already seeing a pass rate of 85 percent for hybrids during the three annual safety and emissions inspections required by the TLC. Crown Vics have a 54 percent pass rate.

Still, don’t count on a city full of Escapes. A TLC representative said discussions are underway with other potential suitors, and 2010 is still a couple of years away. No word yet if the Escapes will also have all those groovy air fresheners, either…

—Jim Travers

Also read:
Rally cry for a taxi revolution
Greener taxis coming to New York City
Real New York cars are yellow

Paint it green

Last year, the Los Angeles auto show was moved from its familiar slot in early January (where it was continually overshadowed by the larger North American International Auto Show in Detroit) to November, where it can make its own mark. Yet, another move that helps give the show its own identity is its overriding green-car theme.

 

On the first press day, more than a dozen vehicles were highlighted that provide cleaner and/or more fuel-efficient alternatives to conventional gasoline engines. This ranged from the familiar, such as diesels and flex-fuel vehicles (which can run on E85 ethanol) to more exotic designs, such as the second-generation Honda FCX Clarity fuel-cell vehicle and the plug-in, fuel-cell Volkswagen Space Up! Blue concept.

 

Chevrolet crowded eight vehicles onto its stage to provide the right setting for announcing that the brand will be GM’s big tent for fuel-efficient vehicles, and that its goal is to be “the industry leader for fuel-economy leadership.” The eight ranged from small, fuel-efficient conventional cars, such as the Aveo and new Beat, to hybrid versions of the Malibu sedan, Silverado pickup and Tahoe SUV, to the more advanced plug-in electric Volt and Equinox fuel-cell vehicle.

 

Among the intriguing, yet do-able, cars on display was the diesel/electric-powered Mercedes-Benz S400 BlueTec Hybrid. We were very impressed with the E320 BlueTec diesel we recently tested, rating it slightly higher than the similar E350 gasoline model. Like the E320, the S400 will be available in all 50 states. But in contrast to the E320’s 29 mpg overall that we got, the company says that the S400 will achieve 40 mpg while providing even quicker acceleration. That’s impressive for a relatively heavy luxury car. And even if Mercedes’ mpg number proves to be a little high compared with real-world results, the combination of clean diesel and hybrid electric power is promising and a design that we’ll likely see more of in coming years.

—Rik Paul