Jalopnik
As with other auto media outlets, we've been closely following Chrysler's "Let's Refuel America" program, which is offering three years of $2.99 gas for anyone who buys a Dodge, Jeep or Chrysler vehicle (that isn't a Challenger, Viper, Wrangler, Sprinter Van or other popular vehicles). After a few back-of-the-envelope calculations we're starting to see this is a good deal for Chrysler and, at best, a mediocre rebate for consumers. For one thing, in lieu of other rebates, Chrysler doesn't necessarily have to put all of these expenses on their books right away when it records the sale, which could be a PR boon for the automaker while it tries to buy time for the "New Day" that's coming. But most importantly, the amount of money that a consumer can save is maybe less than most expected.
Let's start with an extreme example by choosing the Chrysler Aspen SUV with the large 5.7-Liter V8, which isn't exactly a teetotaler when it comes to gas. We'll assume 12,000 miles a year with an average gas price of $3.61, which is what AAA considers the average gas price for this week. The Aspen gets 13 mpg city and 18 mpg highway. In all city driving you'd use 923 gallons of gas a year with a savings of $0.62 per gallon for a total savings of $572 a year or $1,716 over the three years. In all highway driving you use 667 gallons of gas for a total yearly savings of $413 and a three-year savings of $1,240.
That isn't bad, if they let you keep the other rebates. Last month, the suggested incentive on a Chrysler Aspen was a $3,000 instant cash rebate. Assuming a three-year savings of $1,500 in combined driving at $0.62 savings you'd need gas to go to approximately $4.85 per gallon to even it out.
To use a more regular example, the Chrysler 300 with the 2.7-Liter V6 gets 18 mpg city and 26 mpg highway. Under the same circumstances you get $1,240 at one extreme with all city driving and $859 with all highway driving. Given that they offer up to $3,000 cash incentives on the Chrysler 300 as well, you're talking about a bad deal for consumers if they pass on the cash for the gas savings.
And what if your car takes more than regular gas? Here's what Chrysler's own press release has to say:
"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)."This means that you're now taking up to $.30 off of your average savings, meaning that if you use the card when gas drops to $3.28 and you're using premium that you'll actually be losing money.
And what happens if gas drops to closer to $3.00 a gallon? Your rebate is suddenly a big, fat zero. The one thing that is clear is that Chrysler is desperate to move inventory and, if you play your cards right, a deal is to be had. Just make sure you consider all the facts and don't pass on an instant cash rebate if you think it could outweigh the cost of gas savings over three years. Obviously, the best deal is a rebate and gas savings, so make sure to ask as Chrysler is saying that this is available on some vehicles. [Source: Chrysler , Houston Chronicle[
Comments
Glad you did the math so we did not have to rack our brains this morning.
..."if you use the card when gas drops to $3.28 and you're using premium that you'll actually be losing money.
And what happens if gas drops to closer to $3.00 a gallon? Your rebate is suddenly a big, fat zero. "...
Why not go further into your fantasy world and pretend gas will drop into the $2.00 per gallon range?
Once gas hits $4.00 per gallon it's not going to drop down to $3.00 ever again.
The Oil Company execs wouldn't be able to buy ivory toilet seats if that happened.
You forgot to add in all the repair bills on a Chrysler vs. buying another brand of vehicle.
...that isn't a Challenger, Viper, Wrangler, Sprinter Van or other popular vehicles...
So what's left then? Ohhhhh, the crap nobody wants to buy!
Call me back when you're offering unlimited free tires for the SRT-8 Challenger!
@bohemian: However, Chrysler has some crazy unlimited powertrain warranty. That's a pretty serious warranty. I could see them having to replace the engine in 50 years with something crazy because they just don't make the parts or the engine anymore to fix it.
What if you buy gas for $2.99/gallon and resell it for $3.50 during the summer, when retail prices are likely to be close to $4?
Drive 12,000 miles/yr at 20mpg. Gas is $3.75, but Chrysler hooks you up with $2.99
So what would have been $2,250/yr is only $1,794/yr thanks to the "rebate". A savings of $456.
Over three years at a discount rate of 5% (doom and gloom!), that's a rough present value of $1,241
I'm sure the beancounters realize that's a lot less than the average cash-on-the-hood rebate.
Cha-ching
This is a pretty smart marketing move I think, as it appears to be a better deal than it is, at current gas prices anyways.
If gas hits $5 next year, than I'm guessing this will be stretching the loss reserves over there.
I thought I heard there was a yearly maximum allotment of gallons? That would even lessen the savings...
Actually, yes, there's a line on the Chrysler media site link under the "Select Program Offer" that says "Yearly allotment of gallons provided".
The [www.freep.com] listing infers that the allotment's based on 12,000 miles a year for each vehicle...
Quoting 8th paragraph, Freep link: "Under Chrysler's plan, the guaranteed price covers an annual allotment of gallons based on 12,000 miles divided by the average mileage per gallon of the purchased vehicle."
@Sloop_John_B: However, Chrysler has some crazy unlimited powertrain warranty
A couple of caveats, though...the warranty requires regular (annual?) mandatory inspections at the dealer, at a certain cost to the owner. Assuming they can stick with this routine AND they remain the first owner of the vehicle, your scenario is definitely possible. If I had to gamble, I'd say the average owner only keeps that warranty valid for 3-4 years, assuming they don't trade the vehicle. Which would actually be shorter than most mfrs' powertrain warranties, when practically applied.
Again, beancounters FTW!
AND, the Hemi vehicles are recommended to use 89 octane... So, adjust the math for the 0.15 added for the proper fuel for that Aspen and you are looking at much less savings.
BTW: That Aspen won't get what the sticker says for mileage. My '05 Hemi Grand Cherokee gets 11-12 MPG in the city and barely brakes 17 MPG on the interstate (Cruise at 78 MPH). The fuel per year number would be higher than calculated.
It is a great marketing gimmick. I would just about trade my grand on a new one with the diesel if it was covered by the program.
@sbcncsu:
Well, it DOES come with the Diesel Grand Cherokee. Hmmmmm, Let's check stock at the local dealer....
Matt: Woah, there, fella. I think you overestimate your readership. I can't keep up with all this.
Which side is the back of the napkin?
@Bumblebee: I think he should have said, "back of the envelope." That would make more sense without butchering the idiom.
Maybe he meant "sanitary napkin".
"The new Dodge Rorschach: Any Color You Want, As Long As It's Red"
...In summary, Chryslerberus isn't screwing around. Between this and Ash's assessment of the "lifetime" warranty, they've got a pretty solid scam going on that will thoroughly bamboozle both people that are still willing to buy a new Chrysler product.
No amount of rebates or promotions could get me to buy a Chrysler anyhow, so there is no need for calculations!
@Paul Y. is Going Dumb at the Sideshow: And this is why we don't write at three in the morning. Thanks.
I smell a Cerberusian 2-9-9 Scam!
@Ash & Carry: I was just trying to spread it out for you in a nutshell.
You fail Consumerist. You forget to mention that $500 to $1500 rebates are still available on certian models. Second you overly assume that Gas prices wtill stay at a certain value or even go down (in which if YOU read the terms and conditions you would notice they would charge you the lower amount but also subtract it from your yearly total). But I don't see prices falling unless the US Government introduces price controls.
This isn't that much different than signing up for a gas station credit card. That card gives you $.05 off/gallon in rebates. But the value is limited to $200 or so, and starting in year two you're paying a $50 annual fee. A no annual fee card with 1% cash rebates is a much, much better deal.
@LJKelley: We literally say it in the last sentence of the piece "Obviously, the best deal is a rebate and gas savings, so make sure to ask as Chrysler is saying that this is available on some vehicles."
@Saboth: Ditto. I couldn't get rid of my newly-out-of-warranty 41Kmi Damnango R/T fast enough to keep the parts from falling off in my driveway.
I can't imagine myself buying a new Cerbyrler any time soon w/out serious duress on my part or superOEM improvements on theirs.
Lets all get our facts straight here, First, the Refuel America program is not a rebate ... it is a price protection system. It does work on Wrangler, in lieu of a $750 rebate ... still a good deal, ESPECIALLY if gas gets to $4++ per gallon.
You also get the gas protection PLUS rebates on almost EVERY model. The system works great, can you imagine the savings if you buy a diesel truck?
What Chrysler has done here is reduce TOTAL cost of ownership for those of us on a budget. Lifetime powertrain warranty, huge rebates, 0% financing, and $2.99 gas for three years.
Now take your ass down to your local Toyota store, and buy one of their super awsome hybrids ... Then check back with me after 100,000 miles, lets see who has spent the least per mile on their car, YOU or ME ... assume I just bought a 2008 Avenger with a 4 banger. I win, hands down.
@jjj7088: Now take your ass down to your local Toyota store, and buy one of their super awsome hybrids ... Then check back with me after 100,000 miles, lets see who has spent the least per mile on their car, YOU or ME ... assume I just bought a 2008 Avenger with a 4 banger. I win, hands down.
That's quite a gauntlet, Mr. Nardelli (why the pseudonym?). Are you including depreciation in TCO?
@jjj7088: We mention that it includes a rebate on same vehicles. We just want consumers to balance expected returns, rebates and financing so that they don't jump at the discount gas and let a dealer deny them rebates that they qualify for or accept the gas deal in lieu of other rebates. And you can know that we meant this because we say it.
@Ash & Carry: Of course not. A Chrysler would almost automatically lose if depreciation was counted. To resell one, you're competing against all the "low mileage" rental cars that are already going for half price ... in 3 years, I'm not sure it'd even be worth 25%.
In true Jalopnik fashion, the better way to beat the system is to pick up a much cheaper (ideally sub-$1k), more economical for commuter vehicles.
Chrysler isn't the only maufacturer with a "lifetime" guarantee scam on drivetrains. Toyota is doing it too. All it is is a way for dealers to make more $$ on unnecessary maintenance.
My g/fs new Matrix comes with this warranty. For the first 10,000 miles or so, she was taking it back to the dealer faithfully, and in those first few miles, the bills were "reasonable"- about $50 or $60 every 3000 or 5000 miles. But now she's about to turn 12,000 or 15,000 miles (I forget, something like that) and the "required maintenance" in order to keep the unlimited warranty is something like $450!
So she asked me, as an engineer, what my opinion was. I said "well, your Honda has lasted over 250,000 miles so far with basic maintenenace (mostly just oil changes and one timing belt), and the last compression check I did showed the engine was roughly only 1/2 used up. Let's assume the Toyota goes just 250,000 miles, and then the engine dies. At the maintenance plan you're on, you will have spent several times more than the cost of the engine replacement in unnecessary maintenenace over and above simple oil changes."
She stopped going to the dealer.
Of course the math works in favor of Chrysler, just like the math works in favor of the house at your local gambling establishment.
They wouldn't offer it if they didn't figure, urm, know it would work out best for them in the end.
heh, thanks to hamster overlap, mechimike just proved my point again.
In the U.S. we will NEVER EVER EVER AGAIN see gasoline sell for $3 per gallon... EVER. We'll never again see fuel sold below $4.50 by the end of the year. Thinking that the average price of fuel will miraculously return to $3.30???
That's just foolish thinking.
So, I've been crunching the numbers and... why the hell would I not use this Gas Card to fill up every car I own? Can anyone tell me how Chrysler is going to know what car the gas is going into? This marketing scheme has fraud, waste & abuse written all over it. God bless America
@DustyButt: We're not saying it will happen, we're saying if it did happen this would happen.
@mechimike: Brilliant ... the Chrysler "lifetime warranty" is not at all like the dealer scam you fell for. It is underwritten by the manufacturer, and has no fine print, and you dont have to do any of your scheduled maint. at the dealership ... the only fine print: it goes with the original owner only and you have to have your car inspected every five years AT THE DEALERS expense ... comment on what you know to be true, not what you think to be true.
@FLAT4-PΩWER ™: How about selling petrol at the pump.
@DustyButt: Yeah, there's a chance you're right .. but there's also a big fat chance you're making stuff up on the spot.
@Matt Hardigree: Wow, you're getting a lot of crap for this article. Go good deed...
@Ash & Carry: Sure, what do you think that a used up, 100k hybrid with (by then) super "old" technology will be worth, especially when it will be due for its second replacement of its (by then) no parts to be found battery packs? People will be running from these cars with high miles, go check and see what a 100k Honda Insight is worth ... Its worthless ...
@FLAT4-PΩWER ™: Sell gas to strangers for cash. You can make enough money to pay for the car.
So far, everyone has failed to mention that Chrysler is obviously using hedging to make this work for them. Otherwise, they would have tremendous tail risk in the case that gas goes to $6-7/gal. IMO, this is great for both Chrysler and the consumer and to say that it's a scam shows the paranoia that exists in some consumers. Chrysler gets to move inventory more quickly, and the consumer gets access to the gasoline futures market that is usually only accessible to those putting millions of $ up.
Just like airlines use oil futures to hedge their future fuel costs so that they predict future earnings, this allows the consumer to more effectively budget without having to worry about getting another job, moving closer to work, or cutting vacations if gas goes to $5-6/gal.
I say bravo for a brilliant marketing plan. Sure, it makes Chrysler money by selling more vehicles, but the consumer now has another investment tool in his/her pocket.
@FLAT4-PΩWER ™: you only get to use so many gallons per year based on 12,000 miles per year. BUT you could use the card to fill up your less fuel efficient vehicle or diesel ... nice thinking.
@LJKelley: "You fail Consumerist."
Shit, where am I? I thought this was Jalopnik.
Thanks for doing the calculations, me and a friend were arguing about this the other day. Good to know I was right.
I'm sure there is a cap--gas could be $5 a gallon in the not too distant future and there's no way the big C didn't work out all the permutations.
@Novaload: No CAP kiddos ... gas can go to $15.00 and higher, all you pay is $2.99, I happen to have the program rules in front of me.