My Insurance Insider and Finance Blog

photo credit: richardmasoner

Car makers are always exploring new ways to catch your eye by rewarding cash backs, 0% financing or even offering $2.99/gal. gas. Quite interesting-isn’t it?

Chrysler and American Suzuki are offering such deals on gas, hoping to boost the car sales. Chrysler is offering car buyers gas at $2.99 per gallon. American Suzuki, on the other hand has come up with a more modest deal by giving qualified buyers a prepaid credit card that can only be used to buy gas.

Under Chrysler’s deal if you buy a car, you’ll get a pre-paid credit card that can be used at most gas stations costing you $2.99 per gallon. Means a $1.01 savings over the present national average cost of about $4. Then who’s going to pay the rest? Its Chrysler. And the difference (between $2.99 and the pump price) is being credited back onto your card. You’ll get this subsidized gas until July 31, 2011, if you buy a car(a specific model) within July 7, 2008.

Chrysler’s offers 36,000 miles to cover over the life of the promotion. Now, under this promotional offer, your exact quantity of subsidized gas depends on the purchased model. The biggest allowance is 2,400 gallons for 5 models over three years that estimated to be 15 miles per gallon for those models.

If you somehow drive 36,000 miles and use 2,400 gallons of gas, you’ll have to pay $7,176 out-of-pocket which would save you $804 over 3 years. If you buy a car that drives 21 mpg, the total gas required to cover 36,000 miles is 1,714 gallons. And at $4 per gallon, it would cost you $6,855. And that’s $321 less expensive than the 15 mpg cars.

With a Dodge Ram 1500 pickup, the buyer gets $3,000 cash back on the highest allotment of gas. The SRP (suggested retail price) for the Dodge Ram 1500 is $22,385. If you use the rebate as a down payment and get a three-year loan @ 6%, your net purchase price would be $21,230. Now adding in $7,176 (out-of-pocket as above) brings the three-year cost of subsidized gas to $28,406

Now if you purchase the 21-mpg-car at the same price, with the same loan, no rebate and with gas at $4, the three-year cost of the car would be $31,370 But if the company offers the same rebate for the better mileage car also, your financial package improves. And your three-year cost would drop to $28,085, still paying $ 321 that is less than the Ram. So rebates can make a difference.

But there are some limits on Chrysler’s deal. If you buy more gas than the yearly allowance, you pay full price for the gas until the next year of the program starts. For Chrysler models with better mileage, the rebate and the gas allotment drop.

On the other hand, Suzuki’s gas deal is simpler. If you qualify for 0% financing you’ll get a prepaid card to pay for gas.
Toyota hybrid, starts at $21,500 with a mileage of 45 mpg. If you drive 12,000 miles you’ve to pay about $1,066. With no rebate, and 6% loan, the three-year price tag is $26,744 - cheaper than the Dodge Ram with both rebate and the gas subsidy.