Chrysler, Suzuki Offer Gas Incentives to Car Buyers

In an appeal to consumers who are fed up paying record-high gas prices, Chrysler and Suzuki now offer incentives that help offset the pain at the pump. The promotions promise to either lock in lower gas prices ($2.99 a gallon in the case of Chrysler's offer) or pay for gas outright for a set period of time. That could come as welcome relief to consumers who, in some parts of the country, pay as much as $4 a gallon, according to Neil Gamson, economist at the Energy Information Administration (EIA). (Gamson says gas prices will likely remain high through most of 2009.)

Of course, car makers hope to get something out of the deal, too. Between March 2007 and March 2008, auto sales in the U.S. fell some 12%, according to Edmunds.com. In April, Chrysler reported that sales were down 23% year over year. Resorting to incentives like discounted or free gas is just one way car makers hope to lure in much-needed customers, says Jessica Caldwell, an analyst at Edmunds.com.

Whether gas incentives will boost Chrysler and Suzuki's bottom line is debatable. General Motors (GM) unveiled a short-lived program in 2006 that set a year-long cap of $1.99 a gallon on gas prices for new car owners in certain markets. GM then picked up the difference. According to John M. McDonald, a GM spokesman, the promotion did little to boost sales. "We now focus on producing vehicles that get better fuel economy," he says.

Indeed, most of the vehicles eligible for gas discounts at Chrysler and Suzuki, like the Jeep Commander and Suzuki's XL7, aren't known for their fuel efficiency. So car shoppers need to consider whether they could reap bigger gas savings by opting for a more fuel-efficient subcompact or hybrid car instead. "You don't see Toyota's Prius having a $2.99 offer because they don't need to," says Caldwell. "If fuel economy means so much to you, you should investigate more to see what cars will be more fuel efficient in the long run."

Here's a rundown of the latest gas incentives offered by auto makers:

How it works: Anyone who buys a car and applies for the promotion receives a gas card tied to their MasterCard (MA) or Visa (V) account and a personal identification number (this takes about four to six weeks). From that point on, the car owner pays just $2.99 a gallon and Chrysler picks up the rest of the tab — no matter how high gas prices climb.

The fine print: The $2.99 per gallon is only valid for 12,000 driving miles per year. Also, the price is only set at that amount for 87 octane unleaded gas, diesel gas and E85 (a type of ethanol fuel commonly used in the Midwest). For midgrade fuel with an octane of 88 or 89, drivers pay 15 cents more per gallon; for premium fuel (90-94 octane), it's 30 cents more per gallon.

The trickiest part of this program is choosing between the various incentives that Chrysler offers. Those who opt for the gas card may also receive cash that can be put toward the purchase of the car or used as spending money (the cash can't be added to the gas card). Opt out of the gas card, and receive either a larger cash back amount of up to $5,500 or APR financing of as low as 0% to 2.9% (for those with stellar credit). The average APR in March for nationwide financing on new cars was 6.4%, according to Edmunds.com.

"You really have to do the math and look at the gas prices in your area," says Caldwell. "A lot of times, the cash they offer ends up being more than the money you save on gas."