Dodge’s New Fuel Price Protection Program Is A Scam
Jason Lancaster | May 06, 2008 | Comments 32
In an effort to boost sales, Dodge has announced a special “Fuel Price Protection” program for their trucks.
Dodge’s latest marketing ploy is bad news for consumers.
Simply put, you get a special credit card when you buy a new Dodge (not every new Dodge, but most). You can use this credit card to buy fuel for $2.99 a gallon at any service station for three years following your date of purchase, regardless of the actual market price. Sounds great right? Everyone else is paying $4-$5 a gallon for gas (or diesel), but you’re only paying $2.99 (provided you buy normal 87 octane gas – they’re not paying for premium). Except for the fact that it’s really not that great of a deal.
First of all, the program only covers enough fuel needed to drive 12,000 miles per year. Too bad the average annual mileage in the U.S. is closer to 15k miles than 12k. So, for average drivers, the last couple of the months of the year their Dodge gas card is going to stop working.
Secondly, since Dodge will have no way of knowing how far you’ve actually driven in order to determine when you’ve hit 12k miles, they’re going to use the EPA average fuel economy estimates for each of their products to calculate how many gallons work out to 12,000 miles. Why is that important? Because Dodge makes you give up most of the cash rebate on the new truck to get the fuel card.
NOTE: Dodge has announced the full program now, and they’re including a $3,000 rebate with the gas card option. So, instead of being a complete rip-off (with no cash), it’s at best a push.
Unfortunately, the “fuel price protection” credit card is actually a worse deal for consumers (at least anyone buying a new Ram 1500). Here’s why:
Let’s say, for argument’s sake, that regular 87 octane gas costs $5 a gallon for the next three years. Some people estimate that gas will actually stabilize at $4 a gallon, but let’s be on Dodge’s side and say it hits $5 and stays there. That means you’ll “save” $2 on every gallon Dodge buys you for your new 08′ Hemi Ram 1500. Of course, Dodge is only going to buy you enough gas to go 12k miles a year, which is 857 gallons a year using the EPA estimate.
Dodge has announced the full program now and the math on this graphic is incorrect. Dodge is providing a $3,000 rebate as well as the gas card. It’s still not what we would call a good deal, but it’s not a ripoff either.
If you do the math, you’ll find that IF fuel is $5 a gallon, you’ll save about $5200 over the next three years using Dodge’s fuel price protection program. A quick visit to Dodge’s website showed the current cash incentive you have to forgo is $2500 on new 1500 Rams (at least in the Denver region). If you use the more realistic gas price estimate of $4.00 – $4.50, you only save $2,600 to $4,000 over the next three years.
SO, if gas stays at or near $4 a gallon, you only save about $2,600 over three years.
Too bad that $2,500 today is worth more than $2,600 in gas savings spread out over three years. It’s called time-value of money. If you used the $2,500 in cash rebates as your down payment on a new Ram, you save about $200 in interest over the next three years (assuming you get a 3 year loan at 6%). If you got a 6 year loan at 7.99% (which a lot of people do now), using the cash rebate saves you almost $800 in interest on a loan. So, obviously, unless gas climbs past $4 a gallon, this isn’t much on an offer.
Unfortunately, a lot of people aren’t going to do this math. They’re going to hear “$2.99 a gallon gas” and run to their nearest Dodge dealer.
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Filed Under: Auto News
To me the biggest downside to this offer is actually having to buy a Chrysler product.
that’s why they call them scams
I don’t think ‘scam’ is the right word here. They’re clearly telling you exactly what you get – $2.99/gallon up to X gallons per year for 3 years. Just because there are better available options, it doesn’t make something a ‘scam’. Really it’s just smart marketing tactics – no worse than a Best Buy rebate, or the free coffee with purchase of X, or any of a million other consumer incentives you come across every day. They all have catches – money isn’t free.
Furthermore, cashback on cars is just one of many negotiation points when you buy a car. Not saying you can get the price down the full $5500 + the gas card… but unless you have no comprehension of how to buy a car, you are certainly not going to pay anything close to sticker on a 14mpg truck right now.
Not only did you pick the truck with the highest cash back, you failed to mention that in lieu of the $5000 cash back you get $3000 in “Let’s Refuel America” bonus cash. (source: http://www.dodge.com/en/refuel/)
So you should be comparing $5000 in cash back versus $8200 ($5200 in savings plus $3000 in bonus cash)
Um… if you get the Dodge Ram and want the gas card they *still* give you $3000 cash back. So you only give up $2500 in exchange for the card. This article makes no sense.
[…] money on the deal. There are a couple of other gotchas associated with "the card" too. Check it out, and do the […]
Can you possibly be a little more sensational? For example maybe you could make the bright flaming red “Talk about a rip-off!” sentence, sitting by itself all lonely without any fellow paragraph friends, move around on the screen? Or maybe you could make it blink and change colors. Or maybe you could go the other way and cite some sources, stop using silly fonts, and stop insulting our intelligence. The premise of this article is that Chrysler is taking us for a ride, and you take us for a ride to “prove” it.
I suppose I get a free ride either way…
n00b
Well, maybe the solution is not buying a huge truck if you don’t need one? I understand there’s people that actually need these behemoths, but I’m pretty sure 90% of the population can get a very spacious car for that money, and then save at the counter.
Smiff – LOL! Good one.
cman – It’s true that good marketing often gets people to choose a more profitable option over a less profitable option, but anytime a business claims they’re “relieving” economic strain (when they’re taking advantage) they open themselves up to this.
Joe – Yesterday when we wrote this article Dodge hadn’t publicized all the details. Today, looking at their website, Dodge is giving people $3,000 on the Ram 1500 plus the gas. So, instead of being a complete ripoff, it’s at best a push now.
David – Good point.
[…] it’s not. Check out this article explaining why it’s actually WORSE to take advantage of this deal than to buy a car normally. […]
WHEN we had published this article Dodge had not announced full program details. We can no longer say this offer is a “scam”. Depending on what gas prices do, this could be a very good (or very bad) offer. We regret the error.
Why dosen’t Chrylser take all the money they are spending on this ‘offer’ and invest it into development for some better, and more fuel efficient, vehicles?
Timothy are you talking about the Chrysler Titan? Cman I hate to be a bearer of bad news but rebates are given becasue the vehicle isn’t selling for what they have it for. So to get customers to look they lower their high price to start with to get you out there. Then they come up with gimmics like this gas card.
Yes, how dare they try to use marketing to sell a product. I actually thought that they found oil reserves that were refined to produce gas that only worked i Chryslers.
Its a repacked incentive. That’s it. What’s wrong with that? And you’re basing your $5200 estimate on current gas prices, you aren’t taking into account the fact that they are probably going to rise as time goes on.
This is just a fear-mongering article that doesn’t really make sense. A scam would be if they meant 2.99 Euros/gallon, not this.
A decent deal, but companies don’t “offer” a deal that would lose them money. It would be nice if they saved us money by producing fuel efficient vehicles, I’m sure the oil companies are shaking hands with Chrysler and Dodge on this one.
[…] [See full article here..] […]
If you look at Chrystler’s website they only show a savings of about $485.00 so, I don’t know why everyones math shows so much more. I think Chrystler is not counting Federal, State and local taxes.
So o.k you don’t think it’s a great deal. Wonderful. But how come no-one stops to say – hey they don’t have to do ANY incentive if they don’t want to. THEY ARE DOING YOU A FAVOR & you are complaining about it !!! You should be happy they are giving you anything at all !! You people make me sick everybody wants something for nothing !!!!
Shut up & be happy they are even giving anything away in the first place. . . are you really complaining that they are only going to save you a couple thousand dollars as apposed to a few thousand dollars?!?!?!
You make me sick when someone gives you a gift you accept it with a smile on your face & say thank you, not complain about how they could be giving you something better.
Clearly your mama did NOT teach you any manners !!!
Jen – What?! Are you seriously suggesting that a manufacturer’s rebate, along with any other sales incentive, is a gift? The reason that Chrysler has come up with this program is that their sales are terrible – they HAVE to do something like this if they want to sell their product. It’s not a ‘gift’, it’s a marketing tactic. Excuse me for evaluating it critically.
Well it’s Memorial Day weekend and 87 octane gas is at $4 at gallon. I just bought a Caliber and the reason is for the card. Unfortunately the Caliber is the most fuel economical vehicle offered with 27 mpg highway, but thats why we bought it. I use to have a Nissan Murano, 24 mpg highway, and it was very hard to trade down but necessary for me. But with a lifetime powertrain warranty, plus we opted for a 60 month 60k bumper to bumper extended warranty. I also have a F250 Deisel and at $4.65 a gallon, its just sitting. I am sorry to say, my personal belief, $4 a gallon for regular is not the high point of fuel costs, not with predictions of $200 a barrel for oil being forcasted. I am just thinking that we made a fairly acceptable bet on the card, even if the relief is temporary. I am sorry tho that one has to use a Ram 1500 as an example of this gas plan. Trucks, Suvs, and Hemis….I dont believe qualify as economical. If you continue, remember I have a F250 so I am guilty too, to drive these gas/deisel guzzlers you are goin to have to pay.
Sounds like Toyota has sour grapes
Well I have to admit I’ve never had a vehicle get the sticker mpg. So that in it’s self is the first sign you are going to have to keep records. With all other things you have to deal with from day to day. It’s like spending $15,000 to $35,000 on a vehicle to save 2 to 6 thousand dollars. I wouldn’t buy into it unless I needed a new car or truck.
The savings on the gas deal for the Hemi or 4.7L truck don’t really begin until gas hits about $4.15/g. You give up $2500 rebate on the Ram and the mileage allowance is figured at 15 mpg average fuel economy>>800 gallons per year x 3 yr, so you need to save 1.15/g to equal the $2500 given up. However, the deal also applies to diesel trucks, where you surrender $2500 also! There it is a great deal already since diesel prices have hit $4.80! On Calibers, the fuel economy is averaged at 24 mpg, so you have 500 gallons per year on the discount, and you’re giving up just $750 rebate…the math on that was easy, save $.50 per gallon and you’re good! Save $1 per gallon and you have twice the saving! On the Chargers, Avengers, Grand Caravans, and Journeys gas prices have already passed the ‘break even’ point of $3.75/g.
What you also forget is that if you use more than 12000mi worth of gas your card is useless. The average distance people drive a year is 15000mi a year. Interest rates also need to be taken into effect. Also if your buying a gas guzzler and after your done your three years of 2.99/gal your stuck with a gas guzzler with gas prices as high as 4-6 dollars a gallon. You try and sell a vehicle with 12-18 mi/gal with gas at that price, good luck. You can bearly give away a V8 4×4 truck at the moment with the price at 4.35/gal. Don’t forget your insurance will most likely go up as well for a new vehicle. My advice is with the economy the way it is right now people shouldn’t be buying 20-30 thousand dollar vehicle to save 2 bucks a gallon on a new ride.
Bottom line is Chrysler is not going to loose any money with this program. They will however make money.
[…] [See full article here..] […]
We traded a less efficient 2004 Pacifica for the more efficient 2009 Journey. We got $1000 rebate, plus the gas card.
We also got a 4.25% interest rate, (the Pacifica was paid for, but the rate there was 6.25%).
Since we bought the Journey, the price per galllon has already gone up about 15 cents, and doesn’t look to go back down any time soon, with the situation in the Middle East.
Is it a good deal? Only time will tell how good/bad a deal it was. It is a hedge against increasing gas prices, and at a comfortable interest rate.
Sure it’s a sales tactic – EVERY rebate/incentive is! The point is, don’t just take what they give you.. advocate for yourself. By negotiating, we were able to get the rebate PLUS the gas card, (although when we got to the dealership they were insisting that it was an either/or deal. We stuck to our guns, and got what we were entitled to.
One slight drawback to the program is that it is NOT available at every gas station.. but they have a website available that will tell you which ones qualify, so with a little foresight you can easily get the $2.99. Three stations are available within 2 miles of my house, (closer than the station I was using previously).
John – You’re absolutely right that the benefits of the hedge have yet to be shown, however, the fact that only certain gas stations accept the gas card takes more wind out of the offer.
This would be awesome to use in remote alaska villages where gas goes for $8/gallon. Is it true that you can sell the vehicle and keep the gas card for yourself (essentially you could use it for boats, snowmobiles, etc)?
[…] anywhere in the US (no geographical exclusions that I’m aware of).
Jason the dodge dealership here is offering $.99 a gallon when you buy a jeep, dodge, and chrysler. I guess they will pay the extra $2.00 a gallon to sell a vehicle. Times must be hitting real hard in areas trying to sell vehicles.
Peter – Good point. I’ve read that only certain gas stations accept the card, so that might be the “catch.”
Mickey – Your local dealer’s got a good idea there. Maybe Dodge should roll that out next.
how about this:
buy a vehicle you like, drive it, and shut up.
too easy to complain…
or should I WHINE.
happy owner, 08 ram 1500.
done.