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Price fixe fill-up at the gas station

May 29th, 2008

With gas prices surpassing a whopping $4.00 per gallon, millions of Americans are collecting the pennies in their couches for their “drive to work” funds. Cash-strapped Americans are canceling summer vacation plans, looking for jobs closer to home and changing their consumer and purchasing behavior as they desperately attempt to save money in order to be able to fill their tanks. But in the backs of everyone’s minds is a lingering question—just how much more expensive is gas going to get?


As a way to help Americans pay for gas, Chrysler, is offering Americans the opportunity to improve their luck at the pumps. Through their new “Let’s Refuel America” program, the company is offering a set price of $2.99 per gallon for the next three years with the purchase of a Dodge, Chrysler, or Jeep vehicle (select vehicles qualify). The strategy has led to an increase in sales and additional car manufacturers are quickly following suit. American Suzuki is offering zero percent financing and three months of free gas with the purchase of a 2007 or 2008 vehicle.

Just a few years back, $2.99 for gas seemed obscene. Now, it seems like a bargain and some cash-strapped Americans stuck in a car buying decision are jumping at the offer. This is a great marketing strategy in theory, but the reality is that when you do the math, this won’t save consumers that much money over the long haul. Due to the economic fallout, the rising cost of gas, and the emphasis on global warming (all of which are extremely important to consumers), car sales are at record lows. In fact, for the past five months, Toyota, which many believed was immune to the effects of a sour economy, has not only reported falling sales, but its inventory of unsold cars and trucks is larger than ever before. Something does need to be done to boost car sales and help get our economy back on its feet—but Chrysler and Suzuki are looking at it the wrong way.

Yes, this strategy does promise to alleviate a customer pain point. Everywhere you turn from the media to bloggers to your friends, family and neighbors, people are feeling pain at the pump. But is the promise of fixed gas rates so compelling that it’s worth footing the extra cash each month towards the increased car and insurance payments that generally come with buying or leasing a new car? Plus, in today’s environmentally-aware world, will consumers really be interested in a Dodge Ram which gets 15 miles per gallon—even if they get a cheaper gas rate?

Jeeps, Chryslers and Dodges generally don’t get good gas mileage and in an economic downturn, it’s the cost of gas per mile driven that matters more than the cost of gas per gallon. According to TheStreet.com, at $4.03 per gallon of gas, a Dodge Ram costs $0.27 per mile to drive. That adds up—and not in savings. That’s more money on gas per year and more damage to the environment. Chrysler and Suzuki would be better off touting better fuel efficiency, lower emissions and cash rebates to interested buyers—rather than desperately trying to get cars off the lot that aren’t saving consumers money or helping to save the environment.

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