Don’t Fall for GM’s Gas Price Deal

I would like to preface this article by stating that I do not have any hatred toward General Motors.  I simply think that they’re a very poorly managed company.  They desperately need to innovate and adapt to the needs of consumers rather than hope consumers adapt to them.

General Motors has recently rolled out advertisements for consumers in California and Florida.  These advertisements state that if you buy one of GM’s vehicles that get low miles per gallon, they will subsidize the price of your gas so that it only costs you $1.99 per gallon.  Sounds great, right?  Unfortunately, that’s not exactly the way it works.  Consumers should not fall for this deal for the following reasons:

• The deal is only valid through the end of 2007.  That means if you buy a car today, you get about 1.5 years of “cheap” gasoline.  After that, you’re stuck with a gigantic car and an even bigger gas bill.  This is a kind of dirty trick, because I’m sure many consumers don’t realize it’s only valid through 2007… and they’re going to get stabbed in the back when it’s no good anymore.

The credit will be applied each month to a pre-paid card, which will be issued to the consumer. The credits are good until December 31, 2007 and may be used for any type of purchase at any location that accepts MasterCard.

• Your overall savings on gas is small.  Assume your car from GM gets 25 miles per gallon (they’re only using the cars that get low MPG, so this is a high estimate of MPG).  If you drive 10,000 miles per year, you will pay $796 for gasoline with this plan.  If gas is $3.00 per gallon, you would be paying $1200.  In effect they are only giving you a little over $400 per year, or $600 total (1.5 years) for the deal.  You can do better than a $600 rebate that you don’t even receive all at once. On the other hand you could go out and buy a small car that costs less and gets 40 miles per gallon and pay $750 per year for gasoline at $3 per gallon.
• You are reimbursed for gasoline costs through a card that can only be used to pay for more gas.  This means inconvenience, because you’re going to have to switch between that card and your credit card at the pump… awkward and time consuming.
• I don’t know much about taxes, but I doubt these rebates will be tax friendly.
• You have to pay for Onstar: $16.95 per month.

And here is a funny quote:

The incentive program comes after GM vowed to avoid the sweeping discounts that raised sales last year but cut into profitability and hurt resale values for its cars.

Isn’t this basically the same thing as a discount?

And an even funnier quote (note this is from GM’s website):

The vehicles selected for this program were chosen because of their outstanding fuel economy and great consumer appeal. The 2007 Chevrolet Tahoe leads the full-size utility segment in fuel economy and has a two-wheel-drive EPA highway estimate of 22 mpg. The Chevrolet Suburban and GMC Yukon XL have EPA highway estimates of 21 mpg.

22 and 21 miles per gallon… “great” fuel economy?  Calling an apple an orange doesn’t make it an orange, sorry.