The Early Show

Beware "Cheap Gas" New Car Deals

May 31, 2008 / 9:48 AM EDT / CBS

Have you seen those car commercials on TV touting offers of gas for $2.99 a gallon when you buy certain new vehicles?

Financial expert Vera Gibbons says they sound better than they may actually be.

On The Early Show Saturday, Gibbons told how such deals work and pointed out their pitfalls as she steered viewers toward the best bang for their new car bucks:

Chrysler, with Chrysler, Dodge, Jeep and many other lines, is the biggest automaker promoting this kind of deal. If you buy particular new vehicles from Chrysler, it guarantees you $2.99-a-gallon gas for three years. Once you buy the vehicle, you receive a gas card that's directly linked to your Visa or MasterCard. Use the card when you fill up, and you'll only be charged $2.99 a gallon; Chrysler picks up the rest. The amount you're charged will show up on your next credit card bill. That continues for three years.

Suzuki is offering a version of that sort of arrangement: IF you qualify for zero-percent financing on a new car — which means you need to have really great credit — the company will pay for your gas for the three months of summer, up to a maximum of $470. Basically, that enables you to drive your new car about 1,000 miles a month on Suzuki's gas tab.

The promotions have been getting a good response. As a matter of fact, Chrysler decided to extend the promotion through July 7 in response to demand. Dealerships across the country report that $2.99 gas is at least encouraging more people to come to their showrooms and check out vehicles.

But so far other big car companies haven't followed Chrysler's lead. Chrysler is in financial trouble, and produces a lot of gas-guzzlers which, no surprise, aren't big sellers in the current market. The other major American companies offer some more fuel-efficient options, which are helping keep them afloat, and foreign manufacturers have been offering highly-rated, fuel-efficient models for years.

And $2.99 gas isn't as good a deal as it sounds. For starters, there are a few "fine print" restrictions:

12,000 miles per year limit: The amount of $2.99 gas you're eligible to receive will vary based on your car's miles per gallon average. But for any gas needed to drive more than 12,000 miles in a year, you'll have to fork over the going price.

No premium gas: The deal does allow you to buy diesel, but doesn't offer $2.99 on premium or mid-grade gasoline.

Must pay with credit: If you don't pay off your balance each month, the accruing interest payments may potentially eliminate any savings you're gaining on the gas. And let's be realistic: No matter how good their intentions, the majority of consumers don't pay their cards in-full each month.

Forfeit other incentives: Most of these vehicles also have cash-back incentives of up to $3,500. But, if you choose the $2.99 gas option, you can't also take the cash, although some of the cars tied to the $2.99 gas deal ALSO offer a small cash-back incentive — $500 and the gas as opposed to a straight $2,500 cash back, for example.

In many cases, the cash-back incentives could be the better deal. You need to run the numbers, taking into consideration how many miles you drive, how fuel efficient the car is, how high you think gas prices are going to go, etc., then compare.

But the real factor to consider is whether you should be enticed by the incentives to begin with. Bottom line: Don't buy a car just because of an incentive like this.

According to Consumer Reports, Chrysler and Suzuki both rank at or near the bottom of their surveys in many categories: fuel-efficiency, reliability, safety, etc. Plus, many of these models depreciate faster than other cars, which is bad news for you if you want to resell them. And remember, you actually have to drive the vehicle around, so make sure you like how it handles and that you and your family are comfortable in it! If you fall in love with a Chrysler, that's one thing, but if you're just panicked about gas prices and attracted to the $2.99 deal, think carefully about your choice.

To bring those points home, take this example based on information anyone can find at ConsumerReports.org.

Compare a Chrysler vehicle that's eligible for the $2.99 gas, and a Toyota that's not. As you'd see, the Toyota overall is a better car to own, no matter what initial incentives are being offered:

DODGE NITRO
Price: $28,875
Fuel Economy: 16 mpg
CR Overall Rating: 33 (based on 100 point scale)

TOYOTA RAV4
Price: $30,328
Fuel Economy: 22 mpg
CR Overall Rating: 83

We can expect to see other deals and incentives from car companies this summer, particularly as we move toward fall and dealers need to clear their lots in preparation for the next season's new cars.

There's a variety of incentives out there right now, with the biggest on large SUVs and trucks. The most common incentive is customer cash-back. Low interest and zero percent financing are also common, but there's a host of special incentives, too, such as military bonuses, college grad bonuses, etc.

Remember: Individual dealers also have the power to create their own, special incentives.