updated 11/17/2005 5:39:30 PM ET 2005-11-17T22:39:30

DaimlerChrysler AG’s Chrysler Group said Thursday it will give two years of free gas to customers who buy a 2005 or 2006 vehicle before Jan. 3, following announcements of new discounts by rivals General Motors Corp. and Ford Motor Co.

Chrysler will also kick in two years of free scheduled maintenance and increase the warranty on mechanical parts to five years or 60,000 miles. Chrysler now offers a three-year, 36,000-mile warranty. The offer, called the “Miles of Freedom” plan, begins Monday.

“The combination of free gasoline, free scheduled maintenance and a full warranty puts our customers’ mind at ease and allows them to fully experience the joy of driving one of our vehicles,” said Joe Eberhardt, Chrysler’s executive vice president of global sales, marketing and service.

The company said the free gas will come in the form of a $2,400 debit card that can be used for anything. Alan Helfman, manager of River Oaks Chrysler Jeep in Houston, said the free maintenance is worth $200 to $300 and the extended warranty is worth $600 to $700.

“It’s a great tool for marketing,” Helfman said.

DaimlerChrysler shares rose $2.03, or 4.1 percent, to close at $51.18 Thursday on the New York Stock Exchange

For the rest of November, customers will be able to choose between the new incentive or cash-back plans already in place that expire Nov. 30. Helfman said some customers might still choose the cash, although the new plan could be a better deal. The 2006 Jeep Commander, which starts at $27,290, currently has a $1,500 rebate, Helfman said. Under the new plan, that would double.

Chrysler is excluding some of its hottest-selling vehicles from the plan, including the Dodge Viper, Chrysler 300, Dodge Magnum, Dodge Charger, Dodge Sprinter and SRT8.

Chrysler is the latest of the Big Three to announce new incentives to boost anemic sales. After a summer of heavily promoted employee-pricing discounts, the Big Three’s sales fell a combined 17.6 percent in October, according to Autodata Corp. Chrysler fared better than GM and Ford, with flat sales compared to October 2004.

Automakers typically offer discounts over the holidays, but GM jump-started those promotions earlier than usual when it announced its “Red Tag” discount this week. GM’s plan allows buyers to pay a fixed maximum price advertised on red tags at dealerships.

Ford’s rebate offer has a similar no-haggle aspect. Under its “Keep It Simple Plan,” customers are given one consistent, maximum price that will be printed on vehicles’ window stickers.

Chrysler isn’t the first to offer free gas. Mitsubishi Corp. since September has been offering one year of free gas for customers who buy a 2005 vehicle.

U.S. automakers have a love-hate relationship with incentives, which boost sales but can cheapen a brand’s image. Asian automakers also use incentives, but they’re generally much lower.

GM, Ford and Chrysler have all tried to pull back on incentives but returned to them when sales slowed. As soon as October sales were released, Chrysler slapped a $1,000 discount on all 2005 and 2006 vehicles.

Chrysler had the highest incentives of any major automaker in October at $3,075 per vehicle, according to Autodata. Honda Motor Co. spent the least, at $618 per vehicle.

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