Chrysler is offering free financing on most 2010 model-year vehicles or up to $4,000 in cash rebates for the month of May as it tries to boost U.S. sales amid heavy discounting by rivals.

Customers buying Chrysler cars or Ram trucks are offered zero-percent financing for up to five years, or as much as $3,000 in cash rebates, the automaker said in a statement on Tuesday.

The Jeep brand offers zero-percent financing for 36 months or cash incentives of up to $4,000, while the Dodge brand offers the same financing rate or cash of up to $3,000.

Chrysler announced the May incentive program a day after posting a 25 percent jump in April U.S. sales, its strongest year-over-year percentage sales gain since July 2005.

Chrysler sold 95,703 vehicles in the U.S. market in April, an improvement from a year earlier when demand for its vehicles had tumbled in the run-up to a U.S. government-funded bankruptcy filing at the end of April.

Bigger rival Toyota Motor Corp <7203.T> has also extended record company discounts for a third month as it tried to bolster consumer confidence in the wake of a series of damaging safety recalls.

Chrysler U.S. sales chief Fred Diaz said on Monday the automaker was hungry to continue building on the sales improvements.

Chrysler's incentive spending fell 13 percent to $3,664 per vehicle in April from a year ago, but it was still the highest of any automaker in the United States and significantly above the industry average of $2,702, according to industry tracking firm Autodata Corp.

Chrysler, which emerged from bankruptcy in June under the management control of Italy's Fiat SpA , has been battling to stabilize sales and its U.S. market share while racing to revamp an old, gas-guzzling lineup.

(Reporting by Soyoung Kim; Editing by Derek Caney)