10 Dirty Secrets of Car Rental Companies

A nationally recognized reporter, writer, and consumer advocate, Ed Perkins focuses on how travelers can find the best deals and avoid scams.

He is the author of "Online Travel" (2000) and "Business Travel: When It's Your Money" (2004), the first step-by-step guide specifically written for small business and self-employed professional travelers. He was also the co-author of the annual "Best Travel Deals" series from Consumers Union.

Perkins' advice for business travelers is featured on MyBusinessTravel.com, a website devoted to helping small business and self-employed professional travelers find the best value for their travel dollars.

Perkins was founding editor of Consumer Reports Travel Letter, one of the country's most influential travel publications, from which he retired in 1998. He has also written for Business Traveller magazine (London).

Perkins' travel expertise has led to frequent television appearances, including ABC's "Good Morning America" and "This Week with David Brinkley," "The CBS Evening News with Dan Rather," CNN, and numerous local TV and radio stations.

Before editing Consumer Reports Travel Letter, Perkins spent 25 years in travel research and consulting with assignments ranging from national tourism development strategies to the design of computer-based tourism models.

Born in Evanston, Illinois, Perkins lives in Ashland, Oregon with his wife.

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When you step up to a rental car counter, do you automatically anticipate an adversarial relationship with the agent? Lots of us do, and with some good reason: The fear that the agent will try to get us to pay for something we don’t need—or gouge us for something we do need—is real and rental car companies do employ tricks for those purposes. You can avoid some of these with careful planning, but others you can’t.

They Really, Really Push Gouge-Price ‘Insurance’ You Don’t Need

The biggest point of contention, almost everywhere, is the collision- or loss-damage-waiver (CDW/LDW). Legally it really isn’t insurance, but most consumers and many rental car agents call it “insurance” anyhow. And at somewhere around $30 a day, it can as much as double the cost of a rental.

Just how much is that cost inflated over the company’s actual financial risk? A few years back, one company told travel agents they could offer customers the unbeatable rate of $0 a day, provided the customer bought the insurance. Rental car companies repeatedly deny instructing agents to use hard-sell techniques to sell insurance; “deep throat” former agents report that compensation and advancement are often tied directly to insurance sales.

You definitely do need collision/loss coverage on a rented car, but you don’t have to buy it at the rental company’s wildly inflated rates. You have three options: (1) Your own auto insurance may cover you, at least in the U.S.; (2) many credit cards provide no-charge secondary coverage; and (3) you can buy primary coverage for less than $8 a day from Insure My Rental Car and Protect your Bubble. Big OTAs also offer damage coverage for $10 a day or so.

The rental companies’ CDW/LDW has one big advantage: If you damage a car, you can return it and walk away with no further responsibility. With other insurance, you may have to pay up front and make claims later. But that freedom from responsibility comes at a high price to you—and a fat profit to the rental company.

They Pile on Damage ‘Costs’

Rental companies don’t like it when you use your “free” credit card coverage, so they keep escalating new cost elements they hope your card won’t cover so you’ll have to buy their overpriced stuff anyhow. In addition to the actual costs of repair—often inflated beyond what a normal person would pay—you typically encounter these extras:

“Loss of use” charges—the list-price daily rental rate for every day the car is out of service—even when the rental company has lots of cars available at the time, and even if the actual rental rate is a lot less than the list-price daily rate.
“Administrative” fee for processing the paperwork.
Towing, storage, and other associated expenses of retrieving a damaged car.
“Loss of value,” the amount they claim is the reduced resale value caused by the damage, even when repaired.

So far, the credit cards and third-party insurers seem to be keeping up with these escalating costs. But that doesn’t stop the rental companies from searching out other ways to bypass less expensive forms of insurance.

They Overbook with Impunity

Rental car companies overbook for the same reasons airlines and hotels do: to compensate for no-shows and to offset drivers who return cars early. Presumably, they rely on historical experience to overbook to a “safe” level that minimizes being unable to provide a car to a customer with a reservation.

But a “safe” level for a rental car company is a lot different than a “safe” level for an airline. When an airline bumps a traveler due to overbooking, the traveler has the recourse of federally-mandated cash compensation. And to offset that cash compensation, airlines satisfy about 90 percent of their overbooked customers by offering big-dollar travel voucher incentives to travelers willing to “volunteer” for a later flight. As a result, airlines are pretty adept at keeping overbooking levels low enough to avoid serious financial exposure.

Travelers who rent cars, on the other hand, have no such mandatory compensation: The only effective ceiling on overbooking by rental companies is how many dissatisfied customers they will tolerate. And that, apparently, is a large number.

When a rental company can’t accommodate you with a firm reservation, its first ploy is to offer an “upgrade” to a more expensive model for an extra fee if the agent thinks he or she can get it, or for “free” if you’re a savvy customer. An agent may even try to find an available car from a different rental company but probably will not offer to pay for it. And when cars are scarce, the best offer you get may be “hang around the airport for a few hours and we’ll give you a car when someone returns it” or “go to your hotel and we’ll have a car for you tomorrow.”

Consumers really can’t do much about this, except to try to avoid arriving at an airport late in the evening in need of a car.

They Gouge on Fuel Charges

Most rentals are on a “get it full, return it full” fuel policy. If you return a car with less than a full tank, the rental company refuels it and adds it to your bill—with a per-gallon charge that can be double or triple the going rate. And because gas gauges are so imprecise, the rental company will take the car to a pump and top it off immediately, which may take enough to charge you. Also, even when you return a car full, an agent may demand a receipt for a fill-up from a nearby station. A receipt is critical if you rent from Avis, Hertz, or any other company that charges a flat $13.99 for any rental of less than 75 miles if you can’t prove you refilled the tank. That’s not a bad price if you actually drive 75 miles, but if you drive only 20 miles in a fuel efficient car, that’s a huge overcharge.

The other main fuel option is to buy a full tank when you start the rental, typically charged at near the going local price, then return the car as close to empty as you can. The “gotcha” in this case, obviously, is that it’s difficult to drive so precisely that you leave only a cupful of gas in the tank when you return the car. Anything left in the tank is effectively a donation to the rental company, which is likely not your favorite charity.

Overall, the “buy it full, return it full” approach remains the best strategy. But be sure you get that receipt.

They Charge for Something That Costs Nothing

One of the most annoying rental car gouges is a daily charge for an additional driver. That charge is up to $13 a day in much of the U.S., sometimes with a cap, and it’s irksome because you know that having someone else spell you during a long drive costs the rental company absolutely nothing.

Fortunately, you can often avoid the charge. Some rental companies exclude the charge for spouses, domestic partners, or business associates when on a corporate rental. Even when a company normally doesn’t waive the charge, membership in the rental company’s loyalty program or renting through an association such as AAA or AARP often comes with a waiver.

They Play Games with Discounts

Rental companies are notorious for posting artificially high “list” prices, then offering big “discounts” to members of AAA, AARP, and lots of other organizations. In reality, those big discounts usually apply selectively to the very high daily rates; discounts on weekly rates tend to be much lower. Just don’t obsess about getting the “best” rate: If it looks good, take it.

They Charge More for Driving Less

Rent a car for a week, pay $289 including tax. Rent a car for four days, pay $333. Rent a car for a week but turn it in three days early, pay $333. You have to keep it at least five days to get the weekly rental rate. Go figure.

They Add Phony Fees

Rent a car for one day at Boston’s Logan Airport, and here’s the itemized bill: Base rate $67. Airport concession fee $8. Customer facility charge $6. Convention center surcharge and parking fine recovery $11. Vehicle licensing cost recovery and excise tax reimbursement $4. Energy surcharge $1. Taxes $5. Total cost $102. That’s $35 more than the base rate.

Of those itemized add-ons, only the convention center fee and the taxes are paid out as such to governmental agencies. The other fees are all really a part of doing business at the airport and should be included in the base rate. You find similar charges, with varying names and rates, at most other rental locations.

Fortunately, the online search systems, including the rental companies’ own websites, all post the full cost on the initial screen, so the misrepresentation doesn’t really hurt most consumers. This situation is much better than the prevalent case with hotels, where mandatory fees are not included in the initial displays. But you have to wonder why rental companies play with pricing this way: It neither fools nor helps anyone.

They Include Woefully Weak Liability Insurance

Adequate liability protection is far more important than even collision damage protection, because if you hurt someone else, a big damage award could wipe out your entire net worth and then some. For rentals in the U.S., base rates typically include only the mandatory minimum liability coverage in the state where you rent, and those state limits can be as low as 10/20/10 in Florida, 15/30/5 in New Jersey and /Pennsylvania, and 12.5/25/7.5 in Ohio (the three numbers, in thousands of dollars, refer to the maximum coverage for bodily injury per person, maximum coverage for bodily injury per accident, and total coverage per accident for property damage. Even the best state requirements top out at 50/100/55 in Wisconsin.

These figures are woefully low in today’s litigious society, and you surely need more protection. You have several options: your own auto insurance may cover you, a big-dollar umbrella policy covers you, and some association rental deals, such as the AARP deal with Avis/Budget, includes 25/50/10. Credit cards, on the other hand, typically do not include liability protection. So if you don’t have a better deal, you almost have to go with the rental company’s overpriced insurance.

Mandatory liability coverage in Europe is much higher than in most U.S. states. And damage awards are usually lower. So the insurance included in the base rate is usually sufficient.

They Hide Maximum Age Limits

This one for our senior readers: Some rental companies in some locations impose maximum age limits, starting at 70 years. That’s bad enough, but what’s worse is that those limits may not show up anywhere during the rental process—even when the website asks you to input your age. The result is that you don’t find out about the problem until you arrive at the rental counter and the agent says, “sorry, but you’re too old.” Yes, you can often go to a nearby counter and rent from some other company, but you’ll probably be stuck with a much higher rate.

This problem appears to be most severe in Europe, but you may face it in other areas as well. No matter where you’re renting, if you’re 70 or over, double check your eligibility before you commit to any rental.

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10 Dirty Secrets of Car Rental Companies

Ed Perkins