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Overlooked: court upholds pricey car rental fuel

February 24, 2007

In all the excitement over the latest runway-imprisonment incident and the prospect of a passenger bill of rights, the travel blogosphere has overlooked a small but important court ruling. Earlier this week, Avis Budget Group Inc., persuaded a U.S. District Court judge to dismiss a lawsuit against it that challenged the legality of its $5.99-a-gallon fuel.

The customer, Andrew Ramon, said Avis imposed an “unreasonably large” service charge to refuel cars returned with less than full tanks. But the judge ruled that the rental contract was clear and sided with the car rental company.

Now, I can see both sides of this argument. The car rental companies insist that there’s a cost to refueling the cars, and that if a customer doesn’t return the car with a full tank, they have to do it. Customers view these charges as excessive and suspect that the rental companies are profiting from them.

Time to whip out the ‘ol calculator and see who’s right.

The going rate for unleaded gas in the Ramon case was $2.14 a gallon. Avis charged $5.99.

The difference between the two? $3.85.

Let’s say a hypothetical car rental location processes 100 cars a day, and that every fourth motorists forgets to fuel up and is forced to buy 10 gallons of marked-up gas under Avis’ fuel purchase option.

That’s $1,540 a day — or $562,000 a year.

Does it cost that much to gas up these cars? Considering you could buy a gas station for about the same amount, I would say it’s doubtful.

(Car rental insiders, please shoot me a note if my math is wrong or post a comment below.)

Christopher Elliott is the author of Scammed: How to Save Your Money and Find Better Service in a World of Schemes, Swindles, and Shady Deals. Critics have called it “eye-opening” and “inspiring” — it’ll “grab your attention and won’t let go.” Order your copy now on Amazon, Barnes & Noble or iTunes.

12 comments

  • Kal London

    I don’t believe car rental companies always fill up the gas tank when rental customers drive out their rented cars thinking gas tank is full. I know ,in several cases, the car rental company didn’t fill up the tank ( Top it off), if last car customer brings back car supposely with full tank of gas left. These car companies should actually pump gas into the tank until it is full. Most customers think they are getting a FULL tank of gas.

  • Anne Oestriecher

    I agree that the fuel surcharge is ridiculous, but it is one of the few charges that car rental companies are very upfront about. Since they tell you upfront how much they will charge, its hard to argue when you don’t bring it back full and they actually do charge you that outrageous per-gallon fee.

    It’s very simple to avoid…fill up before you return the car. Yes, it takes more time, and drivers can decide if the cost of the time is worth more than the cost of the overpriced fuel.

    Just as a matter of principle, I always fill up, even if I’ve only used a couple of gallons. I’ve learned to look for nearby gas stations as I leave an airport, so I’ll know which exit to take on return. Some airports (Cincinnati, for one) don’t have gas stations anywhere near the airport. (For CVG, take the Buttermilk Pike exit!)

  • BriCo

    No gas doesn’t cost what the rental agencies charge, but firstly, you’re paying THEM for the convenience of YOU not taking the time to do it yourself. Secondly, they’re paying an employee to take the time to do it, so it’s more than cost per gallon, it’s hourly wages and benefits also. Thirdly, not only is it written in the contract you agreed to, but they usually ask you when renting if you want to prepay for gas (at a much reduced rate, but a full tank), and it’s normally posted at/behind the counter where you rent the car.

  • Chris

    Based on my experience as a rental agent, your assumptions are a little high. In a shift last week with maybe 30 returns (we’re in the middle of the low season here), there were maybe two or three people who did not fill the tank–and sometimes there are none. I’d say the rate’s more like 5%.

    And on average, the people who don’t fill it up all the way don’t come back needing 10 gallons–most of the time, they’re somewhere between 3/4 and 7/8 of a tank, so they might need 5 gallons tops. I think most people do know that the refueling rate is high, and so if they’re running at 1/2 or below, they make a point to stop and fill it up. The people who don’t fill it up are the ones who are running late but are willing to put up with a $20 gas charge if they’re just a bit under full. No one consciously puts up with a $75 or $100 gas charge. (I’ve only seen that a couple times in the four years I’ve worked there.)
    I think we make more money on people who prepay for their gas and then bring it back higher than empty (I’d guess 10-15% prepay, and of them, 75% bring it back with 1/4 tank or more) than we do on the fuel charge.

    I should state as a rental insider, I think that the high refueling charge is a ripoff and the prepaid gas option is a confusing mess. If I were the franchise owner, I would eliminate the prepaid gas option and move the refueling option down to something reasonable, like $2.79 per gallon (approximately 50 cents per gallon more than local refueling rates). With a smaller markup like that, I think more customers would choose to let us fill up their cars, since it would only cost them a few dollars more than having to fill it up on their own (many might think the convenience is worth the modest charge), and it would certainly eliminate the negative perceptions that people who have to pay the $5/gal refueling fee have of us. On, say, an eight-gallon refueling, we’d make $4–enough to cover the cost of the employee having to stop at the gas pump for three minutes and still make a tiny profit on the deal.

    I did the math in an Excel spreadsheet once, and I figured tdhat we could make more money doing it this way than the way we’re currently doing it now. It’s not a huge difference, but I think the improvement in customer satisfaction (or really, the decrease in customer dissatisfaction) is worth far more.

    Another alternative I just thought of would be to charge a flat refueling fee and then charge the gas at market rates. In other words, if gas is $2.15 in town now, we’d charge $2.15 plus a $5 or even a $10 refueling fee–which covers the cost of the employee having to go out of his way to fill the car up. (That three minutes at the gas pump doesn’t sound like a lot, but it does impede with the smooth flow of cleaning cars at our shop.)

  • Vincent Iamunno

    You are correct about the rental car folks gouging customers. It happens to me from time to time, most recently at a car rental location in Louisville. The real issue is this. If you don’t like the rule, you have two choices. You can try renting from someone else or you can refill the car yourself. I know that they are gouging, but they do tell you up front and it’s your choice to accept this larceny or fill it up. Same thing in restaurants. Ever order calamari as an appetizer at a nicer restaurant? Might be ten bucks or more?? If you can put aside the thought that calamari is commonly used as fish bait at virtually no cost to fishermen, then is the restaurant gouging you? It’s about choices. Don’t get me wrong. The rental car guys are trying to screw us every chance they get. ( How about concession recovery fees?) The bottom line is that we have a choice and we allow it if we are too lazy or rushed to fill er up.

  • Sheinfamil

    As long as the terms are clearly spelled out and explained to the customer I don’t have a problem with this.Most companies offer you 3 choices 1. fill it yourself 2. pay us in advance for a full tank (usually at a reasonable price) or 3 pay us a lot for the convenience. The rates for rental cars in most locations are low so they look to other ways to make money including waivers insurance and fees for service. The thing that bothers me more are all the added fees that are not optional suck as facility fee license fee airport recovery fee license fee etc. When you go shopping in a store the costs of doing business are included in the price you see on the shelf. (Full Disclosure) I operated a rental franchise in the 1990′s.)

  • RaymonWazerri

    Hey,
    I love what you’re doing!
    Don’t ever change and best of luck.

  • Bob

    Yeah, I’m gonna have to say that math is pretty fuzzy. I work for the biggest car rental company in the world (one guess) and in my entire group of about 30 branches, we consistently LOSE money on gas. How? The only option at my company is “bring it back the same level” or be charged. However, we usually don’t charge unless gas is about 1/4 tank off … 1/8 or about we usually just let it slide. Plus, we only charge about $1 more than pump prices, often giving discounts on that even for “customer satisfation issues.”

    In the end we never recoup costs and fueling costs are a black hole for the company (admittedly, we’re also the most profitable rental car company in the world). I can see why Avis-Budget would charge $5.99/gal for those who bring it back low, you’d have to if you wanna recoup costs.

  • Lara

    As a former rental employee, I wanted to add a comment. Our office always made it a point to identify the gas and the possible gas charges. I personally told the renters, “So, that’s your incentive to bring the gas back – you don’t want us to charge you too much.”

    That being said, I would guess that the $5.99/gallon was from an airport location, because airport locations charge much, much more than your neighborhood locations. And it’s not due to fuzzy math, it’s because the gas pumps at the airport are the property of the airport, and the airport rates are much higher than the rate you would pay at a regular station. Then the convenience factor comes in – in a busy rental office, it’s much faster to run the car to the airport gas station than it is to go 2 miles down the street to the cheaper station. But neighborhood locations? Expect to pay $1 or $1.50 above average pump prices, per gallon.

  • george maringer

    I rented a car for i day this past week at Newark Airport. Sign on counter said $13,50 charge if driven 75 miles or less and no receipt for gas purchase is shown.
    Put on 83 miles and was charged $46.82 for fuel surcharge. Company spokesperson said it was at rate of $8,50 per gallon. Local charge for gas is $1.57.

    I have wruitten a request to rental company for adjustment.

  • http://americaonline barbie45

    maybe i misunderstod;I was under the impression that that it was a customers obligation to refill the tank; even before this oil price problem you knew it would be above the normal cost . If Iam correct there is no justifacation in complaining.

  • Denverlimo

    Yes, I’m gonna have to say that math is pretty fuzzy. I work for a car rental company and in my entire group , we consistently LOSE money on gas. How? The only option at my company is “bring it back the same level” or be charged. However, we usually don’t charge unless gas is about 1/4 tank off … 1/8 or about we usually just let it slide. Plus, we only charge about $1 more than pump prices, often giving discounts on that even for “customer satisfation issues.”

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