Ridiculous or not? Half the car at twice the price

What the heck is going on with car rental prices? Charlotte Drost would like to know.

“I have to pay over $600 for a week of economy rental car rate in Jackson Hole, Wyoming in July,” she says. “These are the most expensive rates I’ve ever seen — and no one would negotiate!”

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Across the country and around the world, travelers are being taken aback by high car rental rates. When Charles Ruffner tried to rent a vehicle in Croatia, for example, his agency quoted him a price that was twice what he’d paid just two years before.

“The quality of the car had gone down, too,” he says. “The model had been downgraded and it had many miles on it.”

No one tracks car rental prices globally, so it’s difficult to tell exactly how much the rates have risen. But risen they have.

“Car rental rates are climbing because fleets are very tight this summer,” says Bob Barton, president of the American Car Rental Association, a trade group. In other words, there’s more demand than supply (the “fleet” is an industry term for car inventory).

“They’re tighter than they have been in a very long time, because of the disaster in Japan, which caused a 30 percent drop in output of cars and the skyrocketing value of used cars,” he says.

Still, how can car rental companies double their prices and offer a smaller car, in some cases? Isn’t that a little much?

Chris Brown, who edits the trade publication Auto Rental News, says you have to also factor demand into to the equation. Drost, for example, is renting a car during peak tourist season, a time when it’s a seller’s market for cars. “Combine that with the crisis in Japan, which has led to rental car companies not being able to stock up for the peak season to meet demand,” he explains.

Still, people are confused and upset by the higher rates. Larry Christensen is visiting his mother in Marquette, Mich., this summer, and all of the car rental companies are charging $80 a day. For a compact car.

“It’s gouging,” he says.

Making matters worse, the high price is often only a base rate. When Richard Wong picked up a rental car in Houston last week, a mid-sized car that cost a reasonable $141 for several days, he was broadsided with $60 in surcharges that included a fee for the city’s new stadium.

“That really galled me,” he says.

So the car rental agencies have fewer cars to rent, and demand is unusually high, which is pushing prices higher. I get it. But how much of this is truly demand- and supply-driven, and how much of it is just profiteering?

I’m given the impression, in talking with car rental customers, that they think there’s as much of the former as the latter going on. And they don’t like it.

51 thoughts on “Ridiculous or not? Half the car at twice the price

  1. This is the free market at work – just supply and demand. If there really is high demand for car rentals, the prices are justified. If you think they cost too much, don’t rent a car.
    On the other hand, if a company is charging more than the market price, they will just lose business and they don’t have anything to gain.

    Sure, rental costs may be high, but too high? No. 

  2. Considering all that you cited, I don’t think there’s a whole lot of profit taking going on. We just bought a car a few weeks ago and I can tell you that this same lack of supply is hitting the retail market as well. And as far as surcharges that are tacked on by the cities – not a whole lot the rental companies can do about that.

    I think you should revisit this topic in 12-18 months when the production of new cars has become more reliable. At that point, you should see the rental prices start coming back down and if you don’t, that’s when you go after them. But right now, I think these fleet cars have become something of a precious commodity  and the current prices accurately reflect that.

  3. What exactly is “profiteering” vs. good ‘ol profits from Supply and Demand?  I have a funny feeling “profiteering” is just another word for “profits I’d prefer not to pay for.”

    Capitalism doesn’t work that way.  If you think they want to charge too much, take a taxi, don’t go, or fly to an airport with cheaper cars.

    It makes sense that peak season cars are going to be really expensive to make up for the off-season where they have a lot full of completely idle cars.  We don’t call it “profiteering” when a nice condo at the beach costs a couple hundred a night while going for $30 in the middle of January.

    1. I’d like to know where you can rent a nice condo at the beach for a couple hundred a night [in season] and $30 in the middle of January!

      1. I can’t speak for the beach, but the desert is priced as sirwired stated. A condo at the Westin runs $275 per night in high season and as low as $59 during the low season.

  4. I don’t understand the reasoning used to justify much higher rental prices. The disaster in Japan didn’t stop all auto manufacturers from making cars. Sure some parts are harder to get, but there are still plenty of new cars out there that were made before Japanese manufacturing slowed down. This isn’t WW2 where no cars are being made. And it’s not like the companies buy completely new fleets every year just before summer. They may add a few here and there, but there is no way they don’t have access to new cars. They just don’t want to buy them.

    How does the high price of used cars factor into this? All of my experiences with rental cars have been cars with less than 20,000 miles. That certainly doesn’t seem to support the idea of Hertz buying a lot used cars. When rental cars pass a certain age/mileage, rental companies sell them. So selling their used cars should bring in MORE money, not less. Unless all the rental agencies are now buying used cars, this is a non-issue at best and bs at worst.

  5. I have a colleague that rented a car last week for $ 5 per day (an one way rental from PHX to LAX).  That time of the year when they moved the winter fleet from AZ.

  6. I’ve found some good base fares, but it’s all those extra fees, surcharges and taxes that are making it too expensive for me to want to rent. I priced a weekend rental recently that was $33 a day base but after taxes/etc. the price ended up costing about $52 a day. For what I needed, a taxi actually came out less.

  7. The company I worked for stopped having us rent cars, and bought cars instead because it was cheaper. A 4 day rental in the middle of the winter in Wisconsin was running $400!  And it’s not like there was short supply, the rental lot was always full of plenty of cars.  But why spend $1,600 a month on a rental, when you can buy a car for less than the cost of renting one for a year. Even shipping the cars from place to place is often less than the cost of 1 weeks rental.
     
    Unfortunately, I am finding that it will also be $400 to rent a car for the weekend to go to my cousins wedding which is simply not in the budget.  I rent a few times a year not for work, and it does seem that price has gone through the roof, but this started before the unfortunate situation in Japan, it happened after the big companies all bought each other.

    The taxes and state surcharges don’t bother me as much as the “Cost Recovery Fee”, the “Facility Fee”, the “Tire/Maint Fee”, and the other misc. fees that seem like they really should just be part of the rental price.  Most of my rentals have about 33% additional added in taxes and fees.

  8. “which has led to rental car companies not being able to stock up for the peak season to meet demand”

    I call BS on this one. Car companies can get other vehicles besides smalll Japanese vehicles. There are no shortages on the dealer lots here of any USA made automobile from GM, Ford, or the other one. (can’t bear to say it) In fact, the cars from the American companies are probably cheaper to purchase than the others. I think it is a sad excuse that has little truth behind it. (lets not forget that stockpiles for most brands exceed more than a few months)

  9. Rental rates are completely out of control, however smart consumers know the secret of getting a great deal — AutoSlash.com.  

    It’s the only site that automatically applies coupons and discounts to your rental after you book to lower your rate.  

    They even re-price your rental multiple times a day looking for better deals, and if they find one, they will automatically re-book you to lock in the savings.  

    There is a better way…  AutoSlash.com

    1. My first thought was to flag this entry as spam, but I decided to check out the site first. What a great idea!  I then Googled AutoSlash and found nothing but good reviews. So, I suppose this entry IS spam, but it’s damned useful spam. Thanks for letting this one through the filter, Chris.  

    2. I was worried this was spam too, and then found good reviews about the company .  I like the idea of it, but I tried it and they don’t have Avis and my company requires we use Avis. I did a few searches and everything was on par with my corporate rate.  If they do add Avis, I wonder if they will allow a fixed car class, our corporate rate requires an intermediate car be reserved, the compact cars actually cost more if we pick them. Almost never rent one anymore though, since my company bought cars instead.

  10. I feel that the rental car rates are about right but I object to the 30% additional taxes and fees. Frankly I feel that the local community is taking advantage of travelers. Perhaps you could do a study on the highest additional taxes / fees imposed by the various cities.

    Have a wonderful day – Cliff 

    1. Over the past few years, Chris has wrote several articles about taxesfees imposed by the airportscities on car rentals.

  11. I agree with Michelle.  It’s not only the rental price that has gone up, but the increase in fees charged.  In airports like Baltimore and Las Vegas the fees can add up to be just as much per day as the rental charge. 

  12. Earlier this year, I rented a car in Orlando for a weekend.  Generally, weekend rates are some of the lowest in the industry but on this particular weekend, I paid nearly $200, once tax and fees were added.  Oh, and the additional $15 I had to pay once I returned home due to their not returning my driver’s license when I checked in – by the time I discovered it, minutes later, they had already lost it.

    The travel industry, world wide, is working harder and harder with each decision they make to separate us from our travel dollars.  It’s not the economy keeping us from traveling, it’s the travel industry itself.

    1. Orlando USED to be cheap – really cheap as in $12 a day cheap – now its one of the most expensive places to rent.  Sometimes I call the private aviation terminal – I can rent a car with no fees [or perhaps all fees included] for $40 a day every day of the year at the private side of most big airports – and they will come over, pick me up and I can drop of there as well – and those places are usually on the side of hte airport with cheap gas too . . . 

  13. I haven’t seen incredibly outrageous pricing in my neck of the woods, but I have seen the end of the non-summer weekend specials, and that basically caused rates to more or less double. Still, the prices still aren’t obscene… yet.

  14. I have not seen rates any higher that last year on my rentals so far.  But I am not renting in the higher priced places the other posters mention.  For example, I am renting a car this weekend from one of the top rental agencies at IAH and paying about $25 a day including taxes.  Mother’s day weekend I rented the same type of car from the same company for the same number of days and paid $40 a day.  This shows the supply and demand forces at work.

    I think part of the issue is the rental companies are taking advantage of the  so called car shortage to push their rates up where they can even if they have plenty of cars.  The small out of the way airports that have less rental companies to choose from will probably see an even greater inflation of the prices simply because they can.  But the rate per day at the top agencies has been fairly flat for many years and maybe should go up a bit.  The fees and taxes have been going up rapidly and don’t see any sign of letting up with all of the budget shortfalls most cities are facing.  And the current fad of so called unbundling mean more dreamed up fees so the quoted daily rate appears lower.  

  15. Sounds like a high school debate on Communism.  Car rental companies are just like any other – they charge what the market will bear.  I’d be willing to bet that every single person reading this blog – if they work for a corporation – their companies do the same thing.  I have a friend who works for Chevron who can’t understand what all the fuss is about gas prices but they complain wildly about the price of everything else. 

    The bottom line is if you don’t like the car rental prices don’t use them.  There are alternatives.  Prices will drop when demand does.

    1. But that’s part of the problem: some car rental locations have shown quite an ability to come up with excuses, fees and charges that have nothing to do with market forces.

      1. But in the end, the total price that you pay is determined by the market, regardless of what fees and taxes are applied.

  16. Prices were artificially low  You pay $3 to rent a dvd that costs Blockbuster $50 and you want to pay $20 for a car that costs $20,000.
    I left the business 15 years ago and in some cases prices are even lower now. I have acar reserved at LAX in 2 weeks for under $17/day of course taxes add 50% to that but it is still a great deal

    1. Prices are neither artificially high or low but are based upon market forces.  I regularly rent from LAX and am constantly amazed that LAX rentals are probably the cheapest of any major US market

      But that’s because LAX has huge competition which drives down the prices.  No surprises there.

  17. I just returned a rental at Oakland airport yesterday, there was almost no room to return the car as the lot was extremely full of cars to rent. It is a joint lot, with all the major rental car agencies in one place. I don’t think there is a “shortage” of cars at least in Oakland. 

    1. CTP

      You cannot look the number of cars in a lot to determine care availability. For all you know, all of those cars are reserved for pickup in the next hour.

    2. The cars are sitting there now for next weekends rental sweep through that will occur starting tonight into tomorrow.

  18. I voted no. Companies can set the rates they want, go too high and you create higher margins, making your niche a target for competition. (Think of the Southwest effect when they move into a new route.)

    (But I do think it is too high for me to rent!)

  19. Have a look at how much you pay to buy and operate a new car on your own.  Imagine if you had to change cars every 1,2, or 3 years.  Add in maintenance, wear and tear, cleaning, staff, etc…I’m surprised that they stayed so low for so long.

  20. I’ve been watching the rental prices for a trip I have in August this year to Oregon.  I started looking last November (before tsunami or any other disasters that would have had an impact) and the prices were high then as well.  Normally, a rental can be had for $200 a week plus change. This year I will be paying $400.00!! (Interestingly I just booked it this morning).

    1. Here is the cost break down for my Economy rental.

      Rental  Time Charge                         $295.24

      APT CONC RECOV Fee (10%)             $30.41

      County Rental Tax (17%)    
                    $55.97

      Energy Recovery Fee  ($0.45 per day)  $3.60

      Vehicle License Fee  ($0.66 per day)    $5.28

      Total Estimated
      Mandatory Charges   $390.50

      Don’t forget insurance added on (use our own and fore go any
      extra)

  21. It’s an artificial market.  I frequesnt Bozeman Montana another vacation area near Jackson Hole.  Advertised rates from car rental companies $92/day.  Hotwire rate $25/day. What is the disconnect?

  22. the comment about higher mileage cars–the rental car companies are holding onto cars longer now because it’s cheaper than buying new cars on a rotating basis.  Makes sense economically, and not a problem IF the cars are well maintained.

    Rates are very regionally based; depends on supply and demand at that location on that date.  Jackson, WY has high demand during the summer, and probably not a huge supply…not a very big location (despite its summer popularity), and the company doesn’t want to get stuck with too many unrented cars, which costs money.  Oakland, in contrast, gets both leisure and business travel, so a large daily supply is needed to offset the more or less constant demand.

  23. I have a two word answer that will help many people looking to get reasonable rates on domestic rental cars. The words are PRICELINE and HOTWIRE. 

    I just purchased air tickets for my wife and I to travel from Tampa to Los Angeles on the day before Thanksgiving and to return the following week. There was a link on the airline’s confirmation page that took me to their car rental sales page. The per day cost of a mid-size car was between $32 and $65 + taxes and fees. I went to Hotwire’s site and found that the price is $16 per day + taxes and fees. Hotwire matches their customers with one of five rental companies. I believe that they are Hertz, Avis, National, Alamo and Budget. The only drawback that I have found is prepaying the rental which is non-refundable. If you don’t show up at the rental office within 24 hours of your stated arrival time, they get to keep your money. I am going to wait until a few days before my scheduled departure to book my car. In this economy, there is a good chance that the rate will remain the same or even go down.

    1. Many people write in to Christopher Elliott about problems with Hotwire and Priceline, at least in regards to hotel rooms and airplane tickets.  I’ve stayed away from the opaque sites for just that reason.

      Are car rentals somehow immune from the same problems plaguing hotel and air reservations?

      1. I only use hotwire for rental cars…the reason they disclose they only deal with national name brand rental companies and not the smaller/local ones.

        The problem with hotels through opaque sites is you dont know what hotel chain you will get so if you had a bad experiences with Clarion hotels that you refuse to ever stay there again then you are in for some issues.

        If you are looking for just a hotel to sleep in and looking for the best rate and loyalty programs is not an issue to you then its safe to book through hotwire.  Hotwaire does say the area where the hotel will fall in.  One time I booked through them and the hotel they gave me was not in the area of their map so I protested it and won…..and it didnt take me weeks.

        With airlines…same thing…if you dont have preferences and are just looking for the best air fare then use hotwire…one problem is you wont earn loyalty points through this site (same with hotels) and given how airlines are changing there is more cost thean just the airfare.   I might see a cheaper airfare but see it involves a 3 hr or more layover at an airport I will pass on this fare. 

        You may get some crazy flight routes where you cant make connections.  Then if you dont make conections you are thrown into the void along with travelocity/expedia/orbitz bookers where you have to go through them and not the airline in case of any issues.

        Sometimes when booking flights through opaque sites the traveler can get burnt because they are unfamiliar with airlines pricing structure and how markets price.  When will an airline accept your bid on priceline—when they know they will be dropping prices to that airfare or below.

    2. I would warn against this…..you will not see hotwire have $15/day rates a week before thanksgiving…if you wait till noember to book it the rates will be $50 or more per day.

  24. It all depends on where you are renting the car and the type of car you are renting.
    I’m heading off to Hawaii in about a dozen days and from Avis, I can get a full-size for $251 for the week, or from Thrifty, I can get a Jeep Wrangler for $360. This is not a bad price for a rental car in Hawaii..of course, this is Oahu, prices may be different on the other islands.

  25. I didnt vote because it depends….

    Is there some price gouging …sure….its when you have big events or high travel times like around the 4th of July.  Airlines and hotels do this too.

    Rental car rates are going to be higher when you are flying to smaller airports which is why you need to weigh the cost of say flying into Grand Junction vs flying into Salt Lake City or Denver….or flying into Fresno instead of flying into LA or the Bay area.

    I am traveling for a weekend visit with family.  I will want to rent a car to go and visit with friends back home.   If I tried renting at the airport the cost would be $50-$60 per day.  I looked off airport and found much more reasonable rental rates.  The trade off…their hours are more business hours of something like 8am-6pm instead of 24 hrs…and they are ususally closed on Sunday and are open half days on Saturday.

  26. I rent every week and my base daily rental rates run between $32.00-$42.00 per weekday for a myriad of pickups. A third of my rentals are big city airports rentals, a third are medium/smaller airports and a third are picked up at my local suburban Baltimore (non-airport) locations. Besides the concession fees/taxes that are heaped upon the daily rates to subsidize cities convention center/stadium supplementals or the joint rental facilities, the medium/small and the local rentals are by far the cheapest.

    Last friday I picked up a standard car for a one day oneway rental from Charleston WV to BWI, no drop off charge and unlimited mileage, the rate was $35 w/ $22 in additional taxes.

    So other than high season, low fleet volume locations like Jackson Hole, things have remained the same for me over the last 10 years

  27. I don’t know about other places, but July in Jackson Hole IS there highest season. Demand for rentals is at its peak. Couple that with and improved economy and more people traveling there. Supply and demand at its best. The air fares into Jackson Hole are also the most outrageous you’ll ever see. It might be cheaper to drive there and have your own car.

  28. My impression is that after the downturn in the U.S. (and worldwide) economy that began in September/October 2008, airfares and hotel rates went down, but car rental rates jumped over the next couple of years. 

  29. Rental car rates go up and down, daily.  Last June we had a Hertz car booked for months in advance and a couple of weeks before we traveled, the price dropped by over 50%.  I just canceled and rebooked at the lower rate. I would never pay a nonrefundable fee on any opague site. 

    In Hawaii a few weeks ago, booked the air and car through a tour company.  Saved over 50% on United’s nonstop air, if booked with them and got a minivan for a week, with taxes and road fees for approx $180….plus no charge for the toddler seat or extra driver since we have Hertz Gold.  Last time I used this company, I save 50% on the car rental with no drop fee to the Hyatt, which booking with Hertz directly would have had.

    Cities and counties see rental cars and hotels are easy money to add on fees and taxes.  Locals vote for adding them, but complain when having to pay them when away from home.

  30. I just given up on car rental since 2008. It was a times I rented at least 60 days a year.
    Now I book Hotels right on the beach and used more Airport Shuttle directly to Hotel and use Taxi when needed. In some countries like Vietnam, Thailand, Philippines … I hired a Taxi or a Car With Driver which cost less than rented a car when I need the car for a day, no driving, no parking searching, no headaches.

  31. There are really only 3 car rental firms left….this is an oligopoly ruling the prices.  Branding makes you “think” there is competition…but in the back rooms, they have the same ownership.  Another case of travel suppliers and the travel industry biting their own hands in the short-term…then, when travelers decide to stay home because of high prices (aided and abetted by local governments with their 50% taxation rates, and hotels with their $40/day+ parking fees), they all cry and blame it on ridiculous outside excuses such as “the US doesn’t have a Tourism Secretary”.  Boo hoo hoo, bunch of industry cry babies.

  32. When I’m president there will be a law against counties and cities targeting tourists with taxes on hotels and rental cars.  It’s the very definition of taxation without representation.  Tourists should not have to pay any more tax than the same sales tax that is charged locals.

    A good step towards this would be ALL websites (whether the rental car/hotel site or aggregators) have to show bottom line prices including all taxes and fees.

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