The Insider: The ABCs of car rental pricing and fees

Editor’s Note: This is part three of our new “Insider” series on car rentals. Here’s the first installment and here’s the second one. By the way, if you see something I’ve missed in this post, please tell me in the comments or email me.

Elliott Advocacy is underwritten by Generali Global Assistance. Generali Global Assistance has been a leading provider of travel insurance and other assistance services for more than 25 years. We offer a full suite of innovative, vertically integrated travel insurance and emergency services. Generali Global Assistance is part of The Europ Assistance (EA) Group, who pioneered the travel assistance industry in 1963 and continues to be the leader in providing real-time assistance anywhere in the world, delivering on our motto – You Live, We Care.

And now, a few words about car rental pricing and fees.

Both are a never-ending source of frustration to travelers. But they don’t have to be.

Here’s the price of a one-day rental at Orlando International Airport on one of the major car rental sites:

Base Rate: 1 day(s) 38.99 USD

Taxes & Surcharges: 13.06 USD
Surcharge: 9.88 USD

– $0.60 per day, max 10 days (Energy Recovery Fee)
– $2.00 per day (Florida Surcharge)
– $0.02 per day (Waste Tire/Battery Fee)
– $0.78 per day (Vehicle License Fee)
– $2.50 per day, max 5 days (Customer Facility Fee)
– 10% (Concession Fee)
Tax ( 6.500% ) 3.18 USD

Mileage: Unlimited
Base Rate and Charges: 52.05 USD
Rental Options: 16.94 USD

Rate Rules:
Maximum 8 Day(s)
Estimated Total: 68.99 USD

Pretty complicated, huh? At first glance, perhaps.

The base rate is a theoretical price, minus taxes, fees and rental options. No one ever pays the base rate, but the car rental company wants you to see it because 1) it makes their rental look less expensive; and 2) You know how much money the car rental company is actually making, which really isn’t that much, most of the time. (In fact, car rental profit-margins are generally razor thin.)

Mandatory taxes and surcharges are then added to the bill. I won’t annotate every one of these, except to say that you can’t negotiate your way out of them. For example, if there’s a an airport surcharge — which covers the car rental company’s cost of operating at the airport — you can’t dodge the fee by not flying in to that airport, and getting dropped off by car, train or bus instead.

Some of these fees are imposed by local municipalities, the airport or the state, and yes, they often fund stadiums and convention centers and all other manner of pet projects. But for you, the driver, the only thing you really need to know is that you must pay them. (Although you can avoid many of them by renting at an off-airport location.)

Either way, you’re best off ignoring the base rate.

The number you’ll want to pay attention to is the estimated total. That’s usually the amount of money you’ll pay, plus or minus a few percent. If you’re making a budget for your trip, that’s the figure to use.

Note that fuel-purchase options are not part of this quote. They’re optional, and you’ll have to settle on them when you pick up the vehicle. More on that in a moment.

But wait! You can also add any number of optional services to your bill. Let’s do that right now. These are daily charges.

Rental Options:22.93 USD

GPS Navigation: 11.95 USD
Roadside SafetyNet (RSN): 5.99 USD
XM Radio: 4.99 USD

Protections – Coverages: 48.37 USD

Loss Damage Waiver (LDW): 26.99 USD
Personal Accident Insurance (PAI): 4.00 USD
Personal Effects Protection (PEP): 2.95 USD
Additional Liability Insurance (ALI): 14.43

Note that saying “yes” to all of these choices will more than double the daily rate of your car — and again, we haven’t even added the fuel-purchase option.

The first category is more or less self-explanatory. If you need a navigation system or an XM radio, here’s a chance to rent it. You can also get the equivalent of “OnStar” for roadside service, although the car rental company also has a 24-hour, toll-free number you can call if you are in trouble. These are somewhat profitable add-ons, and I would definitely think carefully before giving them the nod. For $5 a day, you could buy a lot of new music for your iPod and simply play it through the car’s stereo. Also, many phones now have navigational system apps. And don’t forget the old-fashioned paper maps, which your car rental company should offer at no extra charge.

The second category (“protections”) is not as obvious. Car rental companies offer several insurance options. You absolutely have to think about insurance before you arrive at the counter. If you don’t, you may buy too much insurance, or worse, not enough.

Let’s have a closer look at each type of insurance.

Loss Damage Waiver (LDW) – This is your basic insurance, and it normally covers the loss of the vehicle and any loss of use to the rental company. (A related kind of insurance, Collision Damage Waiver (CDW) is more limited, covering the car but not damage to other property or injuries.

Personal Accident Insurance (PAI) — This policy will cover you and the passengers in your car if you’re injured in an accident.

Personal Effects Protection (PEP) — Insures the property in the car, up to a certain amount.

Additional Liability Insurance (ALI) — Extra protection that covers everything from bodily injury to death to property damage.

Note that the names of these insurance policies may vary based on which company you rent from.

So how do you decide which one to buy?

You need to understand a few things about car rental insurance before you do. Some of these policies make perfect sense for you and are a good deal. Others are overpriced and unnecessary. Which is which? It depends where you’re renting from, and who you are.

Make your decision before you arrive at the car rental counter. Review your car insurance policy, credit card and travel insurance before you leave, to see if your rental car is covered. Also, if you’re renting outside the United States, be sure that you are meeting that country’s insurance requirements — otherwise, you may be forced to buy insurance.

Normally, you’ll have enough coverage between your car insurance and credit card. But watch out — if you’re renting a specialty vehicle like a van or SUV, your policy may not work. Read your policy and cardmember agreement before you rent.

Point is, you want to avoid having to make up your mind at the counter. Car rental agents are trained to sell you insurance and other extras. They are not travel agents; they’re often evaluated based on how much insurance and other add-ons they can sell you when you pick up the car. You won’t be able to avoid the pitch, but you can manage it.

Here’s how smart customers play it:

The upgrade. If you’re on vacation and want a nicer set of wheels, why not? But you may want to turn it down to see what happens. Sometimes, agents will try to talk you into an upgrade when they have no cars in the class you reserved. If you say “no” they will give you the upgrade for free. Incidentally, there may be a time when you’ll want to turn down the upgrade. If your insurance won’t cover a more expensive specialty vehicle or if you’re concerned with gas mileage, you may be better off downgrading and getting the price adjusted.

The fuel purchase option. These come in several flavors, from pre-paying for a tank of gas, to paying for the fuel you consume after you return, to topping off the tank before you bring back the car. If you choose the latter option, keep your gas station receipt — you may have to show it as proof you refueled. The first and second option may work for you if you’re in a hurry or on an expense account; otherwise, go for door #3.

The insurance. Look, if you haven’t done your homework before you get to the counter, and have to endure the sales pitch, complete with the images of damaged cars (yes, I’ve been there) then you owe it to yourself to buy at least a basic CDW policy. Why? Because you don’t know if you’re covered, and that means if you’re in an accident, you may have to buy a $30,000 car.

Nav systems, toll tags and XM radio. Totally your call. You know where you’re going and what you need. If you require any of these items, then go for it.

Don’t forget to read before you sign on the dotted line
Make sure the options you asked for are on the final contract you sign. Some car rental employees have been known to “accidentally” check the option for insurance, and if you sign the contract accepting it, you will be charged the full amount and there’s usually no way to get the money back. It’s a tricky move, and only the most ethically-challenged rental agents do it, but in the end you are responsible for what you’ve signed. If you don’t understand the contract (or if it’s in another language) ask an employee to explain what you’re signing. If you’re uncomfortable with anything at all, don’t sign. Take your business elsewhere.

Next up: What to do after they’ve handed you the keys.

(Photo: Jess J/Flickr)