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My uncle called me from the Denver airport recently. He was about to rent a compact car for his trip to Vail, and the staff at the rental car company insisted that such a car would have trouble driving in the mountains.
I assured him that such advice was nonsense, and recalled that my parents had received the exact same warning the last time they rented a car in Denver.
What’s going on?
Rental cars can be ridiculously cheap. I recently rented a car at the Miami airport for a mere $22 a day – less than the cost of renting a bicycle.
Rental car companies buy their vehicles from manufacturers in bulk at ultra-low prices and sell them off a short time later. In the meantime, a car standing still earns nothing. By offering cars at low rates, rental companies seek to make their profits at the counter by aggressively up-selling options and add-ons. In Denver, multiple companies are pushing the fiction that only a larger car can drive uphill, but I’ve seen other techniques too…
1. Insurance. Technically not insurance, rental companies call this coverage “damage waiver.” More than likely, your existing insurance covers you in rental cars, so this popular up-sell is often an unnecessary expense. Some credit cards also offer this coverage at no extra charge – check your policy and plastic before you leave home. Why do the counter agents push it so hard? They might be receiving a bonus for the sale. To figure out how profitable this stuff is for rental car companies, simply multiply the daily rate by 365 and compare it to what you normally pay for car insurance. For example, Budget sells their Limited Damage Waiver (LDW) coverage for up to $25.99 a day – $9,486 a year!
2. Class upgrades. In Miami, our family was shown an economy car with a big sign on it recommending that we would need an upgrade to carry much luggage. We did have a lot of luggage, but I still declined the upgrade. We were then given the keys to a full-size car. Even though I always reserve and pay for an economy car, I always decline the upgrade – and I almost never receive a compact! Rental car companies simply don’t have many compacts on hand and often upgrade for free.
3. Accessories. It’s amazing that a company will rent you a car for $22 a day but charge you another $12 to rent a GPS that you can buy for under $100. The same is true of $13-a-day child safety seats that could be bought for under $50. If you need one of these accessories, take it with you.
4. Fuel service options. My uncle was told that the fuel station across from the rental car center sold fuel for much higher than the prepaid option. This is true, but as in all cities, the gas station near the airport caters only to lost tourists desperate for a quick fill-up before returning their car and catching their flight. Just a few miles down the road, on the way to the airport, were plenty of reasonably priced stations.
I don’t begrudge the rental car companies for trying to increase their profits, so long as they do so honestly. As a savvy consumer, you should recognize these attempts for what they are and make the most economical choices with your travel dollars.