Summer Car Rental Savings: Avoid Sticker Shock

July 9, 2010— -- Have you attempted to reserve a rental car recently? If so, chances are you were surprised by the projected cost. Due to a variety of market factors, the past year showed major increases in rental car prices, which have remained unchanged into this summer.

Don't fret, however: with some patience and planning, you should be able to find an affordable deal.

Market Forces at Work: What's Behind the High Prices?

"Last year, car manufacturers lowered or, in some cases, stopped production of vehicles," says Clem Bason, president, Hotwire Group. "New vehicles became scarce for both the manufacturer's dealer network and rental agencies, which often had to wait unusually long for the delivery of new vehicle orders. This caused prices to increase substantially. "

This year, demand is returning. Car manufacturers are producing more. And car rental companies are purchasing cars as well — growing their fleets. But it's important to note that everyone involved is being cautious. They are not producing or buying cars ahead of consumer demand, which can stall car prices from falling." Another major factor driving up the cost of rental cars is the shift in fleets from program vehicles to risk vehicles.

"Program cars are individually negotiated bulk car purchases made by a rental agency with a guaranteed repurchase price in place from the manufacturer," says Bason. "Once returned, the manufacturer then handles resale of the used vehicles. Program cars shift the risk off of a rental agency and allow them to maximize the revenue associated with each vehicle while they have it, without regard to the resale value. So often, they would cut prices significantly to keep vehicles rented and on the road.

"Risk cars are not returned to the manufacturer. The rental agency purchases them and then they are responsible for resale. So agencies are very much aware of the mileage of the vehicle and how the mileage impacts resale value. In these cases, there is no incentive to cut prices deeply in order to rent the vehicle. Rather than discounting too much, the agency may choose to keep the car on the lot and mileage low, increasing the overall resale value."

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"There was a period of time where the majority of rental cars were program cars," Bason continues. "Auto manufacturers were willing to provide them — it helped bolster their sale numbers. In this new era where car manufacturers are focused on staying lean and profitable, the incentive to provide program cars is largely gone. Therefore, the bulk of rental cars are now risk cars. For this reason, there is less incentive for agencies to discount."

When to Book

In any situation where there's high demand, early reservations tend to garner the best results.

"Travelers will want to make sure to plan ahead and reserve well in advance to ensure a full selection of vehicles to meet their needs," says Alice Pereira, spokesperson, Budget Rent A Car. "Travelers who have become accustomed to having walk-up vehicle availability will want to start making reservations or risk encountering sold-out rental counters at some locations during peak travel periods."

"We always recommend that customers reserve as far in advance as their travel plans allow to receive our best rates," says Ned Maniscalco, spokesperson, Enterprise Rent-A-Car. "Booking early [also] ensures availability of the kind of vehicle that best meets your needs."

"Reserve early, then shop opaque [sites] aggressively," says Bason. "With a delicate balancing act happening right now between fleet sizes and demand, car prices could easily fluctuate this summer depending on which one increases faster. If you find a nice retail rate far in advance, reserve it now. You won't have to pay until you pick it up. Then keep searching opaque sites to see if better deals become available as you get closer to your date. There's a really good chance you'll score a great price that way."

Sample Prices

Here's a snapshot of what you can expect to pay across the country for a week-long intermediate car rental in July. I selected cities where day-trip options abound, a car is needed, or a combination of both makes the most sense for a vacation. All prices reflect an airport pick-up/drop-off and include estimated taxes and fees.

In many cases, a budget of around $100 per day for a rental car comes out as the norm, especially in high-demand cities where space is at a premium (e.g., Boston, Seattle). Keep looking for deals, though, and test out a variety of car classes to find the best price. Depending on supply and demand, you may find an intermediate car cheaper than an economy rental, or an SUV to be well within your budget. It all depends on the location, supply, and customer requests.

Ways to Save

Move away from major cities, and you may find some deals. "There are bargains available throughout the country," notes Maniscalco. "A full-size car for the last weekend in June would cost only about $17.50 per day at the San Antonio airport. In Branson, Missouri, you can rent a full-size car at our neighborhood branch for just over $25 a day. And in Denver, the price is about $28 a day for a full-size car at a neighborhood branch. "If you're able to rent off-airport, neighborhood branches tend to offer cheaper per-day prices than the brand's airport equivalents. You'll also avoid additional fees and taxes that tend to get tacked on to airport rentals (e.g., airport concession fees, transit tax, and the like).

Start working your memberships, too. AAA, AARP, military memberships, and professional associations may shave a few dollars off your rental price. If you're not seeing such offers listed on your car rental company's website, call the rental branch office and inquire if any discounts (or other promotions) are available.

If you're still having trouble finding a good deal, ask about any extras that might make the cost worth your while. If prices aren't particularly decent, the agency may have some other promotions in the works, perhaps for GPS units, fuel refills, and more. "Companies will continue to look for ways to add value to enhance the rental experience," says Pereira. She cites loyalty programs, guaranteed smoke-free vehicles, speedier check-out processes, and the ability to make and amend reservations through smartphones as incentives customers can request.

Note your destination's high seasons, popular festivals and conventions, and other events resulting in an influx of visitors. Whenever there's high visitation, you can bet rental cars will be in demand, and you can budget accordingly.

Sarah Pascarella is a Senior Editor for Smarter Travel and writes the Sarah's Travel Tips column. She shares the best advice for travelers on issues including booking, planning, comfort, safety, and convenience. SmarterTravel provides expert, unbiased information on timely travel deals, the best value destinations, and money-saving travel tips.