The wild and wacky world of car rental
I recently rented a car for three weeks on the west coast. That’s a long time, and car rentals have become very very expensive. Indeed, the prices I originally got for this 3-week car rental ranged from about $1200 to $2000, all for a mid-sized car for the same duration.
I’d paid that much before, too, for rentals during the past few years. The explanation I’d read was that car rental companies had overbought electric cars, which just about no one wanted, and also that during the COVID travel slowdown they had to unload a lot of cars that were just lying around on their lots unused.
For this recent rental, I then tried renting the car through hotels.com, which I often use for hotel reservations but had never used for cars. I’m some sort of member, which gives a small extra reduction. But when I checked the same car rental for the same duration through the hotels.com site, I discovered to my shock that the car would cost $315 for the three weeks.
Yes, you read that right: about three hundred dollars total. From a reputable rental company. Same size and type of car.
It seemed too good to be true, and on the flight over I was nervous about whether that car would be waiting for me. That nervousness was compounded when I got some sort of message that the reservation was not found. But you know what? The car was right there, waiting for me, at the quoted price.
Can someone explain this? I’m not complaining. I’m just flabbergasted. And happy.
Your lucky day. They forgot a Zero at the end of the quote.
Was it a conventional internal-combustion engine, or a hybrid, or electric?
Dunno. The car rental place near us we’ve had to use for day trips out of town is a slipshod operation. It’s an Enterprise franchise.
Aggie:
Regular brand-new Nissan Sentra.
We just ordered a rental for a trip we’re taking next month. The rental fees were pretty reasonable, but then they want to sell you on liability insurance in case of accidents, etc. which is where they make their money. Be careful, in many cases the credit card you use to make the reservation with (in our case USAA) covers that. You should check.
That’s a great price! Congratulations! I haven’t been able to find any decent deals on rental cars over the past, several years. Also, they almost always try to push me into an electric. I’m open to renting an electric, but only if I can be sure I’ll have chargers available, when needed, where I’m staying, which is hard to know when you’re not a local. The agents always seem disappointed when I explain why I’m not willing to take a risk on an electric. It seems like they are stuck with a lot of electric inventory and have trouble getting renters to take electrics.
It’s what economists call “price discrimination,” much as airlines do–try to charge different buyers different prices based on their willingness to pay. If they have surplus cars they’d rather get something than nothing, but they don’t want to give that rate to just anyone, only to someone who’s a bargain hunter.
Rental companies will give discounts for longer-term rentals (for the same reason). But $315 for three weeks does sound implausibly low.
Earlier this year we rented a car in California for a “new normal” price— hundred a day? We were given some sort of behemoth SUV that used to command a premium. Thinking of CA gas prices and how many miles we had to drive, we asked if they could change us into a smaller car. They could — but it would be extra, much much extra. So Neo was doubly lucky!
I was feeling pretty good getting about 20% off thru CostCo on a 5 day rental, but Neo put me to shame. However Denver’s mayor along others got an even better deal recently:
Denver mayor caught up in bizarre rental car meltdown
“So Johnston and many other Hertz customers who had reservations just found Hertz cars with keys in them and drove away.”
https://www.cbsnews.com/colorado/news/denver-mayor-rental-car-meltdown-mike-johnston/
That is an epic deal. The only explanation I can offer us that years ago I learned priceline could undercut hotel nights because they would prepurchase the rooms then needed to unload as that date came. I always had good deals through USAA but more recently Costco travel beats them every time. I always use enterprise and rack up the points for free days. Here is my tip: rent the lowest/cheapest car class you are willing to deal with then let them upsell ($12-15 per day) to get into a much nicer car that is available. I have gotten amazing deals on really nice vehicles that way.
When I read Neo’s post, I thought “this sounds like a question for an AI.” so I went to perplxity.ai and asked. I’ve copied the answer below, including citations to the sources used to compose the answer.
I know this takes the fun out of reading a blog; but, for better or worse, I had an answer in much less time than it took me to type the question. I know there’s a faction of anti-AI commenters here, but maybe I can wear them down.
______________________________________________________________
The significant price difference between renting a car through Hotels.com and major car rental companies like Enterprise can be attributed to several factors:
1. Business Model Differences
Third-Party Brokers vs. Direct Rentals: Websites like Hotels.com often act as third-party brokers that aggregate deals from various rental companies, allowing them to offer competitive pricing. They can negotiate bulk rates with rental agencies, passing on savings to consumers[6].
Dynamic Pricing: Major rental companies may implement dynamic pricing strategies that adjust rates based on demand, location, and other factors, which can lead to higher prices during peak times[4].
2. Additional Fees and Charges
Hidden Costs: Major car rental companies frequently add numerous fees (e.g., airport surcharges, fuel charges, insurance) that can inflate the final rental cost significantly. In contrast, third-party sites may present a more straightforward pricing structure without these additional fees upfront[4][6].
Insurance Options: When booking through a broker, customers may have the option to include insurance at lower rates or have it covered by credit card benefits, which can further reduce costs compared to purchasing insurance directly from the rental company[2].
3. Location Factors
Airport vs. Off-Airport Rentals: Renting a car at an airport typically incurs higher costs due to location-based fees. In contrast, rentals booked through third-party sites may often be sourced from off-airport locations where prices are generally lower[4].
4. Promotions and Discounts
Special Offers: Hotels.com and similar platforms frequently run promotions or discounts that are not available when booking directly with car rental companies. These offers can significantly lower the overall cost of renting a vehicle[6][8].
5. Consumer Behavior and Market Competition
Increased Competition: The rise of various online travel agencies and peer-to-peer car rental services has increased competition in the market, prompting traditional rental companies to adjust their pricing strategies to remain competitive[2][6].
Consumer Preferences: Some consumers prefer the convenience of booking through a single platform for both accommodations and rentals, which can lead to better deals as part of package offerings[3].
In summary, the lower prices available through Hotels.com compared to major car rental companies can be attributed to differences in business models, additional fees imposed by direct rental agencies, strategic pricing practices, promotional offers, and increased market competition.
Citations:
[1] https://www.choicehotels.com/choice-privileges/avis-budget
[2] https://www.reddit.com/r/turo/comments/t5i6pv/why_would_you_choose_toro_over_rental_car_company/
[3] https://www.booking.com/cars/index.html
[4] https://www.nerdwallet.com/article/travel/is-it-cheaper-to-rent-a-car-at-the-airport
[5] https://www.expedia.com/Car-Rentals-In-The-Woodlands.d6932.Car-Rental-Guide
[6] https://travel.stackexchange.com/questions/169411/massive-price-difference-between-broker-and-rental-car-company
[7] https://www.expedia.com/Car-Rentals-In-Houston.d178265.Car-Rental-Guide
[8] https://www.nerdwallet.com/article/finance/find-cheap-car-rental
[9] https://www.hotels.com
[10] https://travel.stackexchange.com/questions/34890/why-are-round-trip-car-rentals-much-cheaper-than-one-way-car-rentals
Sometimes hotel sites give you points for booking through them, then later when you book a hotel or rental car you get to use the points, maybe that’s it?
Sandra:
I had a tiny number of those – nothing that would explain the enormity of the discount.
Cornflour:
I’d say “nice try” to AI, because as in my answer above to Sandra, it couldn’t explain the enormity of the discount. The price I got was between 75% and 90% off the regular price.
I’d say that hotels.com made a mistake. It happens and has happened to me also. Not only on a car rental but even on a vacation rental once. Did I call it to their attention and do the right thing? No and Yes.
Neo:
I just looked at the “stackexchange” conversation that is citation 6 in the Perplexity answer.
At stackexchange, the question was the same as yours, but the renter received a 60% discount. That’s quite a bit, though not as much as yours. Still, I’d say close enough for jazz, or a blog comment.
Below, I’ve copied the reponse that might fit your situation. Please note that the responder begins by writing “It is, of course, impossible to say … ”
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stackexchange response:
“It is of course impossible to say what happened exactly in your case, but in other situations where I have come across similar savings from brokers, not only restricted to car rentals, but also hotel rooms and flight tickets, the broker often has had a ‘minimum use’ clause in their contract.”
“It may for example be, that the broker is managing 100 cars from the rental company’s fleet and is additionally guaranteeing that at least 20 cars are in use at any time, if not, the broker may be required to pay the rental company for the use anyway as had the car been rented out. If the broker now realizes that it can’t realistically expect to rent out 20 cars at a profitable rate due to low demand, the broker may decide to drop the rate so low, that they are in fact selling with a loss, but is still minimizing their losses.”
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A few comments here are a bit similar to the stackexchange response, even if no one else has used the phrase “minimum use clause.” Maybe there’s a loose consensus.
I also like grandpagrumble’s suggestion that hotel.com made a mistake.
P.S. Hope you had a good trip. Starting it off with a car rental discount must have been a good omen, even though it’s hard to accept that you might have been just a cog in a fleeting low demand / high supply situation.
See AI, run the other way
See EV, run the other way
See CA, run the other way
At least I am old and won’t have to deal with this for long. The young folks can ask AI why they are unhappy with their mandated EV in CA.
Hotels.com may access their car rentals on a sort of Overstock playbook. They can get a block of rental cars at a low price, thereby limiting the floor that the rental companies might otherwise face. It allows the rental companies to hedge their bets, and makes it easier to rent the cars that remain.
By using the car rental option on hotels.com, I have been able to benefit from prices that are at least 1/2, and often 1/3 or less than the car rental sites.
Autoslash.com has lower prices than going direct.
My lowest price last trip was combining the car rental with a hotel stay at Priceline.