How do I Save Money on a Car Rental?

After several years spent renting cars for work almost on a weekly basis, I had the chance to get well acquainted with the infamous racket known as the car rental industry. Being a typical Corporate Buyer, a few short weeks after beginning to travel often for work, I was already getting a kick out of figuring out ways to save money on this ridiculously expensive affair. My findings lead me to eventually understand how this industry really works, and I am excited to share with you today some real ways to save money on your next car rental.

Why is renting a car so expensive?

Renting a car sometimes feels like throwing money away...

If you've ever compared rates between the major car rental companies, you may have noticed that there's not much difference in price. That's because the car rental company space is an oligopoly – a select few companies control the whole North American market. What was once a diverse space consisting of 9 companies just a few short years ago has been consolidated into 3 companies through a series of mergers and acquisitions. Avis, Hertz and Enterprise control almost the entire market. Think of any rental car company - unless its a small independent operation, its probably owned by one of these three giants. The result? These guys have formed an economic cartel of sorts that set the retail price of car rental which continues to rise, as the industry leaders profit by dumping ridiculous hidden fees onto the end customer.

How to get the best deal on a rental car: 5 proven tips

Should you decide to take the traditional route and rent from one of the established industry players, use these proven rental car negotiating hacks to lower the cost of renting your car:

1. Rent a compact car and upgrade later.

As they can't charge as much for small cars, rental companies will keep a smaller number of them in stock, opting toward higher-margin mid-size, full size and small SUV's. Even if you need a larger car, reserve a compact car and negotiate an upgrade fee when you go to pick up your vehicle. Avis, Hertz and Enterprise give their employees a great deal of wiggle room to negotiate deals. Upgrade specials are often sales tactics made up by the branch to entice you to take a more expensive model, and even these are often flexible.

2. Use the depreciation method

Just like your own car, every car in a rental company's fleet goes down in value over time. Rental companies call this their “depreciation cost”, and they assign a cost per month to each car they've got. The salesperson's job is recoup this cost, and then make a profit on the car by charging the customer more than the depreciation cost. The depreciation cost is the rental company's break even point, if you will.

Next time you rent a car, ask the salesperson what their depreciation cost is next time you rent a car, and tell them you would like to pay a rate that allows them to cover their depreciation cost while making a small profit. They will be surprised by your knowledge and will be more willing to work with you.

3. Check the price online first, and set a target price that you would like to pay.

Once you have a number in mind, stick to it when negotiating at the front desk. Let the salesperson know that this is your budget and it is firm. You'd be surprised to find that a lot of the salespeople you encounter will be willing to work within your budget in order to move their inventory. Don't stick with the price they first give you. Remember: the rental company isn't making any money when their car is sitting on the lot.

4. Use timing to your advantage.

The closer it is to the end of the month, the more likely it is that the rental companies are willing to cut deals as they are looking to meet their monthly quotas. Each branch has minimum number of cars that they're required to rent every month, and also receive bonuses from corporate for hitting certain thresholds.

5. Pay for your rental using a credit card that offers car insurance.

Car insurance is the rental industry's biggest money maker, earning the rental companies far greater profit margins than the cars themselves. Typical insurance will cost you $20-40 per day (depending on how comprehensive the coverage you buy is), while the company is likely only allocating about $3 per day into a slush fund used to pay for damages. These guys have calculated exactly how much to contribute per car rented into the fund based on decades of compiled statistics predicting the likelihood and type of damage that will occur to their vehicles. The rest is all profit. It makes sense, as the number of people who purchase car insurance is exponentially greater than the number of people who severely damage their rental cars.

You may be surprised to find out that your travel rewards credit card includes car insurance. If it does, decline coverage! If you don't have a travel card, think of it this way - buying basic rental insurance for 5 days is the same cost as a $99 annual fee credit card, which offers users additional benefits such as travel points. Something to consider!

Which car rental sites are worth it?

Priceline

My search for a low cost alternative to the industry giants initially led me to Priceline. A completely new way to shop, Priceline offers deep discounts on large car rental companies' unsold inventory (they offer hotels and flights as well). How does it work?

Let's say one particular month, no one is renting Dodge Challengers at the “North Miami Enterprise” location. This branch might offer an extremely attractive price via Priceline to entice potential renters. Having used the service personally, I can attest to the fact that I've found rentals offered at as low as $6 USD per day for a mid-size car. (If you don't need a car every day, renting cars on Priceline as needed could be an economical alternative to ownership or leasing.)

I do have one caveat: when you book on Priceline, adding an extra driver after the fact becomes somewhat of a challenge – and the fees to do so are quite high. Ensure that all drivers that will be behind the wheel are registered at the time of booking.

Turo

Turo is another fantastic option I've tried, a new company that is disrupting the traditional model of renting cars from an agency. Think of Turo as Air BnB for cars, allowing you to save money by taking advantage of “car sharing”. This fully insured service allows car owners to rent their cars out for whatever price they would like to charge. If you're just looking to get from point A to B, you really don't need a brand new car. A model that's a few years old will do the job just as well, and you won't pay the hefty markups charged by traditional agencies looking to recover the money they spend on fleets of brand new vehicles.

If you're a bargain-savvy thrill seeker, Turo is also an amazing option as you can always find hot rides of all kinds, from BMW's to Corvettes to Lamboghinis – for surprisingly less than you might expect. I've seen Corvettes available less than $140 per day. What's more is that you don't have the pay the exorbitant ($5000 +) deposits that the exotic car divisions of the major rental companies charge. And while your average race track will typically charge you around $350 for just 5 laps in a supercar, Turo offers enthusiasts the opportunity to drive some of the hottest cars around for an entire day at a lower cost.

What is the best deal you've ever gotten on a rental car? Let us know below.

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