There was a time when renting a car on a trip was an automatic "requirement." With the gas prices we have come to loathe continuing its upward spiral, deciding on whether to rent a car or pay for a cab is becoming more and more muddled. And do we really need a car in some of those cities anyway?
Cities like Las Vegas, San Francisco, New York, Paris, London and many others have fantastic public transportation systems that are often traveled by tourists to get around. Not only that, these same cities often are difficult to drive in and the parking is expensive, thus municipalities have invested in public transportation for the common folk to get around in this environment. To accentuate the point, lets discuss Waikiki, Hawaii.
Granted, cars are the last thing on your mind when your in the sunshine and surf, but it should be. Parking a Car in Waikiki is starting to edge close to 20 dollars a day just to guarantee a spot for your car to hide when your not driving around at $3.50 per gallon gas rates. tour junkets and bus rides can get you pretty much anywhere on the island for under 20 bucks a day, so you really only need a car for one or two days for when you go out exploring on your own. If you vacation for a week, cutting down your rental needs from seven to two days can save you as much as 500 dollars in parking, gas, rental, and insurance.
So is it necessary to rent a car? That decision is up to you. Sure, I could tell you that you NEED to rent a car on your trip, but its not always that clear cut. After examining your needs, and you realize you indeed need a car rental, there are several basic rules of things you need to consider to keep your costs down.
So now you know what and for how long, now les work on the price. These steps are essential to consider for any affordable car rental episode:
1. Agencies vs. Airports. Car rental agencies must pay a fee for operating at the airport. This fee is allowed by law to be passed onto the renter. Renting away from the airport will often yield rates (and tariffs) savings as much as the car rental itself. Often there are car rental agencies near or in your hotel in many of the major tourist areas, so consider finding alternate transportation to and from the airport and rent from an agency.
2. Choose a car that fits your needs, not your eyes.The most common rental class nationwide is the intermediate. Often a compact car will save you 3-5 dollars per day and gets 5-6 miles per gallon more than an intermediate, yet they often seat the same number of people. Also, the cost in buying a compact vs. an intermediate is often nearly the same, so some rental agencies overstock in the mid size, knowing that they will upgrade you for free into the mid size car.
3. Consider small market companies. Some smaller companies that operate on and off airport grounds are cheaper and have the same cars as the larger nationwide brethren. Take a peek at that company you've never heard of. You may find a gem.
4. Shop around for car rental discount coupons. This is a whole discussion on its own. Many Car rental agencies have discount codes they give to businesses and groups to promote business with that rental agency. Call and ask each rental company if your employer has a discount code. also ask your favorite club shopping company, entertainment book, Wholesale shopping club, Co-op or insurance company. Often they all have some sort of deal that they can share.
5. Prepaid Gas vs. filling up on your own. Car rental companies often try and get you to buy a full tank of gas at the beginning so you can return it empty. Ever try and empty a car tank? not the easiest thing. The only sure bet is to fill it up yourself. Decline.
6. Rent only when you NEED a car. Self explanatory. If you are going to a conference, you don't need a car for the first three days when you are spending every single daylight hour in the event.
7. Car Rental Insurance. Another "whole class on its own." The best thing to know is that your credit card or your own personal car insurance will likely cover you in case of an incident. Check with both before you go to decide if you need to purchase additional coverage.
8. Remember, the agents work on commission. Although they may seem they have your best interests in mind, do NOT blindly follow their recommendations for add on services. Do your homework and decide in advance before you arrive at the rental counter.
Follow these rules, do your homework, and your car rental costs can be limited greatly to what you really need, instead of what you think you need.
www.carrentalinsider.com
Saturday, February 9, 2008
Using Discount Codes
Car rental companies often use promotions and discount codes to drive business. These discounts have created their own subculture on the Internet. Many travel sites openly discuss and share discount codes with other travelers in the hopes of making the travel experience more affordable to all.
Pretty much every employer that boasts more than 100 employees usually has some sort of discount they can apply for or has already. So if you work for any Government Agency, Big box retailer, fast food chain, tech company, sales company, manufacturer, or even janitorial company, its likely you qualify for a discount of some sort. Not only do some of these company codes offer discounts on price, some of them offer additional services as well.
Some of the largest companies have negotiated other "perks" into their price. Rental Car Companies like Hertz and Avis cater directly to Businesses and often against each other for the same company. In exchange for signing multi-year guaranteed business deals with some of these corporations, Rental car companies will offer things like free tank of gas, free insurance, no one way fees, or even free upgrades into the Corporate Discount contract. Often if you are an employee with these companies, even if you were just hired and your job duties do not require travel, you qualify just by showing your work badge.
While using some of these codes without proper credentials can cause you to violate some of the car rental agreement, others are openly offered to any person who qualifies with as little as having membership in a particular club or organization. Costco, Sam's Club, G.E.I.C.O., Citibank Credit cards, Even buying the Entertainment Book can lead to some tantalizing coupons in addition to Corporate discounts in some instances. Known coupons include free tank of gas, free weekend day, dollar off weekly rentals, free upgrades in car class.
Simply ask your rental company before you begin your travel planning to determine exactly what kind of discount could be available to you. Once you have found a few discount codes that you can use, try obtaining quotes under each qualifying rate. Discount percentages will vary even with the same code depending on type of car, day of week, city, and time of year. Due diligence is a great thing when it comes to searching for travel. An hour plugging in discount codes for car rental companies (even for hotels) could save you hundreds, or even thousands depending on how long the trip is and how many people/vehicles are involved.
Remember that the more effort you put into this search, the more likely you will be to finding a rate that not only works for you on one particular trip, but for all your trips.
www.carrentalinsider.com for more information
Pretty much every employer that boasts more than 100 employees usually has some sort of discount they can apply for or has already. So if you work for any Government Agency, Big box retailer, fast food chain, tech company, sales company, manufacturer, or even janitorial company, its likely you qualify for a discount of some sort. Not only do some of these company codes offer discounts on price, some of them offer additional services as well.
Some of the largest companies have negotiated other "perks" into their price. Rental Car Companies like Hertz and Avis cater directly to Businesses and often against each other for the same company. In exchange for signing multi-year guaranteed business deals with some of these corporations, Rental car companies will offer things like free tank of gas, free insurance, no one way fees, or even free upgrades into the Corporate Discount contract. Often if you are an employee with these companies, even if you were just hired and your job duties do not require travel, you qualify just by showing your work badge.
While using some of these codes without proper credentials can cause you to violate some of the car rental agreement, others are openly offered to any person who qualifies with as little as having membership in a particular club or organization. Costco, Sam's Club, G.E.I.C.O., Citibank Credit cards, Even buying the Entertainment Book can lead to some tantalizing coupons in addition to Corporate discounts in some instances. Known coupons include free tank of gas, free weekend day, dollar off weekly rentals, free upgrades in car class.
Simply ask your rental company before you begin your travel planning to determine exactly what kind of discount could be available to you. Once you have found a few discount codes that you can use, try obtaining quotes under each qualifying rate. Discount percentages will vary even with the same code depending on type of car, day of week, city, and time of year. Due diligence is a great thing when it comes to searching for travel. An hour plugging in discount codes for car rental companies (even for hotels) could save you hundreds, or even thousands depending on how long the trip is and how many people/vehicles are involved.
Remember that the more effort you put into this search, the more likely you will be to finding a rate that not only works for you on one particular trip, but for all your trips.
www.carrentalinsider.com for more information
Friday, February 1, 2008
In's and Out's of Car Rental Insurance
Your in Hawaii on vacation. You get your flower lei and your luggage and jump on the Car rental bus to your agency. Standing in line, you hear someone SCREAMING about some damage to their car and upset that they have to pay for it. Then its your turn. "would you like the complete protection package?"
Okay....everyone knows that the car rental agencies are in the business to make a buck. But when they offer you the car rental insurance packages, you always get the guilty sob story of how you will be responsible for all damage to the car and to the other person and property. The big question is..do you need to pay or not?
If you haven't already, check out my entry on Insurance Coverages by state. this will give you an idea of what kinds of coverages are free and clear (if any) without any additional cash.
i wrote this blog entry a few years ago, but much of it remains current.
www.carrentalinsider.com
Okay....everyone knows that the car rental agencies are in the business to make a buck. But when they offer you the car rental insurance packages, you always get the guilty sob story of how you will be responsible for all damage to the car and to the other person and property. The big question is..do you need to pay or not?
If you haven't already, check out my entry on Insurance Coverages by state. this will give you an idea of what kinds of coverages are free and clear (if any) without any additional cash.
i wrote this blog entry a few years ago, but much of it remains current.
It depends on your point of view and your individual situation. I will break it down as easy as I can.
LDW- Loss Damage Waiver. Forgives any damage to the rental car only
ALI- Additional Liability insurance. Actual insurance policy against damage to other people's person and property.
PEP- Personal effects protection. Really cheap and a great idea in crime rich areas.
PAI- Personal accident insurance. If you or your traveling party gets hurt, you have medical.
From the Manager's perspective, its always adviseable to take the insurance coverage, because its not insurance, its loss damage waiver. If you are in a single car accident, meaning you hit a rock in the road, or a deer, or your tire blows out and your car rolls, the car damage is 100% forgiven, it never hits your insurance and your insurance will not go up because its not reported to your insurance. The key word is "forgiven."
If you have the liability protection add on, then if you hit someone elses car, the liability coverage will kick in, and it never hits your insurance coverage. Your insurance company can raise your rates, but it cannot raise them too much because their rate adjustments are based upon damage value paid out. Avis does not report this information to third party requests, only that an accident occurred and it was paid out.
If you choose to use your credit card insurance (standard) then you MUST report to your personal insurance company before your credit card will pay out, so if you have insurance, its likely that your credit card will only pay the deductible. (crappy)! and then your insurance rates will go up if your at fault.
if you choose some sort of extended insurance coverage from your credit card company, you still must report the accident to your insurance company before they will pay out, but it would be listed much as the above liability from avis.
As an insider who has rented out more cars than you will ever SEE, consider partial damage waiver. Some states allow for the first 3000 dollars coverage for a lesser price. Also consider each state independently. A quick look in the computer shows some rates in some states as high as 22.99 per day and as low as 10.95 per day for the same car. Ten bucks a day to ensure all the small dings dont hit your insurance and raise your rates is a pretty good thing.
Some states also require no fault or basic coverage by law. If thats the case you have the state required minimums liability coverage included in the rental price, but no loss damage waiver. (see previous blog post).
also, look into the insurance coverage at the kiosks in the airport. those flight insurance coverages almost always have a LDW and liability component available and its often cheaper than the rental agency prices.
Finally, not all private insurance policies will protect you in a rental car. check with your company. Even if they protect your rental car, they may only protect your car if you have the collision coverage on your policy. No collision, no ldw coverage for your rental car. Some insurance companies by agreement/legal action cannot operate in certain states. So check your policy. Some car insurance companies had their licenses yanked for non payment and other things.
so if it were me,
if i had a car worth 25k at home and its fully insured, i would not buy insurance at the car rental location
if I had a car worth 12k at home and its fully insured, i might consider partial coverage, or coverage from an outside vendor.
if I had a car worth nothing, and had only liability coverage, i would look at each state that I fly to and decide if I needed coverage based upon the price. I would definitely depend upon my credit card insurance.
if i had no car at home, id use credit card insurance solely.
but thats me. everyone needs to look at their own situation, assets they want to protect.
after all, being sued for 100,000 usually means nothing if you have no assets at home for them to seize.
www.carrentalinsider.com
Car Rental Insurance: What does the rental company give me for free?
Okay, Always a Controversial topic. To those of us who travel often enough to end up pondering this question several times a year, its an easy answer. Someone along the way has given us a great answer to the issue.
But for the overwhelming masses, its still quite the question mark. Do we or Don't we...that is the question.
A while back, I was asked this very same question on a travel forum. Here was my answer (edited for grammar...well...a bit). It explains the state minimums. In my next post, I will explain the in's and out's of car rental insurance and when it would be best to use it.
www.carrentalinsider.com
But for the overwhelming masses, its still quite the question mark. Do we or Don't we...that is the question.
A while back, I was asked this very same question on a travel forum. Here was my answer (edited for grammar...well...a bit). It explains the state minimums. In my next post, I will explain the in's and out's of car rental insurance and when it would be best to use it.
State Minimums according to law.
In this graphic he first two numbers refer to the amount of personal injury coverage per accident as 50,000 per person injured and 100,000 maximum per accident (see Alaska). The final figure refers to the total amount paid for property damage which in this example is 25,000. Car Rental Companies for the most part provide this level of liability insurance, called Basic Liability Insurance, on EVERY Rental Car Dependent upon state of Rent. On one way rentals, the State of Origin Represents the Coverage limits on Accidents Occurring Out of State.
NOTE: These Coverages are the basic coverages required by law. Certain States have laws that Dictate exactly how this coverage is used. See the end of the list for further information on Coverages. If anyone here knows who is primary and who is secondary in each state, Ill update this list.
Alaska 50/100/25
Alabama 20/40/10
Arkansas 25/50/15
Arizona 15/30/10
California 15/30/5 (state minimums, but rental cars are exempt, CALIFORNIA: Automobile Liability and Property Damage Protection is not included in the rental rate. The customer may provide automobile liability insurance through their personal insurance policy or may purchase Additional Liability Insurance.
Translation: California does not require any insurance proof on rental cars, but requires Rental Car companies to show proof as owners, therefore there is no basic insurance at all as far as the customer/renter is concerned. You may purchase additional or use your personal policy in the state if your policy allows for it.)
Colorado 25/50/15
Connecticut 20/40/10
Delaware 15/30/5
Florida 10/20/10
Georgia 15/30/10
Hawaii 20/40/10 (In Hawaii, your personal car insurance is primary, regardless of credit card coverage. LDW and ALI Circumvents that and would be primary. I know this from personal experience, dang nabbin lava rocks!)
Idaho 20/50/15
Illinois 20/40/15
Indiana 25/50/10
Iowa 20/40/15
Kansas 25/50/10
Kentucky 25/50/10
Louisiana 10/20/10
Maine 50/100/25
Maryland 20/40/10
Massachusetts 20/40/5
Michigan 20/40/10
Minnesota 30/60/10
Mississippi 10/20/5
Missouri 25/50/10 (MISSOURI: Avis does not provide Automobile Liability Insurance and Property Damage Protection unless the renter /authorized driver does not carry a personal automobile liability insurance policy. If the renter or authorized driver does not carry a personal automobile liability insurance policy, Car Rental companies will provide this coverage up to the financial Responsibility Limits (FRL) at no additional charge in most cases.
Translation: Under Missouri law, Car rental companies do not provide any insurance if you have your own insurance policy. If you do not have any insurance, then the car company will provide it free of charge to the state minimums. you can purchase additional if you desire. This law basically means that the car rental company will never be primary on insurance if the renter has a policy in their own name. Even if you lie to the rental company, they can do an insured search (post accident) and if your name comes up with a policy anywhere, your responsible for all liability. Essentially, Car Rental Companies are a non entity in this state under any lawsuit for damage you incur if you have your own personal insurance. so no sense in purchasing any insurance at all here unless you are from out of country)
Montana 25/50/10
Nebraska 25/50/25
New Hampshire 25/50/25
New Jersey 15/30/5
New Mexico 25/50/10
Nevada 15/30/10
New York 25/50/10 (NEW YORK: Car Rental companies provide liability coverage for its vehicles as required by applicable law. In most instances, this will include coverage for the renter or authorized driver up to the Financial Responsibility Limits of the applicable jurisdiction at no additional charge.
Translation: New York used to not allow the sale of insurance to its customers and required LDW and State minimum ALI to be included in price, which is why New York prices tend to be more expensive. The following changes to the law, effective February 24, 2003:
* In accordance with the provisions of the statute, car rental companies may hold authorized car rental drivers liable for actual damage to, or loss of, a rental vehicle, up to the full value of the vehicle. (Previously, authorized drivers were only held liable for damage up to $100, except in certain limited circumstances)
* Car rental companies will be permitted by the NY state law to offer for a daily fee OPTIONAL Collision Damage Waiver (also known as Loss Damage Waiver) vehicle protection. (Previously, car rental companies were not permitted to offer these optional products.)
What this means that most car rental companies, in New York, provides liability coverage up to the state minimums, where before it used to include everything.)
North Carolina 25/50/10
North Dakota 25/50/25
Ohio 12.5/25/7.5
Oklahoma 10/20/10
Oregon 25/50/10
Pennsylvania 15/30/5
Rhode Island 25/50/25
South Carolina 15/30/10
South Dakota 25/50/25
Tennessee 25/50/10
Texas 20/40/15 (TEXAS: Automobile Liability and Property Damage Protection is not included in the rental rate. The customer may provide automobile liability insurance through their personal insurance policy or may purchase Texas Automobile Rental Liability Insurance. )
Translation: The state of Texas regulates the insurance of car rentals in the state. They fix the price and coverages for liability and from what I see may even administer it. It does say that Car Rental companies cannot force you to buy liability insurance and it warns you that the Car rental company does not provide any coverage whatsoever unless you purchase it directly from them. Liability is through your own insurance if allowed by your company, and through their TARLI program. Vehicle damage is still your responsibility and LDW can be purchased. In state residents are required to show proof of insurance at the time of rental (I have been told, and many texas renters tend to bring their proof of insurance with them when they travel). )
Utah 25/50/15 (UTAH: Car Rental Companies do not provide Automobile Liability Insurance and Property Damage Protection unless the renter or authorized driver does not carry a personal automobile liability insurance policy. If the renter or authorized driver does not carry a personal automobile liability insurance policy, Avis will provide this coverage up to the Financial Responsibility Limits (FRL) at no additional charge.
Transalation: Under Utah law, Car Rental Companies do not provide any insurance if you have your own insurance policy. If you do not have any insurance, then Most Car Rental Policies will provide it free of charge to the state minimums. you can purchase additional if you desire. This law basically means that the car rental company will never be primary on insurance if the renter has a policy in their own name. Even if you lie to the rental company, they can do an insured search (post accident) and if your name comes up with a policy anywhere, your responsible for all liability. Essentially, the rental company is a non entity in this state under any lawsuit for damage you incurr if you have your own personal insurance. so no sense in purchasing any insurance at all here unless you are from out of country)
Virginia 25/50/20
Vermont 25/50/10
Washington 25/50/10
Wisconsin 25/50/10
West Virginia 20/40/10
Wyoming 25/50/20
In some states the liability coverage that is provided is excess to any other applicable coverage. This means the renters personal automobile liability insurance is used first and the Avis protection will not apply until the renters/authorized drivers insurance, if any, has been exhausted. Please check with the rental agent or nearest Avis reservation center regarding the applicability of automobile liability coverage to specific locations.
transalation: Your personal insurance may be primary depending upon the state in liability issues. HOWEVER, LDW is "loss damage waiver", not "loss damage insurance" which means that the wavier is not an insurance, therefore there is no damages that should be reported to your insurance company, rendering the damage to rented vehicle question moot. But damage to other person and property would go according to state law. In some states, your personal insurance is ALWAYS primary. In others, credit card and purchased additional insurance is primary. ask each state you visit for the difference.
www.carrentalinsider.com
Thursday, January 31, 2008
Renting for Special Events
If your just going on a standard vacation, or a normal business trip, typically you can get a car with little difficulty. The only question is "what will it cost?"
But when it comes down to special events, its a much more difficult process. Some events (Olympics, Super Bowl, Pro Bowl, Major College Football Bowl Games, Basketball Tournaments, Famous Festivals and parties) simply are so big that even while booking almost a full year in advance the prices are still sky high, let alone trying to get a car closer to the event. It doesn't matter if you are in town for that particular event, or not, your stuck in the same unwieldy, expensive mess.
So what's a guy to do? I need a car, but how can I get one? The honest truth is there is always cars available. But i'll get to that later. Right now I want to focus on how to get the best price in those situations. In order to do this, we need to discuss how the car rental agencies set their prices.
Every agency, in fact every travel related company is familiar with a term. This term is called "yield management." In a nutshell, this is how they RAISE prices. And lower them, but the purest version of this is all about raising prices. Here is an exxagerated example for demonstration purposes.
A particular car company has 1000 cars on its lot available for rent on a particular day. The company sets a base rate of, lets say for easy math, 25 dollars per day for that particular car class. Based on historical records, they can predict what the final rental demand will be on a specific day as much as 4-6 months in advance. After receiving the estimate, they begin to "yield" up or "down" the price according to match the expected number of available cars for any given day.
in our example, lets choose Forth of July. Independence day is typically a busy travel period. As a national holiday, many people take little weekenders, or escape trips around the Fourth. With the forecast data, the trendline is showing that we will rent around 850 cars at a particular car class for that day. That means we have around 150 car rental days to grow for that period. So a local manager may opt to reduce the base rate of $25 to $22 per day for the same period. Also, he/she may opt to put in sales for weeklong rentals starting several days before the 4th. Each decision would have an effect to hasten the pace of renting cars in that particular locale. Once the Forecast is on target for 1000, then they raise the rates to $25.00 or more to slow it down again.
This also works in the other direction. The Forecast model shows 1400 car demand for the 4th and strong demand for the days before and after. Although they do not HAVE 1400 booked reservations, (actually they may have 650 booked), the projection says that if they don't increase their prices or close down reservations soon, they will be overbooked.
In comes Yield Management at its best. The absolute goal is to NEVER be sold out. If you have one car left on the lot, that car must rent out at 1 million dollars per day. The busier you get, you keep moving the price up and up and up until the the market says "no". The sad part is that there is always someone willing to pay 30-40-50-60 dollars a day more than the last person to guarantee they get a car. So often Yield Management is not enough.
So now that you have a basic understanding of how they set their prices, click the links to the right of my screen (the google ads) for some of the rental car companies that pop up over there. Take a peek and look at what you see. you will see a various list of prices. The Base price as discussed mythically at $25 per day. Here is the basic rule of thumb when it comes to rental cars.
take the MSRP of that car, divide by 1,000. That will equal the "approximate" starting point for every car rental price for that class of car. But as the cars get bigger, the premmium rate increases more and more. Examples...
Subcompact- retail 14-15k Starting price 15.00 per day
compact- retail 14-17k Starting price 17.00 per day
Midsize- retail 18-20k Starting price 20.oo per day
Full size- retail 22-25k Starting price 25.00 per day
SUV- retail 30-35k Starting price 35.00 per day + size market upg ($25.00 per day)
*note- these numbers are for comparison only. When looking at the one week price, these prices reflect the average price per day.
you can use the retail prices formula to "start" your priceline bidding strategy (a blog for another day).
So now that you have a basic understaning of how they price the cars, several theories on how to pick the best price come forward.
1> Mass booking, dollar cost averaging strategy. if you KNOW your going to the "super bowl" and you know that you will need a car, booking a car per week until the prices go sky high is one strategy. Most rental car companies do not penalize you for cancelling car reservations (unlike hotel reservations) but some do. Check the terms of the company your dealing with before you book.
2> Book early. Yes, booking early does work, but too early means you get the "set" price of what they "think" the demand is going to be. Typically about six months out is a good time to start price shopping for specific events, but some places (Hawaii) seem to always book out in tremendous fashion really early around the holidays. When it comes to those locations, its best to book a "safety" reservation first and then go shopping, knowing that if you cannot find a better price, at least you have the backup plan.
3> Walk up. some people are GREAT at yield management, others are not. Booking one really solid but not earth shattering reservation at a company you are comfortable with is where we start with this strategy. Then, on the day of your arrival, put your best negotiating face on and pound the turf. Some companies have misjudged the need on those days by wide margins. If so, they have "Cars Available" signs everywhere with special rates to try and capture on the last second foot traffic. Keep your "safety" reservation (make sure your aware of its cancellation policy) and play one location off the other...." National just offered me 30 a day, can you beat it?"
Whomever gives you the best deal, wins.
Its VERY important to know that agents get comissions on the walk up traffic they bring in. So they are more likely than managers to "drop the rates." Agents have tremendous ability to play with prices. As an agent I sold a subcompact car for 80 dollars a day, and the very next customer "because she was very cute" got the 20 dollar rate and they both got the same car.
May the force be with you. Ask questions and I will answer them. Or visit my website at carrentalinsider.com
But when it comes down to special events, its a much more difficult process. Some events (Olympics, Super Bowl, Pro Bowl, Major College Football Bowl Games, Basketball Tournaments, Famous Festivals and parties) simply are so big that even while booking almost a full year in advance the prices are still sky high, let alone trying to get a car closer to the event. It doesn't matter if you are in town for that particular event, or not, your stuck in the same unwieldy, expensive mess.
So what's a guy to do? I need a car, but how can I get one? The honest truth is there is always cars available. But i'll get to that later. Right now I want to focus on how to get the best price in those situations. In order to do this, we need to discuss how the car rental agencies set their prices.
Every agency, in fact every travel related company is familiar with a term. This term is called "yield management." In a nutshell, this is how they RAISE prices. And lower them, but the purest version of this is all about raising prices. Here is an exxagerated example for demonstration purposes.
A particular car company has 1000 cars on its lot available for rent on a particular day. The company sets a base rate of, lets say for easy math, 25 dollars per day for that particular car class. Based on historical records, they can predict what the final rental demand will be on a specific day as much as 4-6 months in advance. After receiving the estimate, they begin to "yield" up or "down" the price according to match the expected number of available cars for any given day.
in our example, lets choose Forth of July. Independence day is typically a busy travel period. As a national holiday, many people take little weekenders, or escape trips around the Fourth. With the forecast data, the trendline is showing that we will rent around 850 cars at a particular car class for that day. That means we have around 150 car rental days to grow for that period. So a local manager may opt to reduce the base rate of $25 to $22 per day for the same period. Also, he/she may opt to put in sales for weeklong rentals starting several days before the 4th. Each decision would have an effect to hasten the pace of renting cars in that particular locale. Once the Forecast is on target for 1000, then they raise the rates to $25.00 or more to slow it down again.
This also works in the other direction. The Forecast model shows 1400 car demand for the 4th and strong demand for the days before and after. Although they do not HAVE 1400 booked reservations, (actually they may have 650 booked), the projection says that if they don't increase their prices or close down reservations soon, they will be overbooked.
In comes Yield Management at its best. The absolute goal is to NEVER be sold out. If you have one car left on the lot, that car must rent out at 1 million dollars per day. The busier you get, you keep moving the price up and up and up until the the market says "no". The sad part is that there is always someone willing to pay 30-40-50-60 dollars a day more than the last person to guarantee they get a car. So often Yield Management is not enough.
So now that you have a basic understanding of how they set their prices, click the links to the right of my screen (the google ads) for some of the rental car companies that pop up over there. Take a peek and look at what you see. you will see a various list of prices. The Base price as discussed mythically at $25 per day. Here is the basic rule of thumb when it comes to rental cars.
take the MSRP of that car, divide by 1,000. That will equal the "approximate" starting point for every car rental price for that class of car. But as the cars get bigger, the premmium rate increases more and more. Examples...
Subcompact- retail 14-15k Starting price 15.00 per day
compact- retail 14-17k Starting price 17.00 per day
Midsize- retail 18-20k Starting price 20.oo per day
Full size- retail 22-25k Starting price 25.00 per day
SUV- retail 30-35k Starting price 35.00 per day + size market upg ($25.00 per day)
*note- these numbers are for comparison only. When looking at the one week price, these prices reflect the average price per day.
you can use the retail prices formula to "start" your priceline bidding strategy (a blog for another day).
So now that you have a basic understaning of how they price the cars, several theories on how to pick the best price come forward.
1> Mass booking, dollar cost averaging strategy. if you KNOW your going to the "super bowl" and you know that you will need a car, booking a car per week until the prices go sky high is one strategy. Most rental car companies do not penalize you for cancelling car reservations (unlike hotel reservations) but some do. Check the terms of the company your dealing with before you book.
2> Book early. Yes, booking early does work, but too early means you get the "set" price of what they "think" the demand is going to be. Typically about six months out is a good time to start price shopping for specific events, but some places (Hawaii) seem to always book out in tremendous fashion really early around the holidays. When it comes to those locations, its best to book a "safety" reservation first and then go shopping, knowing that if you cannot find a better price, at least you have the backup plan.
3> Walk up. some people are GREAT at yield management, others are not. Booking one really solid but not earth shattering reservation at a company you are comfortable with is where we start with this strategy. Then, on the day of your arrival, put your best negotiating face on and pound the turf. Some companies have misjudged the need on those days by wide margins. If so, they have "Cars Available" signs everywhere with special rates to try and capture on the last second foot traffic. Keep your "safety" reservation (make sure your aware of its cancellation policy) and play one location off the other...." National just offered me 30 a day, can you beat it?"
Whomever gives you the best deal, wins.
Its VERY important to know that agents get comissions on the walk up traffic they bring in. So they are more likely than managers to "drop the rates." Agents have tremendous ability to play with prices. As an agent I sold a subcompact car for 80 dollars a day, and the very next customer "because she was very cute" got the 20 dollar rate and they both got the same car.
May the force be with you. Ask questions and I will answer them. Or visit my website at carrentalinsider.com
How Priceline works
When it comes to renting cars, websites like Priceline and Hotwire can be your best friend, or your worst enemy. Often I heard of customers coming in with stories and confirming printouts of SUV's and Convertibles for as low as $20 per day before taxes. Such rates are extremely tempting and is often part of the viral nature of those sites business. Someone heard from a friend of a friend that they got a car for such a price and you can get it too!
The truth is, they are right! These sites are incredible factories for low cost car rentals, low cost airfare, low cost hotel rooms, and even low cost cruises. The most recent trend on these sites is to package multiple items together into one, incredibly cheap, super package that people cannot ignore.You must be wondering how these companies can do it. I did, but since I worked for a rental car company, I learned through experience and (by asking the right people) how it works. And now you will know.
When a Rental car company buys cars, they do so in tremendous numbers under special "programs". Often deals in the neighborhood of 25,000 of one particular type of car are not uncommon and in all likelihood those numbers may only represent the actual needs of one state. Thats a lot of cars.
These rental cars (using the 25,000 number) cost in the neighborhood of $500 million dollars (based on $20,000 per car). There are very few companies that are able to outlay that kind of cash for immediate purchase, so they end up financing the cars with mega loans at institutional interest rates. So they got a loan just like the rest of us.
So now the car is on the lot. Its ready to rent, but its a "slow" week for rentals. Because these rental car companies (were talking all of them) have some sort of reservation system, a trained eye would be able to look at the reservations build up and know approximately how many cars will be available around what time frame. It doesn't take a rocket scientist to see that 3 weeks for a particular weekend, they have reservations for only 18,000 of 25,000 cars and the computer is predicting that 3,000 cars will go un-rented on a given "slow weekend." When you do the math, that works out to around a $15.00 per car, per day expense to leave that car sitting on the lot un-rented.
In comes Priceline, Hotwire, or the myriad of discounters out there. For a fee (which works out to about $5 per car rental day from my experience) Priceline will sell the rental days to bargain hunters and tour package operators. While Priceline uses its "name your price" gimmick to attempt to match up a customer with a great deal, the truth is they have very specific numbers they must meet. Hotwire doesn't mess around with "price guessing", they just give you their price and move on from there. In both cases, if you agree to the price, and they agree to your price, you must pay for the rental immediately via credit card.
Does it seem too good to be true? Don't worry, it isn't. These sites are perfectly legitimate and actually are great options for seasoned travelers as well as the occasional weekend warrior. But these deals are far from perfect. In exchange for price, you give up some of your flexibility in travel.
Once you buy these deals, your committed. There are no refunds, there are no "changing your itinerary", and its becoming even more and more difficult to even use the vehicle for less than the days you committed to buy em for, even if you prepaid for it. You may think "that doesn't bother me" until your flight is diverted from one city to another because of a freak thunderstorm. If you had a normal reservation, you could make adjustments, probably pay a bit more, but you wouldn't be stuck with a prepaid reservation you cannot use.
Another thing to consider is the underage or undesirable driver factor. Many rental agencies do driving record checks on drivers before renting the car out to the driver. If your driving record exceeds the minimum standards for renting a car for that company, prepaid or not, your not leaving with that car unless you have another driver. And since you needed to name the driver at the time of prepaying for the rental, depending on the company you may just have to eat the cost and rent from a company that will let you rent with your record. Although underage drivers are allowed on these sites (underage meaning 21-24 years of age), if you fail to declare this at the time of bidding on your rental price, you may not be able to use your prepaid rental.
When deciding what the best way to make your accommodations, make sure you have considered all the ramifications of the company.
www.carrentalinsider.com for more information
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