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