Rental cars are expensive because of low supply and high demand, inflation driving up operating costs, and companies taking advantage of limited inventory to charge higher prices and maximize profits. Shortages of vehicles and staff coupled with longer rental periods and enhanced cleaning procedures also contribute to rising prices. Ultimately rental companies can hike fees due to more travelers seeking to rent amid sparse fleets available.
Renting a car can be extremely convenient when you need some extra wheels for a road trip, vacation, or if your own car is in the shop. However, anyone who has rented a car recently knows that it often comes with sticker shock. Rental car rates seem exorbitantly high compared to just a few years ago.
So what’s behind the sky-high pricing for rental cars? As it turns out, there are several key factors driving up costs. Let’s count down the top 10 reasons rental cars have become a big expense.
Top 10 Reasons Why Are Rental Cars So Expensive
1. High Demand and Low Supply
During the pandemic, rental car companies were hit hard and severely reduced their fleets through selling off vehicles. Now demand has roared back, especially for domestic leisure travel, but the supply hasn’t kept pace.
With demand far outweighing supply, rental car companies can charge higher prices. Limited supply also means fewer discounts and deals.
2. Inflation
Like almost everything else nowadays, rental cars are being impacted by high inflation. Rental car companies face higher costs for purchasing new vehicles for their fleets, as well as maintaining and cleaning existing vehicles.
They pass these increased business costs onto consumers through higher rental rates. On top of that, strong consumer demand allows them to easily raise prices.
3. Labor Shortages
Rental car companies cut a lot of staff during COVID-19 slowdowns. Now they are struggling to adequately staff up to meet surging demand. Shortages of employees, especially mechanics, drivers, and customer service agents, reduces productivity and efficiency.
Having fewer hands on deck limits how quickly companies can acquire new vehicles, service existing ones, and process rentals. This staffing crisis necessitates charging higher prices to consumers.
4. Rising Interest Rates
Surging interest rates make purchasing new vehicles much more expensive for rental car companies because they often use debt financing. Higher loan interest costs mean they need to charge consumers more per rental just to cover their larger vehicle loan payments.
Additionally, higher interest rates discourage companies from expanding their fleets since taking out larger loans would be very costly. This dynamic further limits supply, enabling ever-higher pricing.
5. Longer Rental Times
Early in the pandemic, rental car usage plunged. However, as travel rebounded people began renting vehicles for longer periods to avoid exposure risks from flying and staying in hotels. A week or two week rental is vastly more expensive than just a couple days.
Furthermore, having cars tied up in longer rentals only worsens the inventory shortages plaguing companies. So longer average rental terms also factor into rising prices.
6. Airport Rental Fees and Taxes
Renting from an airport location tacks on numerous extra charges that quickly increase the final bill. Airports charge rental car companies concession fees for operating on their premises, which gets included in your rental rate.
Additionally, local taxes specific to airports, including facility maintenance fees, are added on top of base pricing. With all the extras layered in for airport rentals, you’ll pay much more per day compared to a neighborhood rental lot.
7. Enhanced Cleaning Procedures
The pandemic ushered in much more rigorous sanitation and disinfecting standards for rental cars. Companies now spend significantly more time and money thoroughly cleaning each vehicle between customers – disinfecting high touch surfaces, vacuuming, washing seat covers, etc.
These more extensive cleaning processes certainly improve customer safety but also drive up operating costs that bring higher rental prices.
8. GPS and Toll Pass Fees
Many rental car companies used to include GPS navigation units and electronic toll passes for a daily rental fee. However, due to vehicle shortages, most companies can no longer guarantee availability of these popular add-ons.
The solution? Bake the GPS and toll pass fees into the base rental rate for all vehicles so consumers end up prepaying for services they may not receive. And there’s no discount if you don’t actually need or use them!
9. Rising Insurance Costs
Insuring rental fleets has become more expensive lately due to higher accident rates and claims payments. Contributing factors include more travelers renting vehicles, congested roadways, distracted driving, and a shortage of qualified mechanics to maintain vehicles.
Either way, pricier insurance premiums for rental car companies inevitably translate into higher daily and weekly rates passed on to consumers.
10. Bigger Profit Margins
Ultimately, rental car companies are seizing upon scarcities in supply paired with tremendous rebound in demand to maximize profits. Vehicles may be in short supply currently, but throngs of travelers stand ready to rent any car available even at exorbitant rates rather than skip their trips.
Supply constraints combined with still robust desire for rentals provides the perfect environment for rental companies to escalate pricing.
Are rental cars Good?
Rental cars are generally good options for temporary transportation needs. They allow flexibility, convenience, and freedom when your own vehicle is unavailable. However, they can be quite expensive these days due to vehicle shortages.
Are rental cars Worth The Price?
With the high rates most rental car companies charge presently, rentals may not seem worth it. But they do still serve an important purpose for travelers without other transportation options. Compare all fees carefully to find the best deal possible.
Where To Buy rental cars?
You cannot directly buy rental cars, but you can certainly rent them either directly from rental companies or via third-party booking sites like Expedia, Priceline, Kayak and others. Shop around for the best daily and weekly prices.