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The hidden costs of car hire

Car hire can look very cheap with prices for a medium-sized car costing as little £75 per week. But have you ever stopped to think about how they can afford to offer such low prices? Just think that car costs them £15,000 to buy so at that price it would take them almost 4 years to recoup their initial outlay and that’s before you even consider the costs of maintaining the car and running the business. Yet most rental cars don’t even make it to their first birthday with many of the large car rental companies replacing their cars every 6-9 months. So how do these companies make their money?

Basically what is happening is the car hire companies are offering the cars at a loss to entice customers in, then they make their money by selling a bewildering range of insurance policies and extras. By now they have already hooked you on the idea of hiring a car and use your fear of the worst to sell. Here are just a few of the most common types of insurance:

Collision damage waiver (CDW). This is the basic cover and it reduces your liability in the event of an accident. Without it, you could be forced to pay for the replacement cost of the vehicle.

Theft waiver (TW). The equivalent of CDW but protects against theft. Also known as theft protection.

Super collision damage waiver (SCDW). Reduces your liability to zero and covers tyres, roofs and windscreens.

Personal insurance (PI). Pays out if you kill or injure yourself or a passenger, usually covered on regular travel insurance.

Personal effects cover (PEC). Pays out if your property is stolen from a vehicle, usually covered on travel insurance.

To make matters worse the car hire companies have developed lots of fancy names to help market these insurance products making it virtually impossible for anyone without a legal degree to easily compare one companies offering with another. The first thing to do is check what cover if any you already have on your existing travel insurance policy as there is no point paying twice for the same cover. The next thing to check is what is included in the price, it’s usually just the bare minimum required by law so leaves a lot of things uncovered.

You’ll probably want some additional insurance (especially if your standard excess is very high) over and above what is included in the price but don’t just opt for cover from the car hire company. If you search around you’ll find standalone cover is substantially cheaper, often by as much as 70% which on a 2 week hire could easily save you over £100. If you are just hiring a car for a couple of days then the savings may not be worth the effort, but if you do this a couple of times a year then the savings on an annual policy are probably worth looking into.

Next they will try and sell you extras such as child seats, sat-navs. If you need a child seat then you may find it’s well worth packing to take with you and if you have a sat-nav in the UK you may find its a lot cheaper to buy overseas maps rather than hire this when you get there. In fact with many car hire companies charging in excess of £10 per day for having sat-nav in the car you could even buy your own for less than hiring it for 2 weeks!

Your car hire bill will still soar as you move closer towards booking as they’ll add compulsory taxes, airport pick-up fees, different location drop-off fees, young driver surcharges, additional drives fees and many more. Be sure to include the prices of these extras when comparing different car hire companies as they’ll often cost far more than the actual cost of hiring a car and most of these charges can’t be avoided.

Before you rush to book car hire for your next holiday make sure you consider whether you really need it. If it’s really only for getting to and from the airport and a few short journeys once you get to your destination you may find public transport is a much better option, or you may even find that taxis are cheaper.

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