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When making your travel budget, don’t assume that lodging and airfare will be your biggest expense. Now, more than ever, rental cars are shaping up to be one of the biggest — and stubbornly high — aspects of people’s vacation budgets.
While airfare and lodging prices are certainly near all-time highs, rental cars are among the biggest price increases of all travel expenses. When comparing prices for April 2023 versus April 2019 (the last normal April pre-pandemic), the overall cost of travel is up 18%. More specifically, hotel prices are up 15%, according to the latest set of Consumer Price Index data released in May 2023. Airfares are up 10%. But rental cars are up a whopping 51%.
When did rental car prices get so high?
Like most travel costs, rental car prices sharply dropped in April and May 2020 as people began calling off vacations to stay at home. But things began to turn around at the beginning of 2021 when prices began increasing every month, building up to a record high set in July 2021. In fact, July 2021 rental car prices averaged 67% higher than July prices in 2019, the last normal summer pre-pandemic.
Road trips were especially hot that summer (thus high demand), but other factors — including a global semiconductor shortage and tourism industry labor shortages — contributed to low supply.
Prices have luckily dipped from the July 2021 record, but they are still far above pre-pandemic pricing.
How to find affordable rental cars
NerdWallet conducted an analysis of 360 rental car reservations to better understand the cheapest ways to rent. Some of the findings may help you save on your next rental car. Among the rental car companies in the analysis, Enterprise is usually the cheapest, while National is most expensive. The analysis also found that last-minute rentals are typically cheaper than those booked months in advance. And you’ll almost always save by booking at an off-site rental car location versus at the airport.
That knowledge can help you better understand the cheapest places to book, but sometimes booking from a specific location or company might be non-negotiable with the nature of your trip. These other tricks can still help you save:
Use travel credit cards: Some travel credit cards offer rental car insurance as part of their benefits, though it may exclude certain types of expensive cars or rentals in some countries. When it is applicable though, it can save you money on the extra insurance you might have otherwise signed up for at the counter.
Join rental car loyalty programs: Benefits vary based on your level of elite status, though some levels can include free upgrades and waived fees. You might even get automatic status through a credit card. Yet even the entry-level, free-to-join tiers can include perks like priority lines.
Reserve now and pay at the counter: Many rental car companies give you the option to pay at the counter. Paying upon pickup has two major benefits versus paying upfront: First, should you need to cancel your trip, you remove the headache of trying to get a refund since you won't have put down any money anyway. Second, if rates drop, you can always cancel and rebook at a lower rate.
Look beyond the traditional rental car companies: Nontraditional rental car companies have proliferated as of late. Some, such as Turo or Getaround, function like Airbnb for cars, where people rent out their personal cars. Others, such as Silvercar by Audi, are operated by players in the automobile space. And then there are some, like Zipcar, that are run by rental car companies but don't operate like a standard car rental company (such as by marketing hourly rentals or app-based rentals where you never interact with a human being to receive your car).
How to save money on road trips
Throw in high gas prices, and road trips might be one of the most expensive ways to travel these days. Here are some ways to cut back on costs.
Consider an electric vehicle: With an electric car, you’ll avoid paying for gas entirely. While you may still have to pay to charge it, some hotels offer free electric vehicle charging as a guest benefit.
Plan a budget-friendly route: If you’re open-minded to location, consider driving through states with lower gas prices, such as those featured in the GATOR road trip.
Use apps to find cheap gas: If an electric vehicle is out of the question, download apps like GasBuddy, which tracks local gas prices and can help you find the cheapest gas stations along your route.
Join gas loyalty programs: Loyalty programs specific to gas station companies, such as the Shell Fuel Rewards program (which is free to join) are in addition to earnings you might get from a gas rewards credit card.
Here’s how the Shell Fuel Rewards program works:
If you fill up your gas tank at a Shell station with at least 5 gallons six times within three months (essentially twice a month), you earn Gold Status, which earns you an automatic 5¢ off each gallon of gas, up to 20 gallons per purchase.
Even if you don’t shop frequently enough for that threshold, you still earn 3¢ off each gallon.
Unlike credit card points, this is a loyalty program, so you can still use one of our credit card recommendations to pay for the gas while simultaneously earning Shell discounts.
Why trip planning should start with rental car prices
Before you get too caught up in the excitement of a road trip, make sure you can afford it. With prices so much higher than they were two years ago, you don’t want to get caught off guard. Hold off on booking your flights or hotels until you’ve compared rental car prices and included it in your trip budget.
How to maximize your rewards
You want a travel credit card that prioritizes what’s important to you. Here are our picks for the best travel credit cards of 2022, including those best for:
Flexibility, point transfers and a large bonus: Chase Sapphire Preferred® Card
No annual fee:Bank of America® Travel Rewards credit card
Flat-rate travel rewards:Capital One Venture Rewards Credit Card
Bonus travel rewards and high-end perks: Chase Sapphire Reserve®
Luxury perks: The Platinum Card® from American Express
Business travelers: Ink Business Preferred® Credit Card
