When budgeting for your trip, don’t assume that accommodation and airfare will be your biggest expenses. Now, more than ever, rental cars are becoming 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. Comparing prices for July 2022 and July 2019 (the last normal summer pre-pandemic), hotel prices rose 7%, according to the latest set of consumer price index data released in August 2022. Air fares are up 16%. But rental cars are up 48%.
When did rental car prices get so high?
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As with most travel costs, rental car prices fell sharply in April and May 2020 as people began calling vacations to stay at home. But things began to change in early 2021 when prices began to rise every month, building to a record high set in July 2021.
Road trips were especially hot that summer (hence the high demand), but other factors—including a global semiconductor shortage and tourism industry labor shortages—contributed to low supply. In fact, employment in the leisure and hospitality sector is 7.8% below pre-pandemic levels, according to an analysis of Bureau of Labor Statistics data from the US Travel Association.
Prices have fallen slightly from the July 2021 record, but they are still well above pre-pandemic pricing.
How to find affordable rental cars
NerdWallet conducted a 360 analysis of rental car reservations to better understand the cheapest ways to rent. A few searches can help you save on your next rental car. Among the rental car companies in the analysis, Enterprise is generally the cheapest, while National is the most expensive. The analysis also found that last-minute fares are generally cheaper than those booked months in advance. And you’ll almost always save by booking at the airport versus an off-site rental car location.
That knowledge can help you better understand the cheapest places to book, but sometimes booking with a particular location or company doesn’t match the nature of your trip. These other tricks can help you save even more:
Use a travel credit card: Some travel credit cards offer rental car insurance as part of their benefits, although this may not cover expensive cars or certain types of rentals in some countries. When this applies, it can save you money on additional insurance that you might otherwise have signed up for over the counter.
Join rental car loyalty programs: Benefits vary depending on your Elite level, although some levels may include free upgrades and waived fees. You can also get automatic status with a credit card. However, entry-level, free-to-join tiers may include features such as priority lines.
Reserve now and pay at the counter: Many rental car companies give you the option to pay at the counter. Paying at pickup has two major advantages over paying in advance: First, you need to cancel your trip, eliminating the headache of trying to get a refund because you haven’t put any money down. Second, if the rates drop, you can always cancel and rebook at a lower rate.
How to save money on a road trip
Throw in high gas prices, and road trips can be one of the most expensive ways to travel these days. Here are some ways to cut costs.
Use apps to find cheap gas: Apps like GasBuddy track local gas prices and can help you find the cheapest gas stations along your route.
Consider an electric vehicle: With an electric car, you 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.
Budget-friendly route planning: If you’re open-minded about location, consider driving through states with lower gas prices. In the last week of July, the three states with the lowest gas prices were Georgia, South Carolina and Texas, according to AAA data.
Why travel 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 higher than two years ago, you don’t want to let your guard down. Hold off on booking your flights or hotels until you’ve compared rental car prices and factored them into your travel budget.