Prepare to pay even more for gas if you don’t fill up rental car

USA Today : June 17, 2008

If it was difficult to swallow $4-a-gallon for gas, try digesting $8 — the current price you’ll pay at some car rental locations if you return your vehicle without a full tank.

A USA TODAY survey of eight car rental companies found prices of $7.99, or $8, a gallon at all 10 airports surveyed. The prices were levied upon renters who return a car without a full tank of gas or don’t prepay for a full tank at the car rental company’s set price.

The airports surveyed were Boston, Chicago O’Hare, Dallas/Fort Worth, Denver, Los Angeles, Miami, New York JFK, San Francisco, Seattle-Tacoma and Reagan Washington National.

The biggest rental car companies charge the most when customers don’t refuel a vehicle or agree to the prepay option. Avis and Budget say most customers refuel their vehicles, and auto rental consultant Neil Abrams agrees that’s what’s happening throughout the industry. But only a small percentage choose to prepay, and “many” renters return vehicles without refueling, Abrams says.

For those renters, Hertz charges $7.99 at all 10 airports in USA TODAY’s survey. Budget charges $8 at three airports, and Avis charges $7.99 or $8 at four.

Enterprise has the least expensive prices, charging less than $6 a gallon at each of the 10 airports. Every other company, including Alamo, Dollar, National and Thrifty, charges $6 a gallon or more at five or more of the 10 airports.

At $8 a gallon, returning a midsize car such as a Toyota Camry with nearly an empty tank could cost more than $145. For a sport-utility vehicle such as a Ford Explorer, the charge could be about $180.

These high charges became controversial in Maryland last week when the state’s attorney general, Douglas Gansler, announced that rental car companies operating in the state had agreed to lower their gas prices after the state threatened to fine or sue them.

“Marylanders are already hurting at the gas pump, and paying $8 a gallon is just salt in the wound,” Gansler said.

Business expenses
The major car rental companies agreed to charge 133% to 142% of the average per-gallon price for gas in the state, or the average per-gallon cost plus a flat rate of up to $10 a vehicle. Thus, car renters who were paying $8 a gallon may now pay about $5.85 a gallon, the attorney general’s office says.

Rising rental car gas prices can take a big slice out of a company’s travel budget. “It could add tens of thousands of dollars of expenses to a Fortune 100 company’s travel budget,” says Bill Connors, COO of the National Business Travel Association.

A growing number of companies require employees to either take the prebuy option or fill the tank at a local gas station before returning a vehicle, Connors says.

Car rental companies’ gas prices are “one small step from robbery,” says frequent business traveler Steve Rima, who works for an engineering consulting firm and rented a car about 100 days this year. Rima, of Grand Junction, Colo., avoids car rental companies’ high gas prices, because his company requires employees to fill the tank or accept an auto rental company’s prepay option.

Business travelers say that the prepay option, which allows a renter to buy a full tank of gas when picking up a car, is sometimes competitive with prices charged by local gas stations. But it may often not be a good deal. To gain a price advantage, a renter must return a car with the fuel gauge at or below empty.

USA TODAY’s survey found the cheapest prepay price last Wednesday to be $3.74 a gallon, charged by Thrifty at Dallas/Fort Worth airport. The most expensive prepay price was $4.50 a gallon, charged by Avis and Budget at Los Angeles airport. According to travel group AAA, the average price throughout the country that day was $4.05.

Regardless of whether renters choose to prepay or return a vehicle without a full tank, Hertz says it will soon make it easier on their wallet. Beginning July 1, renters in the USA and Canada who choose the prepay option will be charged 15 cents less a gallon than the average price per gallon determined by the Oil Price Information Service, which tracks petroleum prices.

Hertz says it will also lower its most expensive gas prices — those charged to renters who don’t prepay and don’t return a car with a full tank of gas. The rates will be based on local gas prices, plus a $6.99 surcharge.

Not a big source for profit

Auto rental consultants Abrams and Mike Kane say that selling gas is not a big profit source for car rental companies.

“They have to work hard to recapture the cost of fuel,” Abrams says. “They are not gas stations, and the cost to house fuel in underground tanks, the labor expense and the productivity issues create significant cost.”

Car rental companies, Kane says, “raise the cost per gallon to scare you into doing what they really need in the first place — bringing the darn thing back full or with the amount of gas it had when it went out.”

But that’s not how many business travelers see it. The gas prices charged when returning a car without a full tank are “opportunistic exploitation,” says Stu Needel of Westminster, Md., who runs a consulting company.

“When I don’t take the prebuy and am running late or can’t find a gas station near the rental return, I plead with the receiving agent to minimize the charges,” Needel says.

“Usually,” he says, “they’re compassionate and limit the amount somewhat, but some won’t budge.”

Michael J. Kane is president of the auto-rental consulting company Vehicle Replacement Consultant Group, Inc., Southfield, Michigan. He has more than 20 years of experience in the auto-rental and leasing business.

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