U gotta be kidding me.
There I was, going over a pending car-rental reservation and grumbling over the profusion of fees and taxes that increased my base rate by another 42 percent.
There was, of course, state tax (8 percent), county tax (1.5 percent) and city tax (1.5 percent). There were also the usual-suspect add-on fees, including an airport concession recovery fee (11.11 percent), customer facility charge ($3.50 per day) and vehicle licensing fee ($.20 per day), all of which were unavoidable as there was no convenient non-airport location.
That’s when I saw it: an additional 5-percent hit for something called a U Drive It tax. Excuse me? Well, of course, I was going to drive it. I wasn’t renting the damn thing to hang around the airport.
As it turns out, the tax was a county-wide fee assessed on rental vehicles in order to help fund a package of museums and performance halls. And although it had been in place since December 2006, it was news to me and a fresh reminder of the unpleasant surprises that await at the rental-car counter this summer.
Caution: High rates ahead
It’s one of the ironies of these recessionary times. While weak travel demand has led to lower airfares and deep hotel discounts, car-rental rates have soared. “People are saying, ‘Hey, this is a bad economy; nobody’s traveling’,” notes Neil Abrams, president of the Abrams Consulting Group (ACG). “They’re asking how this is possible.”
The answer, he says, is that, unlike other segments of the travel industry, rental-car inventory is elastic: “If you build a 30-story hotel and demand drops, you can’t lop off 15 floors. In the rental-car industry, you can cut back relatively quickly.” With fewer cars coming out of Detroit and more cars getting sold into the used-car market, Abrams estimates that the nation’s rental-car fleet has dropped from around 2 million cars 10 years ago to around 1.5 million today.
And unlike the airline industry, tighter supply has, indeed, led to higher prices. According to ACG’s weekly data, the average rate for a one-day rental for a midsize car, reserved one week in advance, was $99.81 in early July, up from $75.96 a year earlier. A one-week rental for a compact car jumped from $296.43 to $396.50 during the same period. “I’ve been in this industry for over 30 years,” says Abrams, “and these are the highest prices I’ve ever seen.”
U drive it, U fund it
With smaller fleets and other cost-control measures in place, rental-car companies appear to be managing their way through the recession. (Last month, Hertz projected it would turn a profit in the second quarter after two quarters of industry-wide losses.) The problem, say industry executives, is that cash-strapped states and cities are once again targeting rental-car companies — and by extension their customers — with new taxes designed to resolve their own continuing budget woes.
In New Jersey, legislators recently included a provision in their proposed economic stimulus plan that would let cities near Newark International Airport impose a 5-percent excise tax on car rentals, which would be assessed on top of at least five existing fees. (The bill is currently awaiting the governor’s signature.)
In Wisconsin, a new state budget includes a provision that gives officials in Milwaukee the ability to boost one current fee from $2 to $18 in order to help fund a commuter rail system. A specific increase has yet to be announced, but the industry is already assuming the worst. “Any time you give them the leeway,” says Sean Busking, executive director of the American Car Rental Association (ACRA), “that’s what they’re going to shoot for.”
And because such fees are invariably passed on to consumers, those of us who rent cars end up paying the price — more than $7.5 billion worth since 1990, according to the industry-backed Coalition Against Discriminatory Car Rental Excise Taxes. “They’re singling out one industry to be the golden goose,” says Bob Barton, president of ACRA and U-Save Auto Rental, who sees this as an issue of taxation without representation. “I encourage every customer to get a tea party hat and wear it whenever they show up at the airport.”
Which, of course, won’t get you out of paying most add-on fees, whether they’re levied by a local municipality or the rental-car company itself. (Oh yes, governments aren’t the only ones adding new fees these days.) And while there are numerous ways to cut costs — pre-paying your rental, renting at off-airport locations, adjusting your schedule to get a weekend rate, etc. — you should probably be prepared for sticker shock for the foreseeable future.
Most important, book early or you may end up paying top dollar for the last car on the lot. “There are cars to rent this summer,” says Abrams, “but the availability, choices and price points will be challenging.”
In other words, if U rent it, U will pay.
Rob Lovitt is a frequent contributor to msnbc.com. If you'd like to respond to one of his columns or suggest a story idea, .