Executive Travel : Blame Flat Rates for Car Rental Trickery

It’s good news-bad news time, and the topic is car rentals.

Business travelers pay about the same daily rate to rent a car today as they did a decade ago. There are so many cars chasing so few business customers that the basic daily rate hasn’t budged since President Ronald Reagan’s first term.

We’re not talking adjusted-for-inflation figures, but absolute dollars. If your daily corporate rate was $35 a day in 1983, there’s a good chance it is within a few bucks of $35 now.

If anything, basic rates are lower today. Even Hertz’s announcement Tuesday that it is raising rates about 12% in 29 major cities doesn’t alter the fact that car rental prices are awfully low.

Dollar Rent A Car, for instance, recently advertised weekly rentals of four-door, mid-size models for less than $20 a day.

Unfortunately, competitive pressures have kept daily rates so low for so long that the car rental industry now generates profits only from a mind-numbing array of extras, surprise fees and hidden charges.

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Take that cheap rate at Dollar, for example. One Dollar ad promised a weekly rental at LAX for $127.60, or just $18.23 a day. But then it explained the extras: geographic restrictions on the “unlimited miles,” fuel fees, additional-driver charges, airport access fees and taxes.

Then the ad warned, “Some additional charges may apply.”

Until recently, this finagling has been a fairly minor annoyance. But now the trend toward unbundled rental rates has taken a nasty and dangerous turn.

Since there’s nothing else to unbundle from the low-ball daily rates, rental companies have begun to eliminate insurance. Even absolutely necessary coverage for collision and liability has been detached from the daily rate.

“It’s a sleazy racket from the consumer’s standpoint,” said one car rental executive who requested anonymity. “My own friends hate to rent from me--but look at it from our perspective: The daily rate doesn’t even cover our costs, so we can’t afford to throw in the insurance anymore.”

Car rental companies now sell at least five kinds of optional insurance, and most of the a la carte coverage was once bundled into the daily rate or sold for a minimal fee. And the insurance packages are so costly and confusing that it’s caveat emptor.

“It’s impossible for us to know what your needs are,” said Dennis Stuth, director of risk management at Budget Rent A Car.

“We advise renters to check their coverage, both corporate and personal, before they rent.”

So let’s take Stuth’s advice and check our coverage in the two major areas of rental car insurance.

Collision Damage-Loss Damage: Rental companies sell this little gem for as much as $15 a day, and it’s not even insurance. It’s a “waiver” that relieves you of financial liability for any damage to the car you are renting.

If you work for a large company, you’re probably safe, because most corporate daily rates include this coverage. If you are self-employed or work for a small business, CDW is more troublesome.

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Until last year, a driver’s personal auto insurance routinely covered damage to rental cars. But some personal auto policies now specifically exclude rental cars used for business purposes . Others limit such coverage to no more than 30 days a year.

And at least two major insurance companies have taken a cue from the rental industry’s practice of unbundling. They have eliminated CDW from personal policies and now sell it as an option.

Some credit cards, including American Express, gold Visa and MasterCard, offer supplemental CDW if you pay for the rental with the card.

But supplemental coverage is secondary, so the card issuer will pay only for damage not covered by your personal insurance.

Diners Club is a notable exception. Its CDW coverage is primary and supersedes any personal coverage you carry.

Supplemental Liability: Liability insurance covers damage a driver might cause to other people or property.

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Rental companies’ daily rates once included enough primary liability insurance to cover legal minimums.

Now, however, the daily rate often includes only secondary liability, so the rental company gets a chance to sell you extra insurance for as much as $8 a day.

If you’re a corporate renter, adequate liability is probably included in your rate. If not, the rental companies’ switch to secondary coverage means your personal auto insurance will be your first line of defense.

I promised this would be a good news-bad news column. What’s the good news? We’re out of space and can stop talking about sleazy car rental practices.