According to Bureau of Labor Statistics data, the average cost of renting an automobile in the United States has increased by 48% from May 2019. A car which cost $100 per night four years ago now costs $148.
According to BLS statistics, the cost of living has dropped by 12% in the last year. This drop in prices has not been enough to reverse the high costs that were incurred during the pandemic.
Albert Mangahas is the chief data officer of Turo. A car-sharing company. This led to an immediate rental-car crunch, when the demand for rental cars returned .”
According to a report by the BLS for May 2023, flights are now 5% higher than in May 2019. Hotels are 15% more expensive. The prices of flights and hotels are slightly higher but not as high as the rental car price increase by 48%.
Why are these prices so high?
Corporate profits and a supply crunch
Early stages of pandemic decimated rental car companies, just as they did the entire travel industry. Rental car companies, unlike airlines and hotels that can’t sell aircraft or properties immediately during a recession, offloaded an enormous portion of their fleet. Avis Budget sold 250.000 vehicles alone in 2021.
These companies were unable to quickly restore their fleets as demand increased and the pandemic subsided. The shortage of microchips, along with other issues in the supply chain, pushed up prices.
Mangahas asserts that the crunch was caused by the surge in demand. There was simply no way of increasing the supply quickly enough to keep up with demand. Demand has increased since then but not at the same pace as before.
Why have car rental companies not bought more cars to allow prices to be moderated? It could be as simple as making too much profit.
According to the company’s earnings report, “strong demand” and high prices were responsible for Avis Budget Group’s best-ever year of revenue and profit in 2022. The high prices that customers are willing to pay have led to a bumper profit for the corporate world.
A report by the Economic Policy Institute (a nonpartisan think-tank) suggests that in fact, corporate profits have contributed to inflation more than either labor costs or materials. This trend may include higher rental car costs and increased corporate profits.
How to Navigate Higher Prices
There is no indication that rental prices will ever return to their baseline of 2019. It’s up to travelers to take advantage of the situation.
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Avoid driving if you can.
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Turo, Getaround, and Audi on Demand all have different rental rates and models. You could potentially save money by looking at these alternatives.
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Renting a car at the airport is 26% more expensive than renting one in downtown, according to a NerdWallet analysis. According to NerdWallet, the cost of renting a vehicle at an airport location is 26 percent higher than that in a centrally located lot.
Search engines that allow you to compare rental companies can help ensure that you get the lowest rate. Check the total price, not just the listed price, which includes taxes, fees, and insurance. Check your credit card’s insurance coverage to make sure that you are not paying extra for it.
As family budgets become more stretched and as fewer people travel, prices could drop this year. The narrative that “prices are going to drop soon” has been repeated for the past two years. People are actually traveling more now than ever before.
Mangahas: “We have seen an increase in demand for our products this summer.”
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