This is an excerpt from Dollar Scholar, the Money Newsletter where Editor-in-Chief Julia Glum teaches you the modern money lessons you MUST know. Don’t miss the next issue! Register at money.com/subscribe and join our community of over 160,000 scholars.
The roadtrip is an amazing experience, especially if you are on vacation or heading to a destination that you are particularly passionate about (like a Jonas Brothers concert, to give a hypothetical example).
But it’s not worth $ 1,200.
This is how much Hotwire told me it would cost to rent a car for a three day weekend when I did a search last month. I’m not exaggerating – entirely $ 1,200. It’s like a month’s rent! It’s like four round-trip flights to Florida! It’s like 600 Slurpees!
I’ve been vaguely aware of the national rental car drama for a few weeks now. The Washington post published a particularly chilling story on this, telling how travelers deal with long lines, canceled reservations and skyrocketing prices during the “rental car apocalypse.” But, to be honest, I wasn’t particularly interested in the details because I wasn’t affectedâ¦ until now.
Rental Car Shortage: What’s Happening?
I called Jonathan Weinberg, the founder and CEO of AutoSlash, to get the scoop. He told me that the car rental companies had to face a perfect storm of factors.
The problems date back to last year, when pandemic lockdowns began. People have stopped traveling and car rental companies have seen a huge drop in demand.
âThey were a little in shock, and they immediately evaluated their business and they realized they had to crouch down and go into survival mode,â Weinberg said. âTheir biggest asset is the vehicles they own or leaseâ¦ So they said, ‘Okay, what we need to do is sell as many vehicles as possible.’ “
This is what they did. According to an estimate by the Jefferies Group, companies have disposed of more than 770,000 of their cars. Weinberg said they were the right size for the demand they had at the time.
And then the situation changed again.
The vaccines became widely available much faster than expected and, as a result, “demand for travel started to return significantly,” he adds. AutoSlash first noticed this over Presidents Day weekend. Initially, Weinberg said his team thought the high prices were an anomaly, “but it happened again and again.”
âIt quickly became clear that this was not an isolated problem,â he adds. “But we thought at the time, ‘OK the rental companies don’t have enough vehicles, they’re just going to buy more and eventually the problem will go away.'”
Enter the semiconductor shortage. A variety of supply chain issues have resulted in a global chip shortage, making it difficult for manufacturers to produce auto parts and release new vehicles.
Where rental car prices are skyrocketing – and how to find deals
Long and complicated story: Due to the limited supply, car rental companies cannot buy more vehicles, so the prices of the cars they to do have are super high. In early August, searches for Kayak rental cars were up 69% from 2019. Prices are up 70% from 2019.
It was worse in some areas. Anchorage, Alaska was the worst offender, with an average price of $ 195 per day. In Lihue, Hawaii, rental car prices hovered around $ 179 per day, a 277% jump from 2019.
âA lot of the places where we’re seeing the biggest increases relate to outdoor type places,â says Matt Clarke, Kayak vice president of marketing for North America.
Travelers get creative in response, renting U-Hauls and taking expensive Lyfts, but these methods aren’t always practical or recommended. The Hawaii Tourism Authority, in particular, discourages workarounds, writing on its website that it “does not tolerate visitors who rent moving trucks and vans for recreation.” (The message is in bold. And underlined.)
So when is this going to end? Clarke couldn’t tell. (“I wish I had lots of answers to ‘when is this going to end’ for anything COVID-related,” he adds.) Weinberg predicted the overall problem would not abate before “in the middle of next year”.
In the meantime, Clarke advised me to book my rental car as far as possible – “more than two months is advisable,” he says. Instead of booking my flight, then my hotel, then my car, I should return the order and take care of the car first. It will work best if I have the flexibility when and where I travel.
“If you are open to [changing] wherever you go you might find better deals, âsays Clarke.
The bottom line
Rental car prices have increased as demand is high and supply is low, both due to the coronavirus crisis and the shortage of chips. To alleviate it, I should book as soon as I even think of * thinking * about traveling somewhere. I should also avoid certain places (especially those near nature destinations).
A silver lining, according to Weinberg, is that most rental car brands offer free cancellations on bookings.
âHaving a paid reservation later allows you to keep changing the rate,â he adds. âIf a better rate presents itself, you can cancel and book again. “
More money :
A guide to renting a car without overpaying or stressing
Long queues, flight delays and high prices: what can travelers expect at airports this summer
Rental car insurance: what your credit card covers and what it does not