(NerdWallet) – When setting your travel budget, don’t assume that accommodation and airfare will be your biggest expenses. Now, more than ever, rental cars are shaping up to be one of the most important – and stubbornly high – aspects of people’s vacation budgets.
While airfare and accommodation prices are certainly near historic highs, rental cars are among the biggest price increases of all travel spending. When comparing July 2022 prices to July 2019 (the last normal summer before the pandemic), hotel prices rose 7%, according to the latest Consumer Price Index dataset. published in August 2022. Air fares increased by 16%. But rental cars have increased by 48%.
When did rental car prices get so high
Like most travel costs, rental car prices fell sharply in April and May 2020 as people began to cancel vacations to stay home. But things started to change at the start of 2021 when prices started to rise every month, reaching an all-time high set in July 2021.
Road trips were particularly hot that summer (therefore high demand), but other factors, including a global shortage of semiconductors and labor shortages in the tourism industry, have contributed to the low supply. In fact, employment in the recreation and hospitality sector remains 7.8% below pre-pandemic levels, according to an analysis of data from the US Travel Association’s Bureau of Labor Statistics.
Prices are down slightly from the July 2021 record, but are still well above pre-pandemic prices.
How to find affordable rental cars
NerdWallet conducted an analysis of 360 rental car reservations to better understand the cheapest ways to rent. Some of the findings can help you save on your next car rental. Among the car rental companies analyzed, Enterprise is generally the cheapest, while National is the most expensive. The analysis also revealed that last-minute rentals are generally cheaper than those booked months in advance. And you’ll almost always save by booking at an offsite car rental agency rather than at the airport.
This knowledge can help you better understand the cheapest places to book, but sometimes booking from a specific location or company can be non-negotiable with the nature of your trip. These other tips can still help you save:
Use travel credit cards: Some travel credit cards offer rental car insurance as part of their benefits, although it may exclude certain types of cars or expensive rentals in certain countries. When applicable, it can save you money on additional insurance you might have purchased over the counter.
Join car rental loyalty programs: Benefits vary based on your elite status level, although some tiers may include free upgrades and waived fees. You might even get automatic status through a credit card. Still, even the free entry-level tiers can include perks like priority lines.
Book now and pay at the counter: Many car rental companies offer you the option of paying at the counter. Paying at the time of pick-up has two major advantages over paying upfront: firstly, if you have to cancel your trip, you eliminate the hassle of trying to get a refund, as you won’t have any way not deposited money. Second, if rates drop, you can always cancel and rebook at a lower rate.
How to save money on car trips
Add to that high gas prices and road trips could be one of the most expensive ways to travel these days. Here are some ways to cut costs.
Use apps to find cheap gasoline: Apps like GasBuddy track local gas prices and can help you find the cheapest gas stations along your route.
Consider an electric vehicle: With an electric car, you will avoid paying entirely for gasoline. Although you may still have to pay to charge it, some hotels offer free EV charging as a guest perk.
Plan an economical route: If you are open-minded about the location, consider crossing states with lower gas prices. During the last week of July, the three states with the lowest gas prices were Georgia, South Carolina and Texas, according to AAA data.
Why travel planning should start with rental car prices
Before you get caught up in the excitement of a road trip, make sure you can afford it. With prices so much higher than two years ago, you don’t want to be caught off guard. Wait to book flights or hotels until you’ve compared rental car prices and factored them into your travel budget.