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 The Brancatelli File

joe THE TRICKERY BEHIND
LOW CAR RENTAL RATES


BY JOE BRANCATELLI

September 29, 1993 -- 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 renters that the basic daily rate hasn't budged since Ronald Reagan was snoozing through his 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 the announcement by Hertz on Tuesday that it is raising rates about 12 percent in 29 major cities doesn't alter the fact that rental prices are awfully low. Dollar Rent A Car, for instance, recently advertised weekly rentals of a four-door midsize car for less than $20 a day.

Unfortunately, this is the bad news.

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

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 penny-ante 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 their lowball daily rates, rental firms have begun to eliminate insurance. Even absolute necessities like collision and liability coverage have been detached from the daily rate.

"It's a sleazy racket from the consumer's standpoint," admits one car rental executive who begged 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 firms now sell at least five different kinds of optional insurance, and most of the a la carte coverage was once bundled into the daily rate or sold at 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," admits Dennis Stuth, the 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 car rental insurance.

Collision Damage/Loss Damage (CDW/LDW) Car rental firms sell this little gem for as much as $15 per day and it's not even insurance. It's a "waiver" that relieves you of financial liability for physical damage to the rental car.

If you work for a large company, you are probably safe because most corporate daily rates include CDW/LDW coverage. But if you are self-employed or work for a small firm, CDW is more troublesome.

Until last year, a driver's personal auto insurance routinely covered damage to rental cars. But some personal auto policies now specifically exclude coverage of a rental car used for business purposes. Others limit coverage to an annual total of 30 days.

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

Some credit cards, including American Express and gold Visa and MasterCards, offer supplemental CDW if you pay for the rental with the card. But supplemental coverage is secondary and that means the card issuer will only pay for damages not covered by your personal insurance.

Diners Club is a notable exception. Its CDW coverage is primary and supersedes your personal coverage.

Supplemental Liability (SLI) Liability insurance covers damage a driver might do to other persons or property.

Rental companies once included enough primary liability insurance in the daily rate to cover legal minimums. Now, however, the daily rate often includes only secondary liability, thus giving the rental firms 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 car rental firms' switch to secondary coverage means your personal car rental 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.

BUSINESS TRAVEL NOTES
TWA says it will add three new partners to its frequent-flyer program on October 1: Avis Rent A Car, Inter-Continental Hotels and Sprint, the long-distance phone company. The airline also will offer triple bonus miles on transatlantic flights until December 15. United Airlines is scheduled to add more services for international first-class travelers beginning October 1. Included are new facilities for quicker flight check-in and a greater choice of meal options. Taesa, Mexico's third-largest airline, says it will launch flights on October 1 between Oakland and six Mexican cities, including Mexico City, Leon and Guadalajara. Business travelers now have even fewer options when it comes to smoking in flight. Effective October 1, Taiwanese carrier Eva Air will ban smoking on short-haul flights in the Pacific and the airline says it will eventually prohibit smoking on all routes.

This column originally appeared in The Los Angeles Times business section.

Copyright 1993-2007 by Joe Brancatelli. All rights reserved.