(NerdWallet) – When making your travel budget, don’t assume that lodging and airfare will be your biggest expense. Now, more than ever, car rentals are shaping up to be one of the biggest — and stubbornly high — aspects of people’s vacation budgets.
While airfare and lodging prices are certainly near all-time highs, rental cars are among the biggest price increases of all travel expenses. When comparing prices for July 2022 versus July 2019 (the last normal summer before the pandemic), hotel prices rose 7%, according to the latest set of Consumer Price Index data released in August 2022. Airline tickets have increased by 16%. But rental cars have increased by 48%.
When did rental car prices get so high?
Like most travel costs, car rental prices fell sharply in April and May 2020 as people started canceling vacations to stay at home. But things began to change in early 2021, when prices began to rise each month, reaching a record high set in July 2021.
Road trips were particularly hot that summer (hence high demand), but other factors—including a global semiconductor shortage and a labor shortage in the tourism industry—contributed to low supply. In fact, employment in the leisure and hospitality sector remains 7.8% below pre-pandemic levels, according to an analysis of Bureau of Labor Statistics data by the US Travel Association.
Prices are down slightly from the July 2021 record, but they are still well above pre-pandemic prices.
How to find affordable rental cars
NerdWallet conducted an analysis of 360 car rental bookings to better understand the cheapest ways to rent. Some of the findings may help you save on your next car rental. Among the car rental companies analyzed, Enterprise is usually the cheapest, while National is the most expensive. The analysis also found that last-minute rentals are typically cheaper than those booked months in advance. And you’ll almost always save by booking at an overseas car rental location versus the airport.
This knowledge can help you better understand the cheapest places to book, but sometimes booking from a particular location or company can be non-negotiable with the nature of your trip. These other tricks can still help you save:
Use travel credit cards: Some travel credit cards offer rental car insurance as part of their benefits, though it may exclude certain types of expensive cars or rentals in some countries. However, when applicable, it can save you money on additional insurance that you might otherwise have signed up for over the counter.
Join car rental loyalty programs: Benefits vary based on your elite status level, although some levels may include free upgrades and waived fees. You can also get automatic status through a credit card. However, even entry-level levels, to join for free, may include benefits such as priority lines.
Book now and pay at the counter: Many car rental companies allow you to pay at the counter. Paying after pickup has two main benefits over paying in advance: First, if you have to cancel your trip, you avoid the headache of trying to get a refund, since you won’t have thrown money away anyway. Second, if rates drop, you can always cancel and book at a lower rate.
How to save money on road trips
Throw in high gas prices and road trips can be one of the most expensive ways to travel these days. Here are some ways to cut costs.
Use apps to find cheap gas: 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 for gas completely. While you may still have to pay to charge it, some hotels offer free EV charging as a guest perk.
Plan a budget-friendly route: If you’re open-minded about location, consider driving around 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 too caught up in the excitement of a road trip, make sure you can afford it. With prices much higher than they were two years ago, you don’t want to be caught off guard. Hold off on booking your flights or hotels until you compare rental car prices and factor it into your travel budget.