I just went to book a car for my summer holidays in Spain and the prices have gone through the roof. What is going on?
There has been a dramatic spike in the cost of renting a car in Spain, Portugal, France, Italy, the UK, the US, Ireland and pretty much every other country where you might want to go on holiday. The price spiral started last summer, although with few Irish people travelling abroad, car rental inflation did not attract a great deal of attention in this part of the world. But it is likely to attract considerably more this summer.
What do you mean by dramatic? Are you talking 20 per cent? 30 per cent?
Oh, it is much worse than that. The cost of hiring a car overseas has jumped by more than 100 per cent since pre-pandemic times, with the price hikes likely to be even higher as the holiday season comes closer. A serious supply shortage means many Irish people might struggle to get a rental at any price in the months ahead in popular tourist destinations.
What is behind the price spikes?
In a word? Covid. And in another word? Silicon. When coronavirus hit in the spring of 2020, the international travel sector ground to a halt. That left car hire companies worldwide to with huge overheads and massive fleets that were not going to be used by anyone in the summer of 2020. They had no option but to sell a significant percentage of their fleets just to stay afloat. According to research published by French car hire comparison site Carigimi, there was a 40 per cent drop in rental cars on the market between 2020 and 2021. Other estimates have put it as high as 50 per cent.
With Covid in the rear-view mirror (we hope), why don’t the car hire companies just buy more cars?
That is where silicon comes in. Car hire companies everywhere have faced enormous difficulties trying to restock their fleets. This is because of an ongoing semi-conductor shortage which has meant carmakers worldwide have been obliged to slow or halt production of some models. Carmakers have also steered their business in the direction of individual consumers rather than bulk buying rental firms in order to maximise profits. In times past, rental firms have been able to order vehicles in bulk and avail of substantial discounts, but with it becoming a seller’s market, they are suddenly the manufacturers’ least attractive market. In essence, the car hire companies can’t get enough cars to meet demand and that is when a basic law of economics kicks in. When demand outstrips supply, prices spike.
So I should probably book my car now then?
Honestly, you should have booked it three months ago. Fears over demand have prompted many people to book much earlier for summer 2022, meaning many of the deals that might once have been on the table have already been snapped up.
But this is a short-term problem?
Sadly no. It takes a while for a car hire company to grow its fleet, and even when the manufacturing issues end, the companies will struggle, so the shortages are likely to be a feature of the holiday sector for the rest of this year and probably into 2023.
Well that’s not good. Is there anything I can do to save a few bob?
The only option is to shop around. Don’t just go to the big companies whose names you recognise. They first place you should check is an aggregator like skyscanner.ie. It searches dozens of car-hire companies as well as brokers and travel agents and allows you to filter the search results based on fuel policy, air conditioning, transmission, pick-up, car size and a lot more. Small brokers can cost less. Check out the big players’ websites too – they frequently have deals that can’t be topped.
Anything else?
Yes. Do you really need a car to have the best holiday? Or are you just hiring it out of habit? And will the car just sit idle outside your tent while you spend your days splashing about in a campsite pool? Have you checked to see if the place you are going has a decent supply of taxis and public transport? If you do a bit of research and learn how to use public transport in other countries, you could save yourself a fortune. Go to wikivoyage.com and you will find out virtually everything you need to know about the transport options in your destination city.
I need a car. So how do I get the cheapest deal?
Once you have finished shopping around you can look at the type of car you need. In times past you might have just hired the big car with the big boot. By getting a smaller can you can save a lot of money. The journeys may not be as comfortable but you will save money. And do not take out super collision damage waiver insurance when you are picking it up. Typically the cost of car rental includes insurance cover for major incidents, but consumers have to pick up the tab for minor ones. Depending on the car hire company and the contract in place, a holidaymaker could be liable to pay the first €500 of damage done to a car, or as much as €2,000. But excess insurance can cost almost €30 per day which, in some instances, can be more than the actual car hire. Instead of buying super collision damage waiver insurance in an airport, take out an annual policy at home that offers full cover with an Irish insurance company. And maybe instead of automatically getting the car from the airport, arrange to pick it up somewhere else. That can save a few bob too.
