It’s been quite a year. Yet as the economy reopens, Americans are more anxious than ever to travel after more than a year of COVID-19-related restrictions.
“All indications now point to a busy Independence Day,” said Paula Twidale, senior vice president, AAA Travel.
AAA reports that more than 47.7 million Americans are expected to hit the road this Independence Day weekend, July 15, a volume that makes it the second-highest July 4th holiday travel volume on record, trailing only 2019 by 2.5 percent. That’s nearly 40% more than last year, with 91% traveling by car.
But the very restrictions that vacationers would rather forget have led to higher prices.
Renting a car? Good luck.
Think that plane ticket or hotel reservation is costly? Don’t be surprised if your rental car costs you more.
Travel website Kayak reports prices for rental cars this July 4 holiday weekend have risen from 80% to 300% depending on your destination.
Say you’re planning to rent a car this weekend during a quick trip to Orlando from, say, Grand Rapids, Michigan. The airfare will cost $195 round trip on Frontier Airlines, only 15% more than the daily rate of the Nissan Kicks you’ll be renting. If you’d rather have something slightly nicer, like a Ford Edge, that will cost you more than your airfare, or $210 per day; or $760 for the weekend. And that’s if you can get one.
The price escalation of borrowing a car comes from a confluence of pandemic-related factors.
Rental car companies depend on airlines to supply customers, a pool that evaporated as airline passenger volume declined more than 71%. In order to survive, rental car companies sold off hundreds of thousands of units that were sitting unused, along with slashing staff to cut costs. Some companies, such as Hertz (which also owns Dollar and Thrifty car rental brands) and Advantage Rent A Car declared bankruptcy, and are only now emerging from it.
Now that travel has rebounded, these same companies can’t fully restock their fleets, as semiconductor shortages have hampered automakers’ abilities to return to full production. Given the choice between selling to a retail customer or a fleet buyer, OEMs choose retail for its larger profit margin.
This is compounded by the lack of staff due to unemployment benefits that have kept laid-off workers from re-entering the job market. This is leading to long lines at rental car counters.
In statements to The Wall Street Journal, Hertz, which is set to emerge from bankruptcy today, said they are “working closely with our automotive partners to add new vehicles to our fleet as quickly as possible while also moving vehicles to areas with highest demand.” Similarly, Enterprise Rent-A-Car said, “our fleet is not down significantly.”
And insuring it is never a sure thing if you use a credit card
Given the higher cost of renting a car, you might be tempted to use the car rental insurance provided by your credit card rather than the pricey policy offered at additional cost at the car rental counter.
But the thought of that gives many travelers pause.
A new survey by WalletHub found that 43% of people do not trust the rental car insurance provided by credit cards.
“People generally don’t trust credit card companies or rental car providers, so it’s understandable that they’d keep the same attitude when the two worlds collide,” said Jill Gonzalez, WalletHub analyst.
“Besides, credit card rental car insurance has a lot of fine print, which doesn’t inspire a lot of consumer confidence. Reading the terms and conditions for the benefit and being aware of its exclusions can go a long way in setting the groundwork for a positive experience, though.”
Credit card benefits such as trip delay and cancellation insurance can be a big help when unexpected circumstances change your travel plans. And since it’s usually included as a credit card benefit, you might be safe in skipping the rental car company’s insurance, particularly if your personal auto insurance policy covers you when renting a car.
Refueling it will cost more too — and there are spot shortages
Even if the car you’re driving is your own, the cost of feeding it is rising as well.
“Today, 89% of U.S. gas stations are selling regular unleaded for $2.75 or more. That is a stark increase over last July 4 when only a quarter of stations were selling gas for more than $2.25,” said Jeanette McGee, AAA spokesperson, in a statement. “Road trippers will pay the most to fill up for the holiday since 2014.”
Currently, the national average for a gallon of gas is $3.09 and rising, but is still less than $3.66 a gallon that motorists paid seven years ago.
Even worse, there are reports of gas stations running out of fuel in Northern California, Colorado, Indiana, Iowa and Ohio due to a lack of available tanker drivers.
While the shortage of truck drivers has been an ongoing problem for the industry, it’s a far worse for tank truck drivers, which requires special qualifications. The lack of qualified drivers has left as many as 25% of tank trucks nationwide parked, according to the National Tank Truck Carriers, the industry’s trade group.
When should higher prices ease?
Industry analysts say the chip shortage is most acute right now, with Goldman Sachs’ chief Asia economist, Andrew Tilton predicting that the worst may soon be over. Other analysts agree, saying the new car shortage will ease in the fourth quarter, when most factories will be getting back to full production.
In the meantime, travel experts say book your car rental first, and as far as possible in advance to ensure you’re getting the best rates before booking your airfare.