Thousands of us will hire a car while abroad this year but how many will regret not taking out extra insurance to cover the excess many find themselves paying?
Hiring a car to glide across the Pampas in Argentina, getting your kicks on Route 66 or winding your way through the French Riviera is a treat that can add so much to the annual holiday. However, hiring a car comes with a health warning – or at least it should.
Rental firms point out that customers will need to pay an excess before the insurer steps in to cover costs resulting from damage to or theft of the vehicle. You can take out additional protection to cover this excess but Moneywise has discovered that some hire companies make it difficult to find out upfront exactly how much this additional insurance will cost, particularly at the time consumers make the booking.
Car-hire rates differ from one location to another, so Moneywise investigated how much it would cost to hire a car at the popular holiday destination of Barcelona. More than 12 million Brits visit Spain each year, with the capital of the Catalonian region a mecca for many.
Consider the costs
We looked into how much it would cost for someone aged 30 or over to hire an economy car for three days, picking it up from the airport and returning it to the same location. While we found a substantial difference in the prices quoted between firms – ranging from around £40 to more than £100 – we also found significant variation in the amount of excess you'd be liable to pay in the event of an accident.
We found most car-hire companies include standard insurance cover, which includes collision damage waiver (or loss damage waiver). This may sound good but all it means is they'll pay up if your car is stolen or damaged - bar an excess, which you'll be expected to pay upfront.
Covering your excess
Say you have a prang while negotiating the Ramblas in Barcelona. Depending on who you're insured with, you'd be expected to pay an excess of £539 (€650) with Auto Europe and £2,500 with Holiday Autos. This is no mean sum, and a key reason why it's vital you thoroughly inspect the car on collection and report and record any imperfections before motoring off.
If the worst happens…
Do a Google search and you'll find endless examples of people who were charged for damage to cars that they didn't cause. Here's one: "They took the car back and the guy saw the same damage we noticed when we picked up the car, and he told our son-in-law it wasn't there before."
This type of problem is not atypical. You arrive, flight-fatigued, kids in tow, at a port-a-cabin in a massive car park, collect the car and drive off.
If you fail to highlight a dent or scrape on collection and get the car-hire firm to record it, you could be the one acing a hefty bill for the repair - essentially paying for someone else's mistake. You may not receive notification of any damage until you're safely home, making the process of contesting the claim very difficult and frustrating. So it's worth getting extra protection to cover against this eventuality.
How hire firms compare
Moneywise looked at 10 leading car-hire firms, obtaining quotes for an economy car, such as a Volkswagen Polo, a Ford Fiesta or a Seat Ibiza. We compared the rental cost but our main focus was the excess cover on offer. What we found was pretty shocking.
For instance, we obtained a quote for an economy class car, a Volkswagen Polo, from Argus Car Hire. The car was relatively cheap to hire – costing just over £40 for three days touring around Barcelona. However, it came with a sizeable excess.
If the car was stolen or damaged, we'd have to pay up to the first £2,500 of any resulting repairs or loss claim. Fortunately, Argus offers excess insurance to cover this potential liability. For £6.67 a day, damage to the bodywork, windows, tyres, undercarriage, roof, personal possessions (up to £300) and car key replacement (up to £500) are covered. £6.67 a day doesn't sound like much for peace of mind but it amounts to 50% of the price of the hire car itself.
Had we gone to Auto Europe, the cheapest car- hire firm, looking to drive off in a Ford Fiesta – its economy car of choice – we'd have paid just under £40 for three days' car hire, and just £2.65 a day to cover the £539 excess. So far, so good.
But this extra excess cover excludes many key elements that you'd be more likely to need covering, such as damage to the windscreen, interior, wheels, hub caps, tyres, underside and roof. Even at £2.65 a day, you have to question whether the cover you're getting is worth even this small outlay.
Big names fail customers
The large car-hire firms offer excess insurance but are far less transparent about their costs. If you chose to hire a Seat Ibiza, or similar car from Avis for three days, picking up and dropping off at Barcelona's airport you'd pay £97.88 – so more than double what some other firms charge. You can get excess protection but, according to the company's website, you'd have to arrange this at the collection point.
Likewise with Hertz, you'd need to pay for the car hire before finding out what the excess cover exactly costs (although you can get an approximate idea at the 'Review & Book' stage). National also doesn't reveal upfront the cost of excess cover. Again, you'll have to make the booking and purchase this at the collection desk. At least National tells you what the excess is – up to €1,299 (£1,077) but you aren't told what exactly is covered.
By not being upfront and transparent about what this insurance covers and costs, these companies are failing to treat their customers fairly. It is unreasonable to expect a holidaymaker to get to grips with the finer points of having excess insurance when they arrive at a foreign airport after a sometimes arduous flight.
The Unfair Terms in Consumer Contracts Regulations 1999 requires companies to treat customers fairly. Not providing information on an important element of a contract that has been entered into beforehand – in this case probably weeks upfront – could be considered to create "a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer".
David Hertzell from the Law Commission told us: "Following a Law Commission report, parliament is debating new legislation. The new law will require any term in a consumer contract dealing with the subject matter of the contract or the price charged to be both transparent and prominent. That means that the term must be clear and presented in such a way that the average consumer would have been aware of it before the deal is done."
Getting independent cover
Arranging insurance is likely to be the last thing you feel like doing on the first day of your holiday. After traipsing across a huge faceless car park in a hot and humid climate, will you really want to speak to someone about excess insurance? Probably not – and you don't need to.
Instead, you could take out independent car-hire insurance to cover excesses. There are a number of providers specialising in this field of insurance, and they are pretty competitive.
Take iCarhireinsurance.com, for instance. This specialist insurer offers comprehensive excess cover for someone hiring a car in Europe for three days at a rate of £8.97. Yes, this is slightly more than you'll pay with Auto Europe but it will cover you for up to £6,000 and includes damage to bodywork, windscreens, tyres, the roof and the undercarriage.
Insurance4carhire.com charges £11.97 for three days' cover. The undercarriage, tyres, and car keys are covered but the £2,000 excess limit isn't as good as iCarhireinsurance.com's offering (hence, the lower premium). Insurance4carhire also offers a competitive annual European or worldwide policy, costing from a respective £39.99 and £49.99.
If you find yourself being asked to pay for damage that is only 'discovered' after you return the car, and are thousands of miles away from your drop-off point, having any excess cover at all is likely to be very welcome.
If you are planning to hire a car when abroad, do the following:
- Take photos of any scrapes, dents or other damage before driving off into the sunset.
- Get these blemishes acknowledged by the rental firm, preferably in writing.
- Take time to read the rental agreement, taking note of the fuel policy (many firms require you to return the car with an empty tank), and ask about the excess policy.
- If you find the excess policy is insufficient - perhaps not covering damage to windscreen, tyres, undercarriage or roof, etc - consider calling an independent policy provider and asking for immediate cover.
- Take photos of your car when you return it to the depot. You don't want to be blamed for damage you didn't cause.
- Inform your insurer if you are charged for any damage to the vehicle, whether you dispute it or not.