Essential Guide to Renting a Car for the First Time

Name: Essential Guide to Renting a Car for the First Time
Item: Essential Guide to Renting a Car for the First Time
Author: Mark Fitzpatrick

Contributions by 3 experts

Updated: May 20, 2024

Advertising & Editorial Disclosure

Renting a car for the first time can be an exciting and challenging experience. It can be fun to drive a newer vehicle, especially when you’re on vacation or on a road trip. There are also legalities to understand. When you’re renting a car, there are several factors to consider first: Your budget, where you’re going, how long you’ll need it, and what documentation you’ll need to bring with you.

Learn more about the car rental process, how to choose the right vehicle for you and when to purchase temporary car insurance coverage.

The car rental market recorded $39 billion in sales — a 3.9% annual growth rate over the past three years. Of the 2,006 companies in the industry, the sales per company averaged $19.5 million. ¹

The most popular types of vehicles rented in the country are executive cars or full-size car, such as the Toyota Avalon or Chevrolet Impala, and economy cars, such as the Hyundai Accent. ²

The average cost for a long-term lease is $458 per week or $1,962 per month. That’s around $65 per day. For short-term rental, the cost averages $17 per day. ³

Sources:

¹ Kentley Insights Report, ² Grand View Research, ³Kayak

Why Trust MoneyGeek? MoneyGeek performed extensive research using reputable sources such as Grand View Research and a Kentley Insights Report. We also gathered contributions from insurance professionals to provide expert insight on rental cars and rental car insurance.

What to Know Before Renting a Car

Renting a car is convenient. However, there are various factors you should first consider. Requirements and fees may vary depending on the car rental company. You should also decide on the type, class and size of the vehicle, as this may also affect the cost of your car rental.

Below are some important facts you need to note before renting a car.

Minimum age requirement

Many rental car companies have minimum age requirements for their vehicles. Typically, you must be at least 25-years-old. Companies that allow drivers aged 21–24 to rent a car tend to charge an additional fee. That said, drivers as young as 18 may be allowed depending on state laws.

Documentary requirements

You may need to present certain documents, such as a valid driver’s license and an active credit/debit card or check for payment. Some rental companies may also require a good driving record.

Rental rates vary

There are varying factors affecting the cost of a car rental. These include the type, class and size of the vehicle, age of the renter, length of the rental, choice of car rental company and location.

Car insurance coverage

When you rent a car, you must consider the implications of theft or an accident while in your possession. Car insurance coverage protects you from unexpected expenses, but you should know if your policy covers rentals and its limitations. If it doesn’t cover rental cars, the rental company has options you can purchase.

How Does the Car Rental Process Work?

The process of renting a car is fairly easy. Generally, you book the type of car you need, provide your documentation, and pay. However, there are other considerations you should know and steps you may need to complete.

For instance, you must have a valid driver’s license. Rental companies typically have a minimum age requirement of 25. Those that allow drivers aged 21–24 often charge an additional fee. It’s a good idea to understand rental cost calculations, how pick-ups and returns work, how long it takes to rent a car and the different types of auto insurance suitable for rental cars.

How Much Does Renting a Car Cost?

Various factors affect the rental cost, including the driver’s age, length of rental, location and type of car. There may also be hidden fees and additional charges, such as airport charges and cancellation fees.

Current events may also have an impact on prices. For instance, rates have recently hit an all-time high. The pandemic highly affected the travel industry, and with the microchip shortage in 2021, the availability of rental cars was also affected. Prices rose because the supply couldn’t keep up with the growing demand.

KNOW WHAT AFFECTS RENTAL COSTS

The average car rental cost is around $458 per week or $1,962 per month. However, actual prices may vary per person due to differences in age, location, length of rental and car class. Knowing these can help you make well-informed decisions.

For instance, younger drivers tend to pay more as they’re perceived to be riskier and less experienced. Luxury vehicles are expensive, while economy cars tend to be more affordable.

Vet the Company and the Rental Agreement

There are generally two types of companies:

Rental car companies. These refer to companies that own the cars they’re renting out. They also operate local counters.
Brokers. These service providers allow renters to compare rates between car rental companies easily.

It’s important to understand the rental agreement before paying for a car. There are three types of contracts you should know.

One-way: A one-way rental contract is when the client picks up the car at one location and drops it off at another.
Round trip: This type of contract means the car renter picks up and drops off at the same place.
International: These contracts involve rental cars driven across international borders.

The vehicle rental agreement is the contract a renter signs. It typically includes the status of the car, terms and payment agreements, the rights and obligations of both the lessor and the lessee, deposit provision, liabilities for breach of contract, dispute resolution, amendment and termination, auto insurance provision, effective date and the signatures of both parties.

CHECK INSURANCE COVERAGE

Read the insurance provision stated in the car rental agreement. Take note of the coverages and understand what types of damages and incidents the company covers. You may also want to check if you need to pay extra for car insurance. In some cases, the renter may not need separate rental car insurance. For instance, your car insurance, employer’s car insurance or credit card may provide rental car coverage.

Choose the Right Car Size and Vehicle Class

Vehicle classification is determined by size. You can choose your vehicle class by how much space you need. Categories may vary per company. But, in most cases, companies use the following:

Economy: These vehicles are listed as mini, small, sub-compact or compact. They’re best for drivers looking for fuel-efficient cars. These also tend to be the least expensive. According to Kayak, economy cars are the most popular among renters.
Intermediate/Midsize: These are for drivers looking for more space but have a limited budget.
Standard: Also known as full-sized cars, standard rental cars have full-sized backseats and can fit four adults.
Luxury: Luxury vehicles are premium rental cars that may include full-sized SUVs, vans and sports cars.
Special: These cars refer to hybrid and electric cars.

The best rental car isn’t always the cheapest. Select a car that fits your travel needs.

Determine the number of passengers

The number of people traveling with you will determine how much space you need. For instance, an economy car may be enough for 1–2 people. But a full-sized car may be necessary for a four-person family.

Check fuel and parking options

Before renting a car, consider the fueling options in the area. In most cases, rental companies require customers to return the rental with a full gas tank. You should also check where you would be parking the car. Some parking lots may charge fees.

Consider the length of the trip

How long you plan to use the rental car will significantly impact the cost. When looking for a rental car, consider the length of your trip. Companies may charge differently for daily, weekly and monthly leases.

Should You Rent a Car?

Renting a car has many advantages and disadvantages. You may get lower monthly payments and maintenance costs compared to owning. However, there may be mileage restrictions and other charges for wear and tear. Additionally, ongoing payments don’t lead to ownership.

If you’re considering renting a car, the benefits should outweigh the drawbacks. You should also consider your circumstances.

Below are some situations where renting a car makes sense.

Living in a large city

Consider the public transportation in your city. If it’s an efficient form of travel, then buying a car may not be worth it. Instead, you can opt to rent a car as needed.

Going on a road trip

If you’re planning to travel to a different city or state, renting a car can be cheaper and more convenient. That’s especially true if you don’t own a car or don’t want to put mileage on your car.

Vacation

If you’re vacationing in a different area for weeks or months with several people, renting a car may be a convenient way to move around the area.

Need a car for errands

If you only need a car to run errands once a week or month, renting may be better than buying. Some companies offer car rentals by the hour.

A Step-by-Step Process to Rent a Car

The process of renting a car can be a bit overwhelming, especially for first-timers. Knowing what to expect can help you prepare and make better decisions. You can use the following step-by-step guide to navigate the car rental process — from searching and booking to picking up and returning the rental car.

Shop around and research

Look for rental companies where you plan on using the car. You can conduct your research online. Determine the car size you need based on the number of passengers riding with you. Reading about the area may also help you decide.

Compare prices

Car rental costs may vary per company and location. Try to check online prices and compare at least three service providers. Consider playing with dates and locations for pick-up or drop-off. Sometimes, a small change can help you save a lot of money.

Check add-ons and limitations

Check the passenger space and trunk capacity. Find out if they allow renters to add certain features, such as car seats for children and GPS systems. If so, calculate the additional cost to see if it’s still within budget. Take note of available pick-up points, drop-off locations and mile limits.

Include insurance costs, if necessary

When calculating costs, consider insurance as well. Check if your auto insurance policy includes rental car coverage. If you plan on paying using a credit card, see if your issuer covers rental cars. You may also opt to get additional coverage.

Reserve a car

Once you’ve decided on the rental car and company, the next step is to reserve the car. Most companies allow customers to book a car online. Choose the location where you want to pick up and return the car. Enter the pick-up and return dates.

Pick up the rental car and pay

On the date of pick up, go to the location you have chosen. Review the rental agreement and make sure all information is correct, especially the price. If you’ve paid online, you may need to provide proof of reservation. If not, you can pay at the rental company. Some companies may require a credit card. It’s also a good idea to inspect the car thoroughly before leaving the car lot.

Return the rental car

In most cases, the renter has to fill the car with the same level of gas it has when it was picked up from the rental company. Some companies allow renters to return the car without filling the gas tank, but they tend to charge extra.

You should also check the car carefully and ensure that there are no personal belongings or trash left inside. Then, bring the car to the drop-off location at your drop-off time. There may be fees for late returns.

Tips and Tricks to Help You Save the Renting Costs

Traveling costs, including food and accommodations, can be costly. Depending on your destination, you may also have to pay for flight tickets. For your protection, you may also want to get travel insurance.

While renting a car can be convenient, it can also be costly. Fortunately, there are ways to get a cheap rental car and save during your trip.

Book early

Look for a rental car early, if possible. Sometimes, you get better deals when you reserve a car several weeks in advance. This also gives the company more time to prepare the vehicle. Avoid booking during peak travel seasons as demand and prices tend to increase.

Avoid booking a rental car through the airport

Car rentals at airports tend to be more expensive and have added surcharges. Booking directly from a rental company or through a broker can be a cheaper option.

Use your credit card

If you don’t have auto insurance or enough coverage, you may need to buy rental car insurance. Rental coverage can be expensive. You can check if your credit card company offers coverage if you use it to pay for a rental car.

Look for discounts and deals

When shopping for rental cars, remember to check for special discounts. Check rental company websites for discount codes you can use. An online search may also help you find coupon codes. Bundling car rental with hotels or airfare may also help you save money.

Avoid add-ons, if possible

Don’t opt for additional features unless they’re essential. Some add-ons may also increase your car rental rate. Consider alternatives. For instance, instead of paying for GPS, use your smartphone. You can access online tools while traveling or download maps before your trip.

If you have a child, consider bringing your booster seat. Check if the airlines accept it as part of checked baggage.

Inspect the car

Before sealing the deal with the rental company, thoroughly inspect the car. If you notice scratches, take photos and videos. These can serve as evidence should the company try to charge you for damages you didn’t cause.

BE WARY OF SCAMS

There are scams targeting people renting cars. Some include

Fraudulent websites: Scammers create ads that redirect the user to a phony website. It’s important to check the legitimacy of a website. You can contact the company’s customer service hotline for verification. There are also online lookup tools that allow you to access information regarding website owners.
“Too good to be true” offers: You may find attractive offers through your search. If the offer is too good to be true, it’s probably not the real deal. Visit official rental company websites for legitimate discount offers. You can also call their customer service department to clarify discounts.
Overcharging: Car rental companies may tack on additional fees. Inexperienced renters may fall victims to this. For example, some workers may decide to scam clients by adding expenses such as inflating toll charges or other penalties.
Fake rental companies: Some criminals scam people by pretending to be car rental companies. They may advertise cars for rent on online marketplaces like Craigslist. They may have lower rates and good deals. The renter may not be aware of the illegitimacy of the company they’re working with until the pick-up date.

Do You Need Car Rental Insurance?

It’s common to wonder if you need to purchase additional auto insurance for a rental. In most cases, it’s not necessary to get additional coverage. There are two possible reasons for this — the person’s auto insurance covers rental cars or their credit card offers this coverage.

If additional coverage is necessary, be careful when choosing a policy. There may be insurers offering one-day or weekend car insurance. It may be best to avoid these. Generally, the shortest auto coverage insurance companies offer are six months or one-year policies.

Does My Car Insurance Cover Rental Cars?

A standard auto insurance policy will typically cover you if you’re renting a car, especially if you have full coverage auto insurance. However, in some instances, you may need to buy rental car insurance. For example, individuals whose personal auto insurance policy doesn’t cover rental cars.

If you don’t have auto insurance or own a car, you probably have to get rental car insurance. You’ll also need insurance if you’re traveling for business and your employer doesn’t cover you.

Types of Car Rental Insurance You Might Need

There are four types of rental car insurance. Each one offers different coverage. Determine what protection you would want to have. Research your options and weigh the pros and cons of each one.

When booking a rental, you can get coverage through the rental company. Another option is to find an insurance provider that offers rental car insurance.

Loss damage waiver

Also known as collision damage waiver, rental car companies often offer the loss damage waiver. With this insurance, you won’t have to pay for the repair or replacement of the rental car in the event of theft or damage. Note that this policy may require a deductible.

Liability coverage

A liability insurance policy also covers damages you may cause to another person’s property, including their cars. In most states, there’s a minimum liability coverage requirement. That means you may already have this coverage in your auto insurance policy. It’s available through auto insurance providers.

Personal accident insurance

If you want personal protection, a personal accident insurance policy may be for you. It covers medical, ambulance and even death benefits for you and your passengers if the accident occurs while you’re in your rental car.

Personal effects coverage

If you’re worried about losing personal items while traveling, a personal effects coverage may be right for you. It’s a great option for frequent travelers as it protects their baggage, rental car and finances. Baggage loss or damages may already be covered if you have travel insurance.

Car Rental FAQs

Understanding the car rental process can help ensure you get your money’s worth. Below are answers to some frequently asked questions (FAQs) about car rentals.

Can rental cars be driven out of state?

Generally, renters can drive rental cars out of state. However, there may be rules specific to the rental car company. It’s important to review border crossing rules before driving out of state to prevent any issues. You should also check the fees and restrictions set by the rental company if you plan on returning the car to another location.

Can I cancel a rental car?

Yes, most companies allow renters to cancel a rental car. If you have already picked up the car and no longer want to use it, contact the rental company’s counter where you picked it up. If you haven’t picked up the vehicle yet, check the company’s rules on how you can modify or cancel a reservation. Cancellation may come at a fee.

Does my credit card cover rental car insurance?

It depends on the credit card and issuer. Many issuers provide rental car coverage if the rental is under your name and you used the credit card to pay for it. Make sure you check what your credit card covers and how much is the coverage limit. If your credit card includes this coverage, you’re automatically covered.

Do I need insurance to rent a car?

It’s not necessary to have insurance to rent a car. However, some rental companies have minimal coverage for their rental cars. You may have to settle the expenses should the car get damaged. So, having insurance can protect you against possible huge expenses.

Do I need to pay a deposit to rent a car?

Most car rental companies require a security deposit which serves as a guarantee. If something goes wrong while you’re using the rental car, the rental company will use the deposit to pay for related expenses. This often applies to dirt or scratches that require the company to use money. If there’s nothing wrong with the car when you return it, the company will return the deposit fully.

The deposit amount varies per company and location. Make sure you check this with the company before renting a car.

Expert Insight on Rental Cars and Insurance

Understanding the different factors involved in renting a car can help you maximize its benefits. MoneyGeek asked industry experts to share some insights on car rental and rental car insurance.

Are there any alternatives to car rentals? What are they?
If a person has multiple credit cards, how can they choose which one to use for a car rental?
When is it best to get rental car insurance and which type should one get?

Nick SchraderInsurance Agent at Texas General Insurance

Linda ChavezFounder & CEO of Seniors Life Insurance Finder

Eduarda dePaulaCEO of FindByPlate

Resources for Renting a Car

Finding good resources can help you navigate the car rental process without hassle. MoneyGeek lists some resources that assist with car rental expenses and fraud protection.

Car Rental

AARP Car Rental Discounts: AARP partnered with different car rental companies to provide discounts to AARP members. Check their website to see discount rates and which company offers them.
Expedia: Expedia is an online travel shopping company that allows interested renters to get an estimate on how much their car rental would cost. Adjust the dates, times and locations to find the cheapest option for you.
Universities and Colleges: Different universities and colleges offer exclusive car rental rates or discounts to employees, faculty members and students. Examples include the University of Mary Washington, University of Miami, University of Colorado and New York University.

Consumer Protection

Consumers for Auto Reliability and Safety: This nonprofit organization aims to protect consumers against vehicle-related fraud and abuse. Learn about different scams, get tips for rental car safety or file a consumer complaint through CARS.
Federal Trade Commission (FTC): The FTC is the government consumer protection agency that aims to prevent fraudulent activities and unfair business practices. If you’re a scam victim, you can report it to the FTC.
Task Force on Market Integrity and Consumer Fraud: This federal initiative, which includes different federal agencies, government departments and law enforcement, aims to protect consumers against fraud. You can find resources on how to report fraud.

About Mark Fitzpatrick

Mark Fitzpatrick has analyzed the property and casualty insurance market for over five years, conducting original research and creating personalized content for every kind of buyer. Currently, he leads P&C insurance content production at MoneyGeek. Fitzpatrick has been quoted in several insurance-related publications, including CNBC, NBC News and Mashable.

Fitzpatrick earned a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He is passionate about using his knowledge of economics and insurance to bring transparency around financial topics and help others feel confident in their money moves.

sources

Grand View Research. "Car Rental Market Size, Share & Trends Analysis Report By Vehicle Type (Luxury Cars, Executive Cars, Economy Cars, SUVs, MUVs), By Application (Local Usage, Airport Transport, Outstation), By Region, And Segment Forecasts, 2021 - 2028." Accessed June 20, 2022.
Kayak. "United States Car Rentals." Accessed June 20, 2022.
Kentley Insights – MarketResearch.com. "Car Rental – 2022 U.S. Market Research Report with Updated COVID-19 Forecasts." Accessed June 20, 2022.