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Car hire costs doubled during pandemic, with steeper price rises expected in 2022 – Which? News

Holidaymakers face sky-high car hire prices this summer as rental firms, affected by the global microchip shortage that is strangling the supply of new cars, struggle to meet renewed demand.

When we compared rental rates for October 2021 (before Omicron hit) with the last ‘normal’ October in 2019, we found that they had shot up by 125% on average. A week’s hire that cost £99 on average before the pandemic, is now £223.

And those are just the averages. Some last-minute bookers paid more than five times the average pre-pandemic rate last year. One customer visiting Madeira in August 2021 paid a whopping £794 to hire a Fiat Punto for a week, while Madeira’s average weekly rate before Covid was less than £150.

When Covid hit, car hire companies sold off vehicles to survive. But they’ve been unable to restock their fleets due to the ongoing semiconductor shortage that has caused car manufacturers to slow or even halt production of new vehicles.

With demand for holidays set to return in 2022 as restrictions ease, and no end in sight to vehicle shortages, experts predict unprecedented price hikes as demand outstrips supply, especially during peak holiday periods.

Some car hire companies could take advantage of the crisis. Avoid the rip-off rates – find out which car hire companies Which? recommends

How much have car hire costs risen?

Prices were already drastically higher last year than pre-pandemic. According to figures from Zestcarrental.com, in 2019 just one in 20 car hire customers paid more than £500 for their car rental. But in 2021, more than a quarter of rentals cost £500 or more.

It’s very difficult to estimate how much higher rental rates could rise in 2022, but prices in October 2021 do give us an indication. The combination of October half term and the short window of opportunity between the travel traffic light system being scrapped (4 October) and the arrival of omicron (24 November), caused holiday bookings and demand for car hire to surge.

Average prices rose to more than double their pre-pandemic rate. However, there were marked differences across Europe, with bookings in Portugal nearly triple their 2019 rate – see table below.

Country/territory 2019 price 2021 price Price difference Percentage increase
All countries £99 £223 £124 125%
Portugal £76 £220 £144 189%
Cyprus £135 £295 £160 119%
Spain (mainland) £115 £241 £126 110%
Greece £84 £175 £91 108%
Italy £124 £258 £134 108%
Balearic Islands £105 £211 £106 101%
France £195 £241 £46 24%

Table notes: Average rental rates for popular European destinations with October 2021 booking/pickup across all car categories, provided by Zestcarrental.com

How much higher could car hire prices go in 2022?

With travel restrictions easing for fully vaccinated travellers, demand for rental cars from UK holidaymakers could be even higher this summer. Experts predict that some brands could completely sell out of cars, while others will put their prices up to protect availability. 

Early birds who have made Easter and summer 2022 bookings in January will already pay over 50% more than they would have done pre-pandemic. The average weekly cost for August bookings is currently £309, compared to the £196 you would have been quoted for an August booking in January 2019.

But it’s the last-minute bookers, in peak season, who can expect to pay the highest prices. Which? has seen eye-watering examples of prices paid by late bookers in August 2021.

The highest weekly rate was £968 for a VW Polo in Iceland. While car hire in Iceland is comparatively pricey, in 2019 the weekly average was only around £300.

Another outlier was the £949 paid for a 10-day hire of an Opel (Vauxhall) Corsa in Zadar. In 2019 the average cost of a 10-day rental in Croatia was under £250.

Why are car hire prices so high?

The combination of Covid and global car manufacturing shortages has created a perfect storm in the car hire industry.

The pandemic caused a complete collapse of demand for hire cars as overseas travel came to a standstill. Rental companies have now missed nearly two years of normal-level trading and need to recoup some of their losses.  

Many kept their head above water by selling off vehicles, helping to manage costs and generate cash. Some fleets were cut as low as 30% of normal levels.

But as demand has slowly returned, car hire companies have had limited financial reserves to restock. And where they have been able to order new vehicles, they’ve faced waiting times from manufacturers of up to a year caused by factory closures and shortages of raw materials.

The problem is compounded by car manufacturers prioritising individual consumers over car hire companies that tend to order vehicles in bulk at large discounts.

Enterprise Rent-A-Car, a Which? Recommended Provider, told us ‘A key challenge right now is the global supply chain challenges, most notable is the chip shortage which is significantly impacting new car availability.

Our relationships with our manufacturing partners remain strong and our Fleet Acquisition team is working hard to secure additional vehicles to meet demand.’

Some companies have even resorted to buying used cars, but because of the global shortages, they’ve had to pay ‘new’ prices. And because they haven’t been able to renew their fleets (in normal times cars are only kept for two years), car hire companies have been saddled with older fleets that are much more expensive to maintain.

When will car hire prices return to normal?

None of these problems is likely to disappear overnight. Car industry figures predict that the semiconductor crisis that is disrupting global car production will continue well into 2022, and even into 2023.

At the moment car rental fleets are small and firms are unable to expand. But even when the manufacturing bottleneck ends, it will take time for car hire companies to rebuild fleets and recoup the losses of the last two years.

With nearly two years of pent-up demand for travel, if this summer sees far fewer restrictions, it is likely that providers will struggle to meet the demand for rental cars.

How can I save money on car hire in 2022?

  1. Book your car hire at the same time you book your holiday. In normal times we advised booking two months before, but now with demand likely to be so high, we’d advise booking as far in advance as possible. Prices are already 53% higher for Easter and 57% higher for August than pre-pandemic, and they are only going to go up.
  2. Book with a recommended provider. There are providers that will take advantage of this unusual market to ramp up prices to extortionate levels. Which? vets car hire companies and car hire brokers not just on the customer experience, but also on their pricing transparency and the way they have behaved during the pandemic.
  3. Avoid ‘pay on arrival’Unless you lock in your booking, some unscrupulous companies could choose to cancel and take a more valuable booking as rates rise. Either pay the price when you book, or choose a company that takes a deposit and guarantees the booking, like Which? Recommended Provider, Zest Car Rental
  4. Avoid ‘too good to be true’ rates. Car hire will be expensive this year. If a company is offering rates that look too good to be true, they probably are. Rates could include hidden costs, or the company may resort to illegal pressure selling to push up their margins.
  5. Don’t buy insurance at the car hire counter. Car hire companies sell insurance that is often inferior and always more expensive than third party providers. Find out which car hire insurance we recommend.

 

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