Since the onset of the coronavirus pandemic, renting a car has been difficult, to say the least.
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Early in the pandemic, many rental car companies were hit hard by the sudden drop in travel demand. This caused companies like Hertz to file for bankruptcy, and others to fire-sell their fleets. Once travel started its big recovery last year, rental car companies were left with a car shortage that was worsened by an ongoing semiconductor chip shortage.
As a result, travelers have found it harder to find a car at their destination. Prices for the cars that are available have skyrocketed and made rental cars a more expensive part of many trips.
But how much longer is this expected to roll on? And is there a glimmer of hope for a return to rental car "normalcy" this year? Let's take a closer look at the state of renting a car in 2022.
The state of renting a car in 2022
While many travelers in the U.S. are now eager to put the pandemic behind them, many of the economic issues fueled by the pandemic still persist.
These issues can be boiled down to supply and demand. On the supply side, the world is still experiencing supply chain issues and semiconductor shortages.
If you've tried to buy a car over the past year, you've likely noticed how hard the process is due to limited inventory across the board. Lead times for new vehicles are sometimes months into the future, causing there to be fewer cars on rental car lots in many cities — even when demand is high.
In fact, a December 2021 report from IHS Markit shows that vehicle inventory levels are at their lowest levels since the global financial crisis.
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As a result, the cost of cars rolling off the assembly line is higher than usual. The price of a new car in February 2022 was 12.4% higher than it was the same month last year, according to the U.S. Bureau of Labor Statistics. This makes it more expensive for rental companies to buy cars, and that price is likely being passed on to the consumer.
When it comes to demand, Americans are both traveling more and buying cars more than they were at the start of the pandemic. Global demand for air travel was up 82.3% in January of 2022, the International Air Transport Association reported, compared to January of 2021. And as pandemic restrictions continue to ease, demand is likely to increase worldwide as travelers are able to more easily get back out on the road.
On the other hand, new auto sales have started to slip — but not for the reasons you might think. In February, new U.S. vehicle sales fell 4.6% month to month, according to TD Economics. This was largely fueled by supply constraints, which could be worsened by Russia's invasion of Ukraine.
So, while there clearly is demand to buy cards from both rental agencies and consumers, it is getting even harder to purchase these cars.
Related: Why you should be making your summer travel plans right now
Rental car prices are still increasing
This means that the high cost of renting cars is here to stay — and it could get worse.
Prices for rental cars have continued to surge this year, data from Hopper, a popular online travel agency, has revealed. At the start of the year, the U.S. national average rental car rate was $56.12 per day, and it has since peaked at $85.87 per day in March. If the prices continue to trend this way, we could be in for a very expensive year for rental cars.
In a recent blog post, AutoSlash (a website for finding rental car discounts) noted that the average cost of a one-week rental in Hawaii has shot up to $800 before tax, for a daily rate of $113. The company notes that this is twice as high as the company has ever seen when booking six months out.
The trend is apparent in other popular tourist destinations, too. In July, the average daily rental car rate in Anchorage, Alaska, is hovering around $231 per day, AutoSlash found. And in New York City, rates are around $90 per day during the same period. These prices are exceptionally high when compared to pre-pandemic rental car pricing.
In fact, AutoSlash has said rental rates in December of 2021 were up 50% compared to December of 2020, and up 60% compared to December of 2019.
When will it stop? That's a good question, and there's no way to know for sure.
My best guess is that rental car prices will start to normalize once supply chain issues are resolved and there's a larger supply of cars on hand. When this happens, inventories may be able to return to pre-pandemic levels, and prices can trend downward as a result.
Unfortunately, we're unlikely to see the chip shortage end before the middle of the year. On a recent investor call, Hyundai's executive vice president Seo Gang Hyun told investors, "The normalization of auto chip supply and demand is expected in the third quarter when the capacity of semiconductor companies is expected to rise."
Even then, it could be months before new cars are actually on rental car lots.
And beyond this, ongoing inflation (and, in turn, higher operating costs for rental car companies) in the U.S. could mean we have even longer until rental car prices drop.
Related: Which car rental company is right for you?
How to save on rental cars in 2022
Fortunately, not all is lost. If you need to rent a car this year, there are a few things you can do to ensure you find an available car and pay the lowest price possible.
The first thing you should do is start looking for your car as soon as you can. In the past, rental cars were often the last thing travelers planned when mapping out a trip. Now, you should do this at the same time you book your flights. This gives you the most time to get a reservation in and have a car waiting for you when you land. Most rentals are paid at the lot, too, so you can cancel them without penalty if plans change.
You'll also want to brush up on the best ways to save on rental cars.
Start by looking for any corporate codes you're eligible to use. You might find these from your employer, university or other associations you belong to. Depending on the organization's agreement with the rental car company, you could see huge savings at the lot. If you're not eligible for any corporate codes, consider enrolling in AAA, which offers discounts with most of the major rental car companies like Dollar, Hertz and Thrifty.
Just make sure you're actually eligible for the codes you use. While you can theoretically add any corporate code to a reservation, rental car companies often ask for proof of eligibility at the lot. If you don't have it, the cost of your rental could rise substantially.
Also, make sure to pay with a credit card that offers primary rental car insurance. When you pay with one of these cards, the full value of the car is protected against damage and theft. This means you don't have to pay for a damage waiver from the rental car company or claim on your own insurance if you get into a fender bender. Some cards that include this benefit are the Chase Sapphire Reserve and Chase Sapphire Preferred Card.
Some credit cards also include complimentary rental car discounts and even elite status benefits. Check out our full guide to credit card rental car benefits for more information.
Finally, you can use AutoSlash to find discounts on car rentals. This free service helps you find a cheap rental car by looking for promotions and other discounts. It may also consider online travel agency bookings, alternate pickup locations and other money-saving strategies. Once AutoSlash finds a deal, it will email you the results and how to book — and it can even let you know if it finds a lower rate at a later date.
If you're unable to find a good deal, you might want to consider rental car alternatives.
For example, you can try the peer-to-peer car-sharing service Turo. It's sort of an Airbnb for cars, where you rent someone's personal vehicle at a price of their choice. Alternatively, you may want to consider renting a car from Lyft if your travels take you to California. I personally saved hundreds of dollars doing this last year.
Related: How AutoSlash can save you up to 77% on car rentals
Bottom line
Renting a car is expected to be an ongoing challenge this year thanks to a shortage of cars, increasing inflation and world conflict.
But even with that, you can still score a deal on a rental car so long as you know where to look. As discussed, always book early, assess your available discounts and pay with the right card.
It may not lower your rental car to a pre-pandemic price, but it will help you get a better deal and ensure you can actually have a car when you arrive at your destination.
Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.
