Guide to low-risk car rental

Car rental contracts operate in favour of the rental companies, but you can reduce your risks.
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  • Updated:21 Apr 2008

01 .Introduction

Car rental signage

In brief

  • Contracts from major national car rental companies have improved since Victoria introduced laws preventing unfair terms in contracts in that state, but there's still room for improvement.
  • Extra fees and contract exclusions can be surprising — compare what the prices cover and check contracts before you sign up.

Please note: this information was current as of April 2008 but is still a useful guide today.

Renting a car

Renting a car at the travel destination offers the freedom and flexibility to make the most of a holiday. But nearly everyone knows of someone who’s been ripped off renting a car, or has encountered problems themselves.

At CHOICE we hear lots of stories about unfair rental car contracts, dubious damage claims, loopholes in insurance cover, outrageous excesses, misleading pricing information, inconvenient mechanical problems and onerous restrictions on use.

In 2004 Consumer Affairs Victoria looked at car hire terms and conditions, in the context of introducing laws to prevent unfair terms in consumer contracts. Unfair car hire terms include those that:

  • Allow hire companies to unilaterally vary prices and other terms and conditions.
  • Require the hirer to agree the car is in sound mechanical condition when it’s collected.
  • Put unreasonable restrictions on where the vehicle can be used.
  • Allow the company to debit the hirer's credit card without informing them first.

The biggest players in the car hire industry subsequently changed their contracts. These changes were rolled out nationally, although smaller companies that don’t operate in Victoria may still include such conditions in their contracts. In Queensland, for instance, consumer complaints about car hire experiences haven’t decreased since the laws were introduced.

All in all, the odds are still very much stacked against the consumer. Some companies continue to debit credit cards without adequately informing the card holder, claim alleged damage to vehicles of which the consumer was unaware (or which was pre-existing but not originally noticed), fail to indicate that they’ve shopped around for a repair deal that’s fair, and have policies with ridiculous exclusions like hail damage.

However, there are steps you can take to help ensure you get a fair deal when renting a car. This report will steer you straight.

CHOICE call for change

It’s not good enough that most consumers don’t have protection from unfair contract terms. CHOICE is campaigning for new national laws to ensure consumer contracts are fair.

When a dispute with a car hire company arises, we think consumers should have a convenient way to resolve complaints, especially where the dispute is across borders.

CHOICE wants to see an industry-wide dispute resolution scheme for this purpose. At present there’s only the state fair trading departments, which don’t have the resources to take on all cases, or the courts.


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Check what's included

In addition to the basic cost of renting a car, there are many other surcharges and fees that may apply. When shopping around, check whether the following are included or additional — you want to compare apples with apples.

You may be charged:

  • Fees for additional kilometres (if it’s not an 'unlimited kilometres' deal).
  • Administration fees.
  • Government stamp duty.
  • A surcharge for drivers under 25.
  • Hire of equipment such as a baby seat or GPS navigation device.
  • GST — even these days, GST isn’t always included in all listed prices.

Also, watch out for:

Premium location surcharge

Also called an 'airport recovery concession', this fee aplies to pick-ups from airports. It's usually a percentage based on the total cost of car hire (including excess reduction cover, additional kilometres and one-way fees). It’s not just a one-off charge on the day you pick up, so if you’re renting for a longer period, think about taking a taxi to a different pick-up location. Airport drop-offs aren’t affected in this way, though you may incur a small penalty for different pick-up and drop-off locations.

Vehicle registration recovery fee

This is a surcharge to recover the cost of registering a rental vehicle. It applies to all vehicles and varies according to state.

Fuel penalties

If you’re supposed to return the car full of fuel and don’t, you may be charged a premium rate.

One-way trip surcharge

There may be a surcharge for one-way car rental, where pick-up and drop-off are at different locations. It’s not always charged, but check first.

Electronic toll fees

Passes are required for 'cashless' toll roads in Sydney and Melbourne, and use of these roads without the appropriate pass can incur fines and handling fees from rental car companies. If you suddenly find yourself on one of these roads, passes can be purchased within a certain period afterwards from the toll road operator.

Credit card capers

Many people are unaware that when they give the rental car company their credit card details, the company may do one or more of the following:

  • Deduct a security deposit, rather than simply hold the details of the card. This will be refunded if there are no claims against you, but in the meantime it could leave you short of credit and even cost you interest.
  • Deduct the full limit of your damage liability, even if the damage is minor and unlikely to cost that much, or if you weren’t at fault. You’ll be refunded whatever is owing at a later date.
  • Debit your credit card without warning you first — for example, if it decides you’re liable to pay for repairs that you knew nothing about.

CHOICE thinks it’s unacceptable for car hire companies to debit a credit card without authorisation. In Victoria, where laws have been introduced against unfair contracts, rental car companies are not permitted to include terms in their contracts that allow them to make unexpected debits from consumers' credit cards.

Regardless of this, clauses such as: "You authorise XX to charge all moneys payable to XX under the Rental Agreement to Your credit card or charge account" still appear.

The Western Australian Department of Consumer and Employment Protection successfully advocated on behalf of two consumers in this situation, returning thousands of dollars to them. If you’re similarly charged, the Department suggests you strongly question such deductions with the company. If you have no joy, contact your state fair trading department for advice.

Finally, if you think you can outsmart the system by using a low-limit credit card as security, you might be in for a nasty shock. Credit card companies may honour claims against your card over the so-called limit — and charge you an over-limit fee of around $30.

Insurance for all major companies (Avis, Budget, Europcar, Hertz and Thrifty) and many smaller ones excludes damage to the roof caused by driving under something too low, underbody damage and damage caused by total or partial water submersion (and offroad driving).

If you have such an accident, insurance won’t cover it and you could be up for thousands of dollars in repair costs. The cost of repairs resulting from your failure to maintain fuel and fluid levels (brake fluid, oil, coolant) is also a standard exclusion.

Other common exclusions include:

  • Single-vehicle accidents
    Such as hitting an animal or tree. Thrifty is one of the bigger companies with this exclusion.
  • Gazetted (officially mapped) dirt roads
    Accidents on these roads (unless the vehicle is a 4WD) are excluded by Europcar Thrifty and Hertz, of the bigger companies.
  • Other dirt roads
    Accidents that occur on other dirt roads, including driveways and park access, can be a hazy area. Budget and Avis, for instance, cover travel only on "roads that are properly formed and constructed as a sealed, metalled or gravel road". However, they couldn’t tell us whether or not this includes some gazetted roads that have fallen into disrepair and can no longer be considered "properly formed".

Hertz, while it doesn’t cover gazetted dirt roads, does cover 'short' access roads to parks and accommodation. Other companies specify that access roads and drives only up to a certain length are covered or that unsealed roads can be covered if travel has been authorised beforehand. Check the terms and conditions carefully before hiring if you know you’ll be using unsealed roads or access drives.

Other less obvious exclusions with some companies are:

  • Hail damage, falling trees and other 'Acts of God'.
  • Tyre, windscreen, headlight and interior damage.
  • Accidents that occur when reversing.
  • Roof or underbody damage whatever the cause (if you roll the car, say).

If you’re involved in an accident that’s not your fault, most companies will retain your excess, then refund it when they obtain funds from the at-fault party. This can be highly inconvenient and cost you interest when they deduct it from your credit card.

It gets even worse — we found one company that charges an excess for not-at-fault accidents!

Check the terms and conditions of various companies and make your choice accordingly. Most companies have a copy of the T&C on their websites, so you have the chance to compare them. Saving a few dollars a day could cost you thousands if you have the wrong kind of accident.

Many companies will offer you a choice to reduce the excess — for a fee. It can range from a few dollars to around $30, but is typically in the order of $20 per day for short-term rentals. This extra cover will substantially reduce the maximum excess payable, but can quickly add up over several days of car hire.

But there are alternatives, including:

Domestic travel insurance often covers you for rental car excess. For example, a two-week $89 Australian Plus Travel Plan with QBE will cover your liability to $3000. The cost of the policy is a lot cheaper than paying over $20 per day for two weeks’ excess reduction.

RACV offers an insurance plan called Reimbursement of Car Hire Excess, which costs $72 (discounted further according to length of membership) for $3000 cover. See if your state’s motoring organisation has a similar deal.

Some credit card companies offer some form of travel insurance when you use their card for travel purposes.

It’s important to realise this cover doesn’t apply to accidents excluded under the rental car company’s terms and conditions (see Exclusions).

Case study - Excessive excess

You might be a careful and skilled driver and reckon on going without an excess-reduction package. But once you take the keys to the rental car, you’re responsible for any damage that occurs, which, depending on the company, can include that caused by rampaging kangaroos, hailstones or careless drivers not honest enough to leave a note when they hit your unattended car — as Kathy from Brisbane discovered.

On day two of her car rental, Kathy noticed a large dent and black scrapes on the car’s front bumper, and knew she hadn’t been responsible. About a month later, and without any prior notice, the full excess amount was deducted from her credit card.

Minor damage like this becomes very expensive, because you’re not only liable for the cost of repairs, but also costs like damage appraisal, administration expenses (time taken to make arrangements for repair and so on) and losses due to the vehicle not being available to rent out.

Kathy was never sure if the incident had occurred under her charge, because like many exhausted travellers reaching their destination, she didn’t quite have the presence of mind to carefully check the car first. "As in most airports, the keys are handed to you at the desk, you then struggle with kids, kids’ paraphernalia, luggage and the odd stray grandmother out in the hire car lot, and look for what seems forever for your hire car with no representatives to help you."

Car rental tips

Shop around well in advance for quotes. To avoid headaches, ask the rental companies the following questions:

  • What’s the age and model of your car?
  • What’s the excess in the event of an accident? Are there different excesses depending on the event, such as a higher one for a single-vehicle accident? Is it possible to lower the excess, and what’s the charge per day? (Compare the alternatives — see Reduce the excess).
  • What is the bond/security deposit? Will it be charged to your credit card, and if so, when will you get a refund?
  • Are unlimited kilometres included? If not, what’s the extra charge per kilometre?
  • If you return the vehicle early, will you get a refund?
  • Who can drive the car? Are there any age limitations (usually 21 to 75 years)? Is there a charge for additional drivers?

Get a copy of the contract, including the full terms and conditions, before making a booking - if the company doesn’t provide it, go elsewhere. Thoroughly read it and ask questions if you don’t understand. Check you’re covered for single-vehicle accidents and any other situations you think are reasonable (see Exclusions).

At pick-up

Check the vehicle in the presence of a representative before you sign the contract. If they won’t oblige, check it thoroughly yourself, not forgetting the roof, interior and boot. Also, make sure all the specified features are present and working.

Note any damage, and immediately report it to the office. Don’t sign the contract until the damage has been noted. Take photos of any damage.

Ask for information about what to do in the event of a breakdown or accident. Also, find out whether you need to bring the vehicle back with a full tank and what is the charge per litre if you don’t.

During and after rental

  • Contact police if you think the vehicle is unroadworthy.
  • If the vehicle breaks down during rental, follow the company’s breakdown procedures. Don’t have it repaired without approval.
  • If possible, return your car during business hours. Insist on an inspection in your presence. If you have to drop the car after hours or at a location other than the office (a hotel, say), you must be prepared to take the risk that you could be charged for causing damage you were unaware of (and that may have occurred after you left the car, for example).
  • Work out any disputes for damages on the spot.
  • If you have a complaint, contact your local fair trading/consumers affairs office for advice.
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