Car hire excess and hidden fees


Hidden fees such as excess insurance are one of the biggest troubles travellers have with car hire.

top car hire troubles ns lead

Reducing your car hire excess


If you've ever hired a car in Australia you're probably familiar with the great rate creep, that strange phenomenon in which unforeseen charges get added to your bill at the last minute.

In this article we take you through:

The cost of excess reduction in Australia

The largest unexpected cost will likely be the excess reduction product offered by the car rental agency as a way to reduce your liability if there's damage to the car. Then there's the question of whether you actually need it. It can be a tough one to answer when there's a queue of impatient holiday-makers waiting behind you at the rental counter. As ever, the world of car hire insurance is complicated, confusing and rife with tricky little details.

By the time you pay to reduce your liability from the standard excess offered by the car hire agency, the advertised daily rate can nearly double. To hire a basic economy car in Melbourne CBD for a week from Avis you'll ostensibly pay $39.60 a day, but to reduce your excess from $4500 to $630 for the same hire, you'll be slugged with an additional $30.15 a day. For the perplexed customer who doesn't want to be left in the lurch, the price of the car just went from $40 to $70 a day – all in about two minutes.

Given this, it's perhaps unsurprising that back in 2016, an industry source told us that excess reduction products were where car rental companies make most of their money. A Europcar spokesperson denied this at the time, while a Hertz spokesperson acknowledged that "ancillary revenues" did contribute to sustainable returns. 

Did you know some travel insurers will provide cover for your car hire excess? Find out which ones do in our free and unbiased travel insurance review

What is the cheapest way to reduce the car hire excess?

The good news is there are better ways to reduce your excess liability than the pressure-sale products foisted on you by the car hire companies. Many alternative insurance products are cheaper and often have fewer exclusions.

While car hire companies can charge from around $20 to nearly $45 per day to reduce your standard liability, standalone alternatives can cost as little as $10 per day.

So what's the catch? The alternatives may not be as convenient - if you are in an accident in your rental car, you may have to pay the car hire company for the damages and then claim them back from your chosen insurer.

We think that's a small price to pay for knowing what you're getting beforehand and paying lower premiums.

Which excess cover alternative should I choose?

  • Standalone car rental excess cover: There are a number of companies that offer specific cover for your car rental excess liability when travelling domestically. Some of these companies also enable you to purchase cover for international car hire. These are often the cheapest option for short trips. One of the benefits is that these policies will usually cover all drivers on the rental agreement.
  • Travel insurance: Both domestic and international travel insurance policies often contain cover for hire car excess. One advantage of travel insurance is that it covers you for more than just car rental. However, it can be an expensive option for short trips and it's charged on a per person basis so if you have more than one driver you'll need insurance for each person. For longer trips however it can be a good option, and may include additional cover for delays and lost luggage.
  • Credit card travel insuranceComplimentary credit card travel insurance doesn't usually cover domestic car hire, however, if you're travelling internationally, many do cover the rental car excess component. Depending on the policy, it may only cover the card holder, and there may be conditions for activating the cover, such as paying for the car rental on the card.

Car hire excess products within Australia

We took a look at the cost of reducing your excess directly through the car hire company and compared that to some of the alternatives available in Australia.

Click here for an accessible text-only version of this infographic.

What's my liability when hiring a car in Australia?

If using an alternative excess cover provider, you'll need to determine your liability in order to know how much cover you need. However, it can be incredibly hard to find out exactly what you're liable for and what exclusions come with car hire excess reduction during the booking process.

To help cut through the confusion, in Australia here's what you need to be aware of in understanding your liability (be mindful that your liabilities may be different when travelling internationally). 

  1. Injury to third parties: In each state and territory it's compulsory to have third party insurance to register a car, so all rental cars should have this (you pay for it through the Vehicle Registration Recovery fees). This covers you for injuries you may cause to other people but may not cover you as the driver of the vehicle. Some agencies offer personal accident insurance to cover this (for a fee).
  2. Damage to the rental vehicle and third party property: Rental agencies in Australia usually have a standard liability/excess which includes a basic cover as part of the rental fee (also known as collision or loss damage waiver, damage recovery fee, damage liability fee and accident damages excess). This reduces your potential liability for damage to the rental vehicle and third party property to a set amount. The amount will vary depending on the rental company but it will be a hefty sum, usually somewhere between $4000 and $4560. Your liability may be higher than this in certain circumstances (e.g. single vehicle accidents or due to exclusions in the agreement). You can pay to reduce this liability further, either through the rental agency or through one of the alternatives. Be aware these products only cover you for the excess amount you're liable for and are still subject to a range of exclusions.

I've reduced my excess to zero, does this mean I have no other liability?

Even if you pay to reduce your excess to zero, either through the rental agency or an alternative provider, you're unlikely to have waived all of your potential liability. That's because there are usually numerous exclusions to the cover, which means there will be a number of scenarios where you will have no cover at all (and it's not usually possible to purchase cover for it).

For example:

  • You may be fully liable for damages (even beyond the standard excess amount) if it occurs as a result of breaching the contract or as a result of an excluded activity.
  • If the car is off the road as a result of damage, you may also be held liable for the loss of income to the rental agency while it's being repaired.
  • Your liability for single vehicle accidents can't always be reduced to $0, so it pays to check.
  • Admin fees and towing fees are often not covered through the standard excess amount if you have an accident, so these will likely be an additional cost if you run into trouble.

Common rental agreement breaches include:

  • disobeying road rules or being in contravention of any law
  • driving outside any town or city limits in WA or NT between dusk and dawn
  • driving on unsealed roads 
  • an unauthorised person driving the vehicle
  • using the incorrect fuel type
  • driving under the influence of alcohol.

What's included/excluded in the standard liability/excess?


What does the standard liability cover? Exclusions to cover through rental agencies*
Avis Loss Damage Waiver (LDW)
  • Cost of damage to/loss of the vehicle and damage to third party property above the excess amount
  • Accidents where you are not at fault (provided they believe the third party insurer will pay)
  • Third party injury (paid for through the Vehicle Registration Fee)
  • Underbody, overhead damage
  • Water damage
  • Tyres and accessory damage
  • Reckless or deliberate damage
  • Accidents involving a single vehicle such as: driving into a bridge, tunnel, tree, car park boom gate or roof
  • Particular breaches of the rental agreement
  • Driving in prohibited areas
  • Unauthorised driver
  • Using the wrong fuel type
Budget Loss Damage Waiver (LDW)
  • Cost of damage to/loss of the vehicle and damage to third party property above the excess amount
  • Accidents where you are not at fault (provided they believe the third party insurer will pay)
  • Third party injury (paid for through the Vehicle Registration Fee)
  • Underbody, overhead damage
  • Water damage
  • Tyres and accessory damage
  • Reckless or deliberate damage
  • Accidents involving a single vehicle such as: driving into a bridge, tunnel, tree, car park boom gate or roof
  • Particular breaches of the rental agreement
  • Driving in prohibited areas
  • Unauthorised driver
  • Using the wrong fuel type
Europcar Damage Liability Fee (DLF)
  • Cost of damage to, or theft of, the vehicle and damage to third party property that is above the excess amount
  • Accidents where you are not at fault (provided they believe the third party insurer will pay)
  • Third party injury (paid for through the Vehicle Registration Recovery Fee)
  • Overhead, underbody damage
  • Water damage
  • Tyres, windscreen, headlight and wheel damage (unless you've purchased Go Zen)
  • Reckless or deliberate damage
  • Serious breaches of the rental agreement
  • Using the wrong fuel type
  • Damage or third party loss caused (or contributed to) by you, where you leave the scene prior to reporting the incident to the police or their arrival
  • Driving in prohibited areas
  • Unauthorised driver
Hertz Accident Damages Excess (ADE)
  • Damage to the vehicle and third party property that is above the excess amount
  • Accidents where you are not at fault (if they can recover the money from the third party)
  • Third party injury (paid for through the Vehicle Registration Recovery fee)
  • Underbody, overbody damage
  • Damage to tyres and glass (unless MAX cover or tyre and glass cover is purchased)
  • Reckless or deliberate damage
  • Damage as a result of use by a prohibited person (eg. intoxicated person or someone not on the rental agreement)
  • Driving on unsealed roads (unless you have a 4WD)
  • Water damage
  • Collisions with stationary objects overhanging or on road surfaces
  • Using the wrong fuel type
  • Colliding with an animal in a rural area between sunset and sunrise
  • If vehicle is left unsecured
  • Driving in prohibited areas
Thrifty Damage Recovery Fee (DRF)
  • Damage, and or theft, to the vehicle and third party property that is above the excess amount
  • Accidents where you are not at fault (provided they believe the third party insurer will pay)
  • Third party injury  (paid for through the Vehicle Registration Recovery fee)
  • Particular breaches of the rental agreement
  • Windscreen, wheel and tyre damage (unless you purchased Ultimate Protection)
  • Driving in prohibited areas
  • Overhead damage
  • Reckless or deliberate damage to the vehicle, underbody or a third party
  • Use of incorrect fuel type
  • Damage or third party loss caused (or contributed to) by you, where you leave the scene prior to reporting the incident to the police or their arrival
  • Water damage
  • Unauthorised driver

*These lists are intended as a guide only, you should read the terms and conditions to know exactly what you are covered for.

What to ask the rental agency

When choosing rental car excess cover, you'll want to ask the rental agency about the following:

  • What's your liability under the rental agreement? This will help you determine how much excess cover you need.
    • What is the rental agency's standard liability/excess for the vehicle you are hiring? Liability for luxury vehicles and 4WDs is often higher than for standard vehicles.  
    • Are there exceptions when your liability may be higher than this, such as for single vehicle accidents, or for younger drivers?
  • What are the exclusions to the cover? Many rental car agencies' products won't cover you at all in a range of scenarios. This is important as it means you have no cover at all in these scenarios and your liability may even extend beyond the standard liability/excess. It's also important to ask any third party excess cover providers if they have any exclusions with their cover. Common exclusions from the rental agency include: damage to windscreens and tyres, overhead and underbody damage, accidents involving a single vehicle or damages as a result of a breach of the rental agreement.
  • What constitutes a breach of the rental agreement? It's fairly standard, among rental agencies, and alternative third party providers, to exclude cover you if you've breached the rental agreement. Examples include driving while under the influence, driving on unsealed roads, using an undeclared driver, driving recklessly or otherwise breaking the law. 

Run into trouble?

If you're unfortunate enough to have an accident in your rental vehicle, there are a few tips to keep in mind. 

  • If there's any damage that needs to be repaired, get an itemised receipt for the cost of repairs. If there is anything suspicious, challenge it. We've heard of cases where rental agencies have added on hundreds of dollars' worth of extra "miscellaneous fees" in addition to the repair costs. These charges were dropped when challenged.
  • While it goes against Australian Consumer Law guidelines, rental agencies sometimes charge the maximum damage excess fee without a repair quote, or place extra charges on your card without first giving you a chance to dispute them. If this happens, you can try seeking a chargeback through your credit card company.

For more information read our article car hire and your rights.

Hidden fees

While excess reduction products are perhaps the most likely item to make your hire car bill blow out, there are an exorbitant number of other fees and charges that can add to the rate creep.

Be aware that any percentage-based surcharges, such as administrative fees, premium location surcharges and mandatory taxes such as the GST, are usually applied to the total cost of the bill. This can really add up as they will not only apply to the hire costs, but to any excess reduction products you purchase as well as other add-ons and fees, such as car seat and GPS hire and one-way hire costs.

Some of these fees and add-ons (some optional, some unavoidable) include:

Vehicle registration recovery fee

This fee is often tacked onto the quote and charged as a set daily rate to recover the compulsory costs of registering the vehicle.

Administrative fee

It's common practice among car hire companies to charge an unavoidable administrative fee of around 3.5% on top of the total cost.

Premium location surcharge

Certain locations (such as airports) will often have a premium location surcharge tacked on – and these can be quite hefty. For example Avis charges a 27% surcharge if you're renting from Melbourne airport.

Credit card surcharges

Car hire companies are allowed to charge a surcharge for card payments, however they can't be higher than the reasonable cost of processing the transaction. The RBA's guide suggests that payments using Visa or Mastercard may cost the business around 1–1.5% of the transaction and 2–3% for payments with American Express.

Admin fees on tolls

If you're using a rental agency's e-tag system you'll usually be charged the toll plus an additional daily admin fee. Some companies will allow you to use your own e-tag while others don't.

Cancellation charges

A cancellation fee will generally apply if you don't cancel within a certain time period.

One-way/relocation fees

If you want to drop the vehicle in another location you'll likely be charged a fee for the convenience. You may also be slugged an extra charge for returning accessories to different locations. For example, Budget charges a $250 fee (plus admin fees) for its GPS system if it's dropped off at a location that hasn't been pre-approved.

Additional driver fee

If you want more than one person to be authorised to drive the car, hire companies will often charge a fee per day for additional drivers.

Excess kilometres

There's often a limit to how many kilometres you can drive. If you go over this limit, you'll be charged extra by the kilometre.

Refuelling fee

If you don't return the car with a full tank, and haven't chosen a pre-paid fuel option, you'll be charged a premium fuel price for the convenience.

Young driver fee

Drivers under the age of 25 are often charged a fee. For example, Hertz charges an extra $16.50 per day while Thrifty charges $27.50 a day.

Early return fee

If you return the car early, some companies charge fees to compensate for loss of rental income, but you should still receive back the charge for the unused days.

Late fees

Some agencies have longer grace periods than others if you return the vehicle after the agreed time. Hertz starts charging an hourly rate after 29 minutes while Thrifty charges a third of the rental rate for returns up to three hours late and for the full day for returns thereafter.

Fee for losing your GPS or accessories

Many of the accessories you rent with the car, such as the GPS, will likely not be covered by insurance, and you may be up for a hefty fee if you lose them. For example, Budget charges $300 plus an admin fee and GST if you lose a GPS unit. 

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