Last Updated on September 7, 2022 by Jonathan
Shopping online for a rental car can be a confusing process in the best of times, but this year is unlike any other. Coming out of the pandemic, we’re still facing a car rental shortage, which has driven up prices. The best way to protect yourself is to choose the “Pay Later” rate for your rental car so you keep your options open and don’t risk missing out on a better deal.
We all want a cheap car rental, but don’t always know how to get the best price. One of the first choices you’ll face is when to pay. When you make a reservation, you might choose to simply provide your contact information and pay for the car at the counter when you pick up the car.
Alternatively, you can opt for a prepaid, non-cancellable rental in which you pay up front in full when you make the reservation. Is it a good idea to prepay for a car rental? Or do you get a better deal by paying later?
In most cases, a publicly available “Pay Later” rate will deliver the lowest price. (After booking, be sure to ask us to track your reservation for price drops. A prepaid rate locks you in and you’ll miss out if a better price comes along.)
No Shows and Prepaid Rental Cars
The no-show rate in the car rental industry as a whole can approach 30%. That means that up to one-third of people who make a reservation for a car rental will not pick it up. To protect themselves, car rental companies must overbook in order to get close to renting the majority of vehicles available. But it can backfire. You may show up with a confirmed reservation, only to find out that there are no cars available in the class that you reserved.
Most customers do not secure their reservation with a credit card, which leads to no-shows. This means that there is no consequence if someone books a rental car and then fails to show up to claim it. The industry has grappled with no shows for some time, which led it to introduce a prepaid model. Prepayment provides financial accountability for the renter to actually show up for their rental. If you don’t show, you will either pay a penalty or you will forfeit the entire amount paid.
How Car Rental Companies Get You to Prepay
When booking a vehicle online, you’ll sometimes see two prices—one for “Pay Later” and one for “Pay Now”. Not every rental company offers a “Pay Now” or prepaid option, and typically not on every vehicle category. Yet when this option is available, the price will typically be 5% to 15% lower than the standard rate.
By paying upfront, you’re signaling to the rental car company that you’ll show up for the rental. In return, the car rental company gives you a bit of a discount as a reward for taking some of the risk out of equation.
If your plans are firm, then a 15% discount might be a tempting offer, but it’s important to keep a few things in mind before hitting the “Pay Now” button. First, if you decide to cancel your reservation, you’ll virtually always be hit with a cancellation fee. One major rental company website states that if you cancel your reservation more than 24 hours before pickup time, it will charge you a $25 cancellation fee. Cancel within 24 hours, and it bumps up to a $50 cancellation fee. If you don’t show, you’ll forfeit the entire amount paid.
There is an exception, however. AutoSlash’s prepaid rates are cancelable up to 48 hours with zero penalty. That means if you book one of our prepaid deals three weeks in advance of your trip, you can track the rental with us for better deals right up to the 48-hour mark and still be able to cancel and re-book if a better deal comes along, with zero penalty.
In contrast, if you make a prepaid reservation elsewhere and need to cancel, you will pay a penalty no matter what.
The other thing to know about a prepaid rate is that the discount is typically off the published rate only. If you apply a discount code or coupon, the “Pay Now” option often disappears. You’d be wise to check the rental company website for coupons and compare other discount codes for which you might be eligible.
Prepaid Car Rentals on Opaque Websites
Sites like Priceline and Hotwire sometimes offer what are known as “opaque” deals, because they offer you a deeper discount in exchange for not revealing the rental company until after you’ve paid. Priceline calls them *Express Deals* while Hotwire calls with *Hot Rates.” Whatever the name, the most important thing to know is that once you’ve paid, you are locked in. You cannot cancel for any reason. Don’t like the rental company? Change of plans? Sorry, you’re out of luck. No changes or refunds.
Certainly there are great deals out here, but the major drawback is that the policies are even more restrictive than if you book directly with the rental companies. For example, you may encounter language like this:
“Rentals are final and cannot be cancelled, refunded, changed, exchanged or transferred. Your account will be charged for the total price shown, regardless of whether the reservation is used.”
Naturally, rental car companies love prepaid bookings. For them, it’s guaranteed money in the bank. From a consumer’s perspective, the attractiveness really depends on how good a deal is, and whether you’re certain you’ll be able to make trip as planned. For a small discount, it may not be worthwhile, But if the price differential is large, prepaying may be tempting. It’s important to evaluate all of your options before making a decision in order to get the best deal.
Does It Make Sense to Prepay for a Rental Car?
Prepaying for your rental, either through the rental company’s website or through one of the opaque booking sites can offer you a discount off the standard rate. Typically the discounts offered by the opaque sites tend to be more aggressive than the rental companies themselves, but there are also more restrictions, so be sure your plans are 100% firm.
Also keep in mind that rental rates can change multiple times a day. What may look like a great rate today can look like a rip-off tomorrow. Savvy renters have learned to let AutoSlash search for the lowest rate and then track your price automatically. But if you’re locked into a prepaid rate, then you will miss out on potential savings if rates drop after you book. (Remember, the exception is if you book AutoSlash’s prepaid rates, you can track your reservation and cancel up to 48 hours before pickup without any penalty.)
The bottom line? We rarely find that prepayment is a good deal unless you’re booking last minute. So long as you have not yet paid for your rental, AutoSlash can usually find a better deal through price drops.