Soaring rental car costs make taxis a better travel option | Financial Times

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I’ve been on a two-week holiday. Four flights. Four airports. Three countries. With two well-intentioned but mildly logistically challenged and permanently hungry teens.

It could have been a shocker — I admit to a pre-departure sleepless night. But it was not.

No flights were delayed more than a few minutes. There were no real queues for security. The waits at passport control were short and simple. And the travelling in between was mostly straightforward — largely because we took a lot of taxis.

I was unable to get a hire car at all at Newquay Airport. Not at any price, nor at any nearby location. In Rome I was quoted something in the region of £700 for four days’ hire wherever I looked, as I was for a similar request in Naples a month ago. Only in Copenhagen were car hire prices even vaguely similar to the prices of old.

All this initially made me feel a little panicked. I’m used to travel independence. Now I see the error of my ways.

At Newquay we were picked up at arrivals by a pre-booked taxi. Later in the week the same company drove us to the Cornish town of Helston and back again the next day. They then took us to Bristol to catch our flight to Rome at the end of the week. Another nice driver picked us up at the airport there and took us to our destination (I wish he had not missed the stop sign and driven directly across four lanes of traffic but we are all alive so I am not quibbling). Then we took a charming train journey back to the airport a few days later.

The total cost of all these taxis was more or less the same as renting a car was three years ago, and very significantly cheaper than renting one now. It also seems like a generally better use of resources, as most rental cars spend their time parked outside villas and hotels.

But the key thing to note is that being picked up at arrivals by a man with a sign and then not having to remember which side of the road you’re supposed to drive on for the next five days is properly relaxing.

Just how relaxing became clear when we arrived in Copenhagen and set off to find the rental car we had booked with Sixt. I had booked the “fast track” service — but having received no information on how that worked, we followed the signs to rental cars. That meant a “courtesy” bus (the joke is in the name). And then it meant a queue.

There were lots of people waiting at the Sixt desk. There was no one available to answer questions without barging the queue and there was no obvious fast track.

We were number 652. They were on 647. Thereafter followed the weirdest scene in travel, and one many of you will have marvelled at before. People who had filled in all the necessary forms online and pre-paid were asked for all those details again by someone who has clearly never been on a touch-typing course, then upsold a few bits and bobs they don’t need before being given the keys to a different kind of car from the one they ordered.

Think a minimum of 10 minutes per bemused customer. When they got to us, it turned out that fast track was somewhere else (back at the terminal) but that this detail was irrelevant in the great scheme of things because investigations revealed that the car we should have had was “lost”. Lost? Yes. Lost.

When we asked Sixt to respond, it said there had been information missing on the booking and the change of car represented an upgrade. But it said it “sincerely apologised . . . for any inconvenience caused”.

Like me, you will know that none of this is necessary. Enough car hire agencies have systems that work for us to know the technology is a piece of cake. Avis Preferred allows you to go straight to your car as does Hertz Gold. You can check in online and have your keys in under a minute. This is apparently something you can also do with Sixt fast track.

Some agencies leave keys in the car for you, an increasingly standard option in the US, where you can often just take any car you like and scan it at the car park exit; and some have systems that let you unlock them with your phone.

So if it is perfectly simple to do all this, why don’t all car hire companies upgrade their systems to do it? The obvious answer is the upselling, but that isn’t quite good enough. You need to pay people to do the upselling and every step of the process makes your customer hate you.

Beyond that, the only answer I can come up with is that until now they haven’t really had to. Historically the big car rental agencies have been as much auto traders as auto providers. They have bought large numbers of cars from the big manufacturers at very low prices — and after a year or two torturing consumers with said cars, sold them back into the market at market price.

You don’t necessarily make money this way but you cover an awful lot of costs — and you can then provide your rental service so cheaply that your customers tend to grin and bear it regardless of its miseries.

Things are different now. The manufacturers have for a long time been keen to cut their dependence on low-margin fleet sales, says Julie Boote of Pelham Smithers Associates, since it is bad for profits and bad for their reputation.

With supply chain disruptions still under way, mostly due to microchip shortages, they can. What cars they are making can be sold direct to retail customers on whopping mark-ups — mark-ups that the rental companies, which massively sold down their fleets during the pandemic, have to pay some of too.

This won’t end soon: Toyota has an order backlog of about 2mn vehicles for example, says Boote. Even with recession the old days of “buy low sell high” are not coming back for rental agencies. That means passing on high prices, expecting low customer tolerance (we will put up with a lot to get a car for a week for £150, rather less if the price is £800) and dealing with heavy competition from taxi companies in Europe at least.

All of these things will surely lead them to upgrade systems across the board and in the process cut long-term costs. Fingers crossed. But while they figure that one out, you will find me heading for the pre-booked taxi section at departures. It turns out not having a rental car can be a lot easier than having a rental car.

Merryn Somerset Webb is editor-in-chief of Money Week. The views expressed are personal. [email protected]

PS I’ll be at the Edinburgh Fringe from August 25-28, so if you want to talk investing, economics, politics or car rental, join me at “The Butcher, the Brewer, the Baker and Merryn Somerset Webb”. All proceeds go to the upkeep of Panmure House, the last home of Adam Smith.

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