Renting a holiday car? Make sure you consider all the costs

Young person driving a car, considering rental car insurance costs.

A rental car could come in handy while holidaying in Australia, whether or not you own your own vehicle. You might have flown interstate and need wheels to explore new roads, or perhaps you’re travelling locally and need more robust transport for multiple mates and camping packs.

Whatever your road tripping needs, you want to get a good value deal if you do end up renting a car. The best way to do this is to waltz into the rental shop (or an online booking system) with a solid understanding of all of the costs that can crop up when you hire a car.

Rental car costs in Australia

According to longstanding Australian hire car comparison site, VroomVroomVroom, there are some components of hire car pricing you’ll see across most rental car companies. This includes:

  • Base rental price. This is the flat daily (sometimes hourly or weekly) rate you’re charged for hiring out the car. 
  • Vehicle registration recovery fee. All Australian states and territories require drivers to take out some version of compulsory third party (CTP) insurance to cover legal liability for injuries or deaths caused during road accidents. So, car rental companies pass on a portion of this fee to renters to reimburse this cost. 
  • Premium location surcharge. Picking up a rental car from airports, some cities and remote locations can come with an additional price. This is usually calculated as a percentage of the total rental costs.
  • Administration fees. This fee covers the State Contract Stamp Duty Costs.
  • Tax. This represents state and local sales tax on the overall rental charges.

All this adds up to what you’ll need to fork out from the get-go, but just like when you use your own car, there are a bundle of other on-road costs to consider. 

Fuel is a rather obvious one, but there can be specific rules around this. Often a car is hired out with a full tank and you need to return it at the same level, or you can opt to return it at any level and pay by-the-litre for the difference.

Other charges like road tolls, speeding tickets and parking fines will all be charged to you as the driver. Repair costs for any damages to the hire car, as well as damages you cause to other cars or property, could also come back to bite you (we’ll get into this in more detail when we cover car insurance).

Remember: pricing and conditions will differ depending on which hire car company you rent from.

Are there hire car optional extras?

Yes, there are extra features or specific costs for certain drivers which you’ll need to opt in for or declare when you sign up to hire a car in Australia. Rental car extras include: 

  • A one way fee if you want to pick up a rental in one location and drop it with another branch of the company elsewhere.
  • Listing additional drivers on the hire car policy, so you can share the driving. Sometimes this will come as standard without a fee, and with other providers you’ll need to pay extra.
  • Young drivers (usually under 25) will need to be accepted by the hire car company and generally pay a higher premium for the rental as they’re considered higher risk on the roads. 
  • Child seats and GPS devices can be included in the hire price for an additional fee.

What insurance do you need for a holiday rental car?

Hire car insurance is complicated. While CTP needs to be included in your rental agreement as standard by rental companies, the rest of the insurance equation is pretty variable.

Generally, hire car companies will include a basic level of cover, often known as a collision or loss damage waiver. This can be included with or without a listed fee, and generally provides coverage for if you damage the hire car and third party property (including other vehicles) to a set amount.

However, consumer advocate groups like CHOICE and the Australian Competition and Consumer Commission (ACCC) advise renters to meticulously assess this coverage in all car rental agreements.

Hire car companies can list numerous circumstances where this coverage will be void. This may include if you drive after certain times, outside some regions or on unsealed roads, or if the damage occurred in a specific kind of collision or while you were disobeying any road rules.

It’s also important to remember there’s a high excess to be paid with these kinds of agreements – often upwards of $4,000. Many companies will let you reduce this excess when you sign up for a rental car (for a fee, of course). But even if you reduce this down to $0, you may still be liable for damages in certain scenarios because of exclusions.

This is why some drivers choose to take out insurance with an independent provider when hiring a car. There are providers which specifically offer coverage for car rental excess liability when travelling domestically and internationally. It may also be included in some travel insurance policies, so if you’re already taking out this coverage check what’s included in your PDS.

According to an investigation by CHOICE, these arrangements are cheaper than excess reduction products offered directly through rental companies, but are seen as less convenient. This is because customers may have to pay out the excess to the hire car company before being reimbursed by the independent insurance provider.

If you’ve come here looking for information about insurance for a hire car after you’ve been in an accident using your own vehicle (or had it stolen), you’ll want to go ahead and ignore all of the above information.

Instead, head to our comprehensive car insurance hub for all the details on how this situation might be handled through your comprehensive policy.

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