05/23/2012 02:19 pm ET Updated Jul 23, 2012

Avoid Rude Rental Car Surprises

I'm usually a pretty savvy traveler, but a recent car rental mishap reminded me that even when you take every precaution, things still can go awry.

While planning a family vacation to Panama, I searched online for rental cars. One lower-cost car rental agency I'd never used before was offering a significantly lower rate than the other major carriers. Ignoring the little voice in my head, I decided to give them a try.

Long story short: Even though our flight was less than an hour late, when I arrived bleary-eyed at the counter I was told that my car had already been given away -- but I could upgrade to the next level for twice the price. After getting the runaround from the company's U.S.-based customer service department and learning from my Hotwire phone app that everyone else's rates had climbed equally high, I was basically stuck.

That experience taught me three lessons:
  • A reservation isn't necessarily a guarantee. (The same goes for hotels.)
  • When traveling abroad, use trusted vendors -- especially if the deal sounds too good to be true. If possible, find out if the branch is company-owned or a franchise, which may not adhere closely to corporate rules -- that's what may have happened to me.
  • Do better due diligence. Research travel columnists and message boards for rental tips, possible pitfalls and customer complaints about particular vendors.
Rental options. You can choose among several car rental methods:
  • Book directly from a rental agency (usually cheaper online than by phone)
  • Comparison shop at websites like Priceline, Orbitz or Hotwire (although, I'll now be wary of bidding on a "blind" rental where you don't learn the carrier's name until after you pay)
  • As part of a package deal that includes airfare and lodging
I usually open several browser tabs simultaneously to compare rentals side by side. Rates change constantly -- sometimes in a matter of minutes -- so today's price may be much lower (or higher) than tomorrow's. Plus there can be wide cost disparities between models and extra features like GPS or child seats. Other tips:
  • Book the best deal you can now and check back for lower rates. There's usually no penalty to cancel a reservation and rebook.
  • Make sure you incorporate all additional fees and taxes beyond the flat rate in your comparison -- sometimes they don't all show up until the "Total" page. In some areas, state and local taxes can make a huge dent.
  • Discounts from membership organizations like AAA, AARP and airline frequent flyer programs can be substantial. Ask for a discount code you can enter when ordering.
  • Consider picking up your car at a non-airport location where rates are usually much lower. (Although not always: At one agency I recently tested, a rental at the San Diego airport was surprisingly lower than at several suburban outlets.)
Other decision-making factors include:
  • Airport shuttle convenience.
  • Fees for exceeding mileage allowances (pretty rare), alternate location return (sometimes astronomical), late returns (can quickly mount) or additional drivers (sometimes spouse are free/sometimes not).
  • Fuel refilling charges -- you may do better refilling the car yourself. Use a website/phone app like GasBuddy to find cheaper gas in the area.
  • Surcharge for drivers under 25 -- the list goes on.
Insurance. Car rental agencies typically offer their own collision, liability, theft and other insurance coverage. Conventional wisdom says you should avoid this route if your own insurance plans -- or benefits available from your credit card -- provide similar coverage. However, before you automatically reject rental agency coverage, contact your insurance company and credit card issuer to make sure you are fully covered. Consider factors that may exclude coverage such as:
  • Rental duration -- coverage often expires after 30 days or less.
  • Car model -- sports cars, luxury models, SUVs and trucks may be excluded.
  • Travel outside specified service areas -- especially crossing foreign borders or in rough terrain.
  • Whether you carry comprehensive and collision coverage on your own car; if you don't, you may not be covered for a rental by your insurance carrier. Also, ask whether coverage is limited to the value of your own car.
  • Ask whether "loss of use" fees (for time the damaged car is in the shop) are covered.
  • What happens if you violate rental agreement terms (e.g., driving recklessly or allowing unauthorized drivers)

If you do turn down agency coverage, bring your proof-of-insurance card. One additional caution: Many rental contracts default to "yes" for each type of insurance, so you must specifically write "no" to any coverage you don't want. Keep your receipt in case you later need to challenge a bill -- unscrupulous agents have been known to alter signed contracts after the fact.

Inspect the car. Before you drive off the lot, thoroughly inspect the car, inside and out, for any pre-existing damage and note it on your contract; otherwise you could receive a hefty bill for someone else's minor scratches and dents. Likewise, when you return the car, consider taking time-stamped photos or video to prove it was in good shape.

There are a number of helpful websites, including Best Car Rental Tips, which includes tips on finding Discount Codes, a discussion about Rental Car Insurance, and much more. Bottom line: Don't gamble your precious vacation -- or business trip -- on simply finding the cheapest deal. Sometimes you get what you pay for.

This article is intended to provide general information and should not be considered tax or financial advice. It's always a good idea to consult a tax or financial adviser for specific information on how tax laws apply to you and about your individual financial situation.