The cost of renting a car in European holiday destinations has almost doubled in the past three years, and experts predict prices will remain high as global shortages mean car hire firms are paying more for new vehicles.
An analysis of car rental prices in six European destinations shows it cost an average of £675 to rent a car for a week at the beginning of August, up from £339 for the same week in 2019.
According to figures from iCarhireinsurance.com, which provides policies to cover the excesses imposed by hire firms, renting a car such as a VW Golf or a Peugeot 308 in Faro, Portugal, will cost an average of £728 a week this year, compared with £428 in 2019.
The cost of hiring a car in Barcelona has more than doubled, from £258 to £609 a week, while the average rental price in Nice is up from £417 to £731, and in Milan from £364 to £617. The company took average prices from six of the biggest rental brands – Sixt, Hertz, Avis, Budget, Enterprise and Europcar – earlier this month.
The high prices are not limited to mainland Europe, however. In Ireland, hiring a Ford Focus costs £1,230 for a week beginning 30 July, while a fancier BMW 3 Series comes in at £2,063 a week. Both prices are from Europcar and are the best on offer this week through aggregator Carrentals.co.uk.
Shrunken fleets
The price rises are mainly caused by car rental companies having sold off much of their stock of vehicles during the pandemic as demand collapsed. Now, with people taking holidays again, they are trying to rebuild their fleets, but a global shortage of semi-conductors means they are paying more for new vehicles. Those increases are being passed on to consumers in escalating prices.
In Tenerife, the price for a week’s car hire in August 2022 has risen by 220% compared with August 2021Holiday Extras
The shortage also extends to the Balearics, Canary Islands and Greece, says Mo Lindsay of Holiday Extras, which offers parking and insurance services as well as car hire. “In Tenerife, the price of car hire in August 2022 has risen by 220% on August 2021,” she says. Last year, she says, a week’s rental would have cost £78.45, but this has risen to almost £250 this year. On the island of La Palma, the price is up 150% – from £221 to £551.
“Many rental fleets were depleted during the pandemic as demand dried up,” says Ernesto Suarez, founder of iCarhireinsurance.com. “People are now travelling again and rental companies are trying to build their fleets back up to meet this demand, but there is a worldwide shortage of new cars available.”
He adds: “Rental companies that have been able to get cars have bought them at inflated prices. In addition to this, many rental companies have been investing to prepare for the introduction of electric vehicles, and they are also facing the same price increases as everyone else is at the moment.”
A spokesperson for the British Vehicle Rental & Leasing Association (BVRLA), the trade body for rental companies, said the sector had been “hit hardest” by the global shortage in new vehicles and had seen “significant price inflation” in the cars it had been able to purchase.
“The sector faces similar cost inflation to many other businesses and is also having to invest heavily in preparing for an increasingly electrified fleet,” he added.
Suarez says the shortage of new cars could continue for some time, which means rental prices could remain high for a number of years.
Holidays are back
The car rental industry has also blamed the price rises on rising demand.
A spokesperson for one of the biggest rental firms, Europcar, says car rental is no different from other sectors of the travel industry, “where prices reflect the tension between supply and demand”. Avis Budget Group and Hertz, two of the other big players, did not respond to requests for comment.
Consumers looking for vehicles over the summer have been advised to be flexible on both dates and the type of car they want. They should also check what extras are available with their booking – additional drivers, child seats and taking the car to another country can add appreciably to the cost. They should also check whether they need to return the car with a full tank of fuel.
The BVRLA spokesperson says: “Demand always peaks in the summer, and we would advise customers to book early and be willing to compromise on the type of vehicle they get.”
Is Airbnb for cars the answer?
The rising cost of fuel has led some drivers in the UK to rent out their vehicles on a daily basis. An app from the American company Turo allows car owners to offer their vehicle for rent in much the way rooms and homes are advertised on Airbnb.
This week, 1,611 owners are offering 2,771 vehicles for hire, with prices from £35 a day, according to Xavier Collins, who runs Turo’s UK division. Renting a higher-end car, such as a Tesla, will cost about £100 a day. The “hosts” receive between 65% and 75% of the fee, and there are limits on how far the car can be driven.
Collins says the company has seen rapid growth in the past year as a result of rising prices across the board: “More and more hosts are offsetting the cost of car ownership by sharing their car on the platform to combat the rising cost of living generally.”
