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Car Rental, Should I buy insurance

Uh-Oh, I Damaged a Rental Car

Author: David Thompson

My grandson (his name is Tate, but I call him "Rambo") turned one-year-old a few days ago. On Friday and Saturday, I made a quick trip to Bluffton, South Carolina (Jim and Nick's BBQ is there!) for the big party. Rather than put 700 miles on my car in two days, I rented a car from Hertz; I do that often.

The daily rate was $42 and the cost of the loss damage waiver (LDW) was listed on the website as $32.99. I've seen a steady increase in the cost of LDW with Hertz over the past few years. That's enough money to catch your attention, especially on a rental for a week, much like I will do this summer out west. I was able to use points to get the car for no cost, paying only a few dollars in taxes and fees. Oh yeah, I got upgraded from a mid-sized car to a 2017 Mercedes CLA 250; a car with a retail price of about $34,000. 

During the booking process the question became, "Do I want to pay about $65 for LDW?" It somewhat made no sense to me to get a "free" car, but pay $32.99 a day for the protection offered by Hertz.

As I sat at the computer I thought of the advice I give in all my classes, "Always buy the LDW. If you can afford the trip, you can afford the LDW." People who know me, however, know I am "a careful spender" (that's a nice way of saying, "cheap"). Oh my…decisions, decisions. Did I spend the $65 or not? First, as Paul Harvey would have said, "The rest of the story…" 

As I was backing out of my daughter's driveway trying to turn around (lots of cars there for the big party) I was making every effort to check my surroundings when suddenly I felt WHAM!! (I think my words were something like, "Oh heck, gosh, darn it"!) I had backed right into a tree in the driveway, and upon inspection I found that I had hit it with enough force that the plastic bumper had a hole in it. I'm not a body shop owner, but I suspect the whole bumper will have to be replaced, and I suspect that would be over $1,000 (did I mention it was a Mercedes?).

From the driveway I sent my daughter a text, "I just backed the car into a darn (not the word I used) tree." She actually had the gall to text me back, "Did you buy the insurance?" 

So, was I all bummed out that I had damaged a rental car and would have to deal with Hertz, or did I say to myself, "Good thing I bought the LDW."

As I said earlier, I suspect damage was over $1,000. It's very likely that Hertz would have charged me for a few days of "down time" for the vehicle. (Some policies cover that but mine does not.) Administrative fees of up to $250 are very common in situations like this. While it might be unlikely in this specific case, diminished value is commonly charged by rental car companies. With a $1,000 collision deductible on my own auto policy, I would have had to bear a majority of these charges. My credit card might fill the gap for some of these charges, but it's common that some vehicles (Mercedes) may be excluded by the credit card agreement. Even if the credit card did respond, mine is excess to my auto policy, meaning that I either have to submit the claim to my auto insurer (claim "hit") first, or just "eat the entire cost" from my back pocket. Wow, all of this sure makes $65 look pretty cheap – after the accident! 

Think about this from a risk management perspective and the probability of a loss. I was in a vehicle I had never driven before. While it was nice to drive a Mercedes, it was a vehicle I was unfamiliar with. Unlike my "cheap" Honda Civic, this $34,000 car had no backup camera; with a camera the incident would never have happened. It did not have wide view mirrors on each side like I have installed on my car. The blind spots were very bad, with the headrests (front and back) almost totally blocking the view. The controls were different than my car, especially the gear shift which was more like a turn signal lever than a gear shift on the console. It was Memorial Day weekend with very heavy traffic on the roads. Finally, the roads I drove were not as familiar to me as where I normally drive.

So, did I buy the coverage – you bet I did. Considering the increased probability of a loss as well as the relatively low cost to "transfer" part of that exposure to someone else (Hertz), $32.99 a day seemed like a good bargain when I reserved the car.

When I go out west later this year I'll spend almost $250 for the LDW for my weekly rental. Having been in three rental cars that were damaged (nothing major, but still over $1,000) I have "found religion" on the LDW. To me, it's money well spent. The ability to just "drop the keys and walk away" is well worth $32.99 a day.

How did this end? I turned the car into the Hertz location at the Tallahassee airport Sunday morning at 4:30 a.m. heading to catch an early flight. The office was not open so on the rental contract I simply wrote, "Backed into tree, rear bumper damage. Bought LDW." Wow, drop the keys and walk away; that's probably the best $65 I have spent since I bought six Boston Butts to smoke a few months back.