Hitting 'Em Where It Hertz

By Barbara Rudolph

After his plane touched down at Denver's Stapleton airport last month, Skier Jeff Blumenfeld hurried to the Avis desk and signed up for a rental car at the daily fee of $44. It seemed like an attractive price; for his four-day trip, the New York City executive figured he would pay around $180. But Blumenfeld's final bill came to a more daunting $253.30. Says he: "You go to a rental-car agency, and you don't know what it's going to cost you. They nickel and dime you to death."

Many travelers would agree. Increasingly high fees for coverage against damage, theft and other hazards can more than double the price of a car rental. A recent Hertz special, advertised at $99 for seven days, would actually cost $230.95 for full protection. Consumer advocates argue that many motorists do not need such coverage. "Car-rental companies try to intimidate customers into buying this insurance," says Robert Hunter, president of the National Insurance Consumer Organization. "It's a rip-off."

The most controversial and expensive coverage is the collision damage waiver, which generally absolves renters of repair costs for accidental damage to the car. Until last year, customers were liable up to a ceiling of $3,000, but rental agencies have now started holding customers responsible for the total value of the auto. Though an estimated 60% of insured motorists are already covered for this by the insurance on their personal autos, many are unaware of it. Moreover, some credit-card issuers have started providing coverage if the rental is charged on their card. Even so, many renters pay as much as $11.95 a day for the C.D.W. Since insurance companies charge the equivalent of $1.30 a day for comparable coverage, rental-car companies are overcharging U.S. consumers up to $2 billion annually on C.D.W.s alone, according to David Cohen, a Massachusetts state legislator. Rental-agency executives claim otherwise. "Waivers do not make any profit for us," says Henry Caruso, president of Dollar Rent A Car.

While many state insurance regulators are eager to supervise car-rental firms, they have been unable to do so. Reason: courts have ruled that the rental-agency coverage for collision, injury and property losses is not a form of insurance in the traditional sense. But states are beginning to enact laws to restrict the industry's questionable sales practices. And last May, Minnesota passed a law that required all auto insurance sold in the state to cover the owner for rental-car use.

The renters who can really get taken for a ride are those with no insurance and no C.D.W., who are often overcharged for repairs. Last month Hertz, the No. 1 U.S. car-rental firm, disclosed that it had duped consumers and insurance companies to the tune of about $13 million in inflated repair bills. While Hertz is paying the money back, two other rental agencies, Avis and Budget, acknowledge that they sometimes charge customers more for repairs than the companies actually pay. One good reason, the rental agencies contend, is that accidents cost them lost rental time.

With reporting by Jerome Cramer/Washington and Thomas McCarroll/New York