Do you routinely decline the over-the-counter insurance when you rent a car? If you get in an accident and you haven't purchased the Collision Damage Waiver (CDW) at the rental counter, the company can charge you for the cost to repair the vehicle. It can also charge Loss of Use fees to recoup the potential revenue it forfeits while the car is in the shop being fixed instead of out on the road with another renter.
On the surface, that may sound reasonable. But in practice, these fees can add up to ridiculous sums. Worse, Loss of Use can become a quagmire because these fees are not always covered by personal auto insurance and credit card protection, so they can take renters by surprise. Here's what you need to know.
The Car Rental Loss-of-Use Loophole
If you decline CDW because you believe you are covered through your personal auto insurance or credit card, getting slapped with Loss of Use fees can come as a shock.
Loss of Use is a murky surcharge, as the laws vary from state to state. Some states—including New York and Wisconsin—do not allow rental car companies to charge Loss of Use fees. In other states—including Colorado and Texas—there are legal precedents upholding the rights of the rental car companies to charge them.
The most surefire way to protect yourself is to buy the Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW) sold over the counter, but it will be pricey and may not be the most cost-effective solution.
Personal Auto Insurance and Car Rental Loss of Use
Most major insurers cover rental car collision damage but not Loss of Use. Call your insurance company and double check rather than assuming you are covered.
Credit Cards and Car Rental Loss of Use
Some credit cards will cover you for Loss of Use fees.
Do you have a Visa card? Consider using it for rentals cars, thanks to its CDW that includes Loss of Use Not that this is secondary coverage, so it kicks in after your auto insurance deductible is met.
If you have a card with primary coverage, use that one to book your rental cars. If there's an accident, you don't have to report it to your auto insurance company and take a hit on your premiums. As of early 2018, these include premium cards such as Chase Sapphire Preferred, Chase Sapphire Reserve, United MileagePlus Explorer, United MileagePlus Club, Ritz-Carlton Visa Infinite and the JP Morgan Reserve card.
If you have any American Express card, you can get primary coverage by enrolling in Amex's premium rental car protection program. You'll pay a flat rate of $12.25 to $24.95 per rental, which is cost-effective on rentals of more than a few days and will offer peace of mind.
One caveat: Even if your credit card covers Loss of Use, the resolution process can be long and drawn out. Credit cards that offer primary coverage rely on the rental car agencies to provide documentation—typically a "fleet utilization log" that documents the actual lost revenue while the damaged car was out of service. Problematically, rental companies often refuse to provide these logs, as they deem them confidential. So the rental car company and your credit card company can get mired in a blame game, leaving you the hook for the bill.
The bottom line is that some credit card policies have your back and others do not. Know which kind of card is in your wallet and choose accordingly.
How to Fight a Loss of Use Claim on a Rental Car
If a rental car company charges you a steep Loss of Use fee, here's how to fight it:
- Enlist your auto insurance company for help. Insurance companies hate junk fees, are good at arguing claims and often take a dim view of Loss of Use fees. Your insurance company might be able to pressure the rental car company to drop or decrease the fee.
- Demand documentation. Just because the rental car company says it has lost $900 in revenue doesn't mean it can prove it. Demand to see records of the rental, the repair bill and proof that the car would have been otherwise rented. If the company refuses to show you the paperwork, you will have a strong case in a credit card dispute.
- Threaten to sue. This is one of those rare times when the threat of a lawsuit may offer an escape. Unless you're renting in Colorado or Texas (another state with loss of use precedents), the company will be reluctant to litigate for fear of setting a precedent for future loss of use cases.