Renting cars in the US

If you travel within the US, renting a car is often the best option to get around. Rental car companies are notorious for offering very low rental fees on the reservation, but then ask you to sign up for various additional services (such as insurances) which will significantly increase the daily rental price. This guide explains what to avoid. When renting a car, there are only two insurances you actually need:

• Supplemental Liability Protection (SLP). This protects you when you are at fault or if somebody else is at fault, but does not have sufficient coverage.

• Collision/Loss damage waiver (CDW or LDW). This protects the rental car itself, so it covers your liability towards the rental company if the rental car itself is damaged because of your fault.

Most rental companies will try to sell you these two insurances for an additional total of 20-30 USD per rental day, which is rather expensive. We will show you different options that allow you partially or fully avoid this. We will also explain why most other products are useless.

Driving licence

When renting a car, you will need to present a valid driving licence. If you live in the US, you can usually get a US driving licence for 50-100 USD, which includes the licence cost and the exam. If you have a foreign licence, you should confirm that your licence is accepted. Usually you are required to also carry an international driving licence document, which includes the translations of your regular foreign licence. However, in many cases your foreign licence will even be accepted if you do not carry the international licence document.

Further note that most states have some regulations that you can only use a foreign licence for the first 6-12 months of your presence in the US, where it is often not clear if this counts from your first entry for the respective purpose (such as studying or working) or the most recent entry (e.g. after your last trip overseas). In practice, it is very rare that rental companies or police would check your last entry to the US. In the case of Germany, I never had problems with my German licence and was never asked for 

Finally, some states offer you to swap your foreign licence (such as German or French) for a US licence. This may not be a good idea, because you will literally need to give up your foreign licence and receive a US licence, which usually expires with your visa end date. Consequently, you should check if there is a way to retrieve your foreign licence or how expensive it is to get a new. In the case of Germany, the licence will be sent back to Germany and either stored or destroyed. In particular, old licenses without expiration date will not be handed back, but you will need to pay for a new licence (with expiration date). This is rarely a good deal, so make sure you check the details.

Age of Driver

Renting a car under the age of 25 will typically incur an additional daily fee. There is no universal way to avoid this fee, but there are a few options:

• Package contract. If you rent a car from some rental website for a longer time, you can often choose an discounted underage, so that one or often all drivers are not required to be at least 25 years old, but usually at least 18 years old.

• Joining an auto club. Some auto clubs, such as AAA and USAA, have special agreements with certain rental companies which will waive the underage fees for club members. You can read more about this here.

• Using some employer deal. Many larger companies or institutions (such as universities) have special agreements with some larger car rental agencies, which will waive the underage driving fee. However, this often only applies to official business trips and not private travel. It is still worth it to check the exact terms and conditions.

Additional options

If you rent a car in the US, you will often be offered a range of additional options which will significantly drive up the price and which you should avoid.

Supplemental Liability Protection (SLP)

In contrast to many other countries, the legal requirement of liability insurance is often very low (depending on the state). This means the car is often only insured for 50,000-100,000 USD coverage, which will not be enough if you create an accident with bodily injuries or fatalities. Note that most car insurance contracts will even not really state what the legal insurance coverage is, as the contract will only state that the car rental agency satisfies the legal requirements of the given state.  Moreover, it may also happen that somebody else is at fault (and damages you or your rental car), but does not have sufficient insurance. In this case, most liability insurances will also cover you.

As it is considered wise to insure yourself against risks that can ruin you financially, you should make sure that you have liability coverage of 500,000-1,000,000 USD or more. Such coverage is often provided from the car rental agency (as Supplemental Liability Protection) for a fee of 10-15 USD per day, which is rather expensive. Instead you should look at one of the following options:

• Booking a package. If you only need insurance for a single long car rental, you can often book the rental through some website (such as rentalcars.com) that will offer to include full liability insurance for a cheaper price (than paying a daily rate). You should run your own comparison. This is good for a single long road trip, but may not be as good if you are planning many short rentals.

• Private car insurance. If you have a car in the US, you will already have a private car insurance, which often also covers your rentals. For temporary residents, it is possible to get decent car insurance (still with relatively low coverage amounts of a 100,000-500,000 USD) for 100-300 USD per year.

• Non-owner car insurance. If you do not own a car in the US, but you know that you will regularly rent cars you could try to get a non-owner insurance in the US. This is often not as difficult, because non-owner insurances are not very much advertised and one needs to contact insurance companies individually (or even find individual insurance agents). You can expect to pay 300-600 USD and more per year. This website reviews some options. If you find a good non-owner insurance, email us at expatfinance.us@gmail.com.

• Daily insurance. An alternative is to insure each rental day with a third party insurance. Finding such insurance is not easy, but you can look worldwide for insurance companies that insure international car rentals. If you speak German or know somebody who does, you could use the HanseMerkur Mietwagen-Versicherung for 6,90 EUR per day (as of writing, July 2024). This insurance includes both liability and insurance of a damage waiver for the rental car itself.

• Trip insurance. For a long time, there were smaller insurance companies around that would offer liability insurance for car rentals on a per trip basis (up to a certain number of days). Finding such insurance companies is quite difficult. A well-known example was Arisa which offered exactly this type of insurance for reasonable prices here. Unfortunately, this insurance product is not offered anymore (as of writing). If you find an interesting replacement, let us know at expatfinance.us@gmail.com.

• Special tip 1: Credit card insurances (of some countries). While many US credit cards offer damage waiver insurance (i.e., insurance for the rental car itself), we are not aware of any competitive US credit card products that also offer liability insurance for rental cars. However, the situation is different for certain credit card products in other countries. If you regularly rent a car in the US, it may make sense to get some premium credit card in your home country which includes car rental liability insurance. You should check the terms and conditions of premium credit card products in your country of your home country. If you use this option, you should make sure that your credit card also includes insurance for the rental car itself (damage waive, see below).
  Example: The German Barclaycard Platinum Double includes a rental car liability insurance for up 1,000,000 EUR and comes with an annual fee of 99 EUR. It also includes insurance for the rental car itself. You will need to pay for the rental using your Barclaycard and the insurance is valid for regular rentals (not leases or long term rentals) up to 90 days. Depending on the number of days you intend to rent cars in a given year, this may be a significantly better option than buying daily liability insurance with the rental company. If you know of any good products in other countries (possibly even in the US), let us know at expatfinance.us@gmail.com.

• Special tip 2: Schutzbrief AllianzMobil (for German residents). For a long time, there was an almost secret tip around, where you could get an extremely affordable rental car liability insurance for roughly 60 EUR per year included in the Schutzbrief AllianzMobil (see § 6 Zusätzliche Kfz-Haftpflichtversicherung im Ausland). This is an extra insurance on top of a regular car insurance for a car in Germany.
  Example: You study in the US, but continue to be resident of Germany (as required by many temporary visa, such as F1 and J1). Your parents have a car in Germany and you are allowed to drive it. You could sign up for the Schutzbrief AllianzMobil in your name for this specific car that you are allowed to drive. On top you get worldwide liability insurance for car rentals.
  It was always difficult to sign up for this insurance, as you had to contact an Allianz sales person. As of writing (June 2020), this insurance product is not listed on the Allianz website anymore, but according to this answer the product is still available when talking directly to an Allianz insurance seller. Most German personal liability insurance terms include liability for rental cars within Europe (Mallorca Police), which unfortunately does not include the United States.
  Update July 2024: It appears that this insurance is not offered anymore. If you find other interesting options, let us know at expatfinance.us@gmail.com.

• Tip by reader: Non-owner insurance by Travelers. A reader of this blog signed up in 2024 for a non-owner car liability insurance with Travelers Insurance. The reader paid 110 USD for a 6-months policy (shortest duration they offer) for Bodily Injury Liability of 100,000 USD per person, 300,000 USD per accident and Property Damage of 100,000 USD per accident. While these insurance amounts are not quite as high as some of the other options, this might still be a reasonable choice and gives some idea of the cost involved.

If you book the car for business trip or as a package (e.g., for a road trip), this coverage may already be included in the rental price, so make sure that you compare and evaluate the conditions correctly.

Collision/Loss damage waiver (CDW or LDW)

Liability insurance only insures yourself from damage of other people or their property, but not from damage to the rental car itself. Consequently, the car rental agency will require you to have insurance for any damages that you may cause to the rental car itself. You can purchase such coverage from the car rental agency directly, but will often need to pay an additional fee of 10-15 USD per day, which is again extremely expensive. Luckily, almost all US credit cards offer at least secondary and sometimes primary rental car insurance:

• Secondary rental insurance. Most credit card insurances will only pay what is left, after you involved your own personal car insurance, which often includes partial coverage for damage on a rental car. However, this can be disadvantageous because your insurance premium may go up. If you do not have a personal car insurance that will cover such damages, most terms and conditions state that your credit card insurance becomes a primary insurance. However, you often need to prove the fact that you do not have personal car insurance by a written testimony certified by a notary public. This will usually incur a small fee, but should be easy.

• Primary rental insurance. Some premium travel cards (such as the Chase Sapphire Reserve) have primary rental insurance built in, which means that you will not need to go through your personal car insurance (or prove the lack of it).

It therefore suffices to decline the insurance offered by the car rental company (i.e. their collision damage waiver or loss damage waive) and refer to the terms and conditions of your credit card insurance. Note that this often requires you to pay the car rental with the respective credit card in full, so you should not use gift cards, travel points or any other type of payment.

If you book the car for business trip or as a package (e.g., for a road trip), this coverage may already be included in the rental price, so make sure that you compare and evaluate the conditions correctly.

It is very important to emphasize that there is essentially no US credit card that also includes personal liability when renting a car, i.e., the credit card insurance will only cover the rental car itself, but not the liability for damage that you do to others (property, injury, death). It is therefore imperative that you make sure that you are also covered for this, as explained before!

Roadside assistance

Roadside assistance will help you if you have an accident or some minor issue (like running out of gas or having a flat tire). However, from a risk perspective it is typically not worth it to buy extra insurance. First, it is relatively unlikely that you will have a problem with a rental car, as they are usually kept in excellent conditions (and if not, the rental company may even be at fault and must pay for roadside assistance). And even if something unexpected happens, you will rarely be ruined if you need to pay 50-300 USD for assistance. The expected return of buying insurance is always negative, as the insurance premium does not only need to cover all the cost of incidents, but also administrative cost (regulating the incidents) and profits (shareholders of insurance companies also want their share). Consequently, you should only insure risks that will ruin you (such as health, liability, property and labour), which cannot be said about shelling out a few hundred dollars for roadside assistance. Moreover, various credit cards (such as the Chase Sapphire Reserve) include coverage for roadside assistance as a perk.

Toll roads and fines

If you rent a car, you should be wary of incurring fees, such as road tolls, or fines, such as speeding tickets or parking tickets. Such cost will be usually forwarded to the rental company, which will charge it to your credit card (as agreed in your rental contract). Moreover, the rental company will often add a "convenience charge", which can be significantly larger than the cost itself. It is not uncommon to be hit by a 10-30 USD convenience fee for being charged a 2 USD road toll. If you are aware of any costs that you may have incurred (passing through a toll road, finding a parking ticket on your windshield etc.), you should try to settle the charge on your own. You can often call the toll company to pay directly by credit card. For this, it will be important that you have noted down the information from your rental car's number plate.

A special case are toll roads, where you need to pay to drive on certain roads. In most cases, it is best to avoid such roads completely (Google Maps offers an option to avoid them, but you should check how much longer the trip becomes and if it is worth it). In most cases, you can just drive through a toll booth and pay by card or cash yourself, which will not involve the rental company at all. However, if you drive through the fast lanes, you are often charged based on your number plate or based on electronic device (E-ZPass) which may be built into your car. Moreover, there are also toll roads that just start suddenly, where you are charged based on your number plate. Typically, there are warning signs on the site telling you that a toll road starts if you continue on the road and only exiting now will avoid the toll. If you know that you will drive on such a road, which is paid for through E-ZPass, you can sometimes pay a small fee to the rental company which avoids later "convenience charges", so make sure to check. Overall, we recommend to stay wary, avoid toll roads where possible and maybe talk to rental company beforehand about options. 

Prepaid gas

Usually, you will receive a car with a full tank of gas and are expected to bring the car back with a full tank. This is easy, because you just need to stop at a gas station shortly before giving back the car and fill it up completely. There is no way that you will fill it up too much, so you will exactly pay for the gas that you used. If you choose this standard deal, you should never forget to fill up your car, because you will be charged a much higher gas price per gallon if you bring back the card with partially empty tank!

Many car rental agencies will offer you a special deal, where you can bring the car back with an empty tank and pay a gas price that is significantly below the current price. However, this is typically not a good deal, because it is very difficult to time your usage correctly, such that you will bring back a completely empty car. In most cases, you will have at least 1/4 or 1/8 of the tank still filled with gas, which means you are effectively paying a higher price again. Note that it can be quite risky to gauge this correctly, because if you run out of gas you will be stuck.

Some rental agencies will offer you to combine the two deals. For example, you receive a car with full tank and only pay for half of the tank, such that need to bring the car at half filling. This makes it typically much easier to time, because just need to make sure that you are at half filling or below when bringing the car back, in which case you can fill up the car to half a tank if needed. This can be a bit awkward, because the gas gauge often only works if you turn the car on, which means you will need to fill in a bit of gas, go back to turn the car on and check if you reached the required level or need to fill in more. In most cases, you will fill the car a bit too much and pay a bit extra. This deal can be sometimes profitable (in particular, if you travel between different regions with very different gas prices), but in most cases it is not worth the effort.

Second driver

Most rental contracts only allow a single driver. Many companies (and as sometimes required by state laws) also allow the legal spouse to drive the car without further certification, but you should carefully review the terms and conditions. For business trips, some companies also allow other colleagues to drive. You will find most of the up-to-date information online. If you would like to have a second driver who is not your spouse, you will typically need to pay ca. 10 USD extra per day, which can quickly add up. Depending on your situation, you can try some of the following options:

• Booking a package. If you are planning a longer trip (e.g. roadtrip) with friends or family, it will make sense to book the whole package on an appropriate website, where you can often choose to specify two or more drivers that are included.

• Getting a Costco membership. For 60 USD per year (as of writing) you can get a membership with Costco stores. The main benefit of the membership is that you can buy at Costco Warehouse stores, where you find huge quantities in bulk for relatively low prices. However, if you regularly need to add a second driver on Alamo, Enterprise, Avis or Budget, a Costco membership may quickly pay for itself. For Alamo and Enterprise, the additional driver fee is waived for rental in the U.S., Canada, UK, France, Germany, Ireland and Spain. For Avis and Budget, the fee is waived for rentals in the U.S. You will need to provide your Costco membership number when booking and present your Costco membership card when picking up the car. You can read further details here. In general, you can use the Costco Travel website to often get excellent rates on rental cars.

One way fee

It can be often advantageous to give the car back at a different rental agency. You may want to use this, if you want to organize a road trip from one state to another (such as New York to California) or if you fly into one airport and then continue your travel from another one. One way fees can be very expensive reaching up to several hundred dollars and even more. It is therefore a good idea to shop around and check different rental companies and locations. It is often cheaper to purchase one way rentals from airport locations, which are otherwise often more expensive. You should also check if there is a way to get the one way fee waived by negotiating or using a special deal (e.g. through your employer).

GPS

You should not bother to rent a GPS device from a rental agency, because it is often crazy expensive. In most cases, it is best to just use a smartphone with internet. You can buy a smartphone holder on Amazon or just use sticky tape to temporarily fix your phone. If you are planning a longer trip and really need GPS, you could even just buy one and sell it on ebay afterwards.

Other things to consider

The following points give some additional tips for renting cars.

Carefully check the car and take pictures

As you (or your insurance) will need to pay for any damage on the car (including scratches), you should make sure that you carefully check the car for any damage. Any existing damage, such as large scratches, lose parts or unusual things, should be properly documented on the rental contract and it often helps to take an additional picture (if you have paranoia, you can even timestamp the picture to prove that you did not just take the picture later or have the rental agent stand in the picture). Many rental agents will tell you that small scratches (like below an inch or so) will not count and will not be documented. Instead of relying on this, take pictures and make sure that everything noticeable is mentioned in the contract. Note that dirt does not matter (and you are not required to clean the car), but a dirty car makes it also more difficult to see possible damage underneath.

Check employer discounts

Many large companies or institutions (such as universities) have collective contracts with car rental agencies, which will give you a better deal for business trips and sometimes even for private travel. Typically, you will need to provide a company code when booking the car and possibly provide written proof that you satisfy the criteria when picking up the car. Often you will receive a fixed price, which already includes all insurances and is perfect for business trips. If you can use the same deal for private travel, you should carefully compare to using the bare price (without insurances) and using your own coverage. Other perkes may include a waived one way fee, which can be a huge advantage when you are planning longer trip. Note that different deals or discount codes can often not be combined.

You can negotiate

If you live close to a rental agency and know that you will regularly need to rent from a given location, you can often talk to the employees and see if they can give you a cheaper price. It does not hurt to ask.

Book or reserve in advance

In many cases, you can reserve a rental vehicle online without any prepayment and without any real obligation, i.e., if you do not show up, you will not need pay anything. It therefore can make sense to complete early bookings for various days or weekends when you may need a rental car, even if you are not yet sure. You can even regularly check the rental prices online and complete a new booking (and cancel the old one) if prices drop. If you have the option to book with prepayment (with limited cancellation ability) or keep a flexible reservation (slightly larger price, but no payment upfront without no-show penalty), you should carefully compare prices and only commit to a prepaid reservation if the price is significantly lower than all other options and you are very certain that you will not cancel the trip.

Membership points

Many rental companies offer you to collect membership points, which you can exchange for free rental days. However, such free rental days usually do not include insurance coverage, which will not be covered by your credit card (as you will not be paying for the rental in full due to the free rental days). In such situations, the free rental days are therefore useless, unless you already have additional coverage or can buy it cheaply (for example through the HanseMerkur Mietwagen-Versicherung). Overall, you should not base your rental decision on how much points you will collect.