How Car Rental Works: The Ultimate Guide

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If you’ve never rented a car before, the whole process can be confusing. Understanding pricing, insurance, and booking is just the beginning. Finding a car in your price range with desirable options can be hard if you’re unfamiliar with the terminology. Read our ultimate guide on how car rental works before you set out on your car rental journey.

What Do I Need To Rent A Car

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Different states and municipalities have different rules regarding renter age, taxes, and bad credit car rentals. Here are the three main things you’ll need to get started.

A Valid Driver’s License

In any case, you’ll need a valid driver’s license to rent a car. You should make sure all of your identification is up to date before you start your trip. This can save you time and headaches down the road. If you’re traveling from outside the United States, make sure your driver’s license is valid on U.S. roadways.

A Credit Card or Cash Deposit

Along with your ID, many car rental agencies require that you pay with a credit card. That way, the rental company can place a hold on a security deposit in case of damage, fines, or failure to bring back the vehicle. Many corporate car rental chains will refuse service to customers that don’t have a true credit card. The best way to get a rental car quickly, is to bring a credit card from a universally accepted provider like Visa or MasterCard. If your card has a low limit, make sure that placing a large sum on hold won’t spoil any vacation plans.

If you don’t have a valid credit card, some independent car rental companies offer cash car rentals. They’ll usually require a cash deposit to cover your maximum liability. In general, the deposit is a separate transaction from the price of your rental car. Once the rental is returned in the same condition it left the lot, you’ll get your deposit back.

Meet Any Age Requirements

Different states have different age requirements. In many cases, the rental company makes the final decision on who can rent a vehicle. In general, 25 is the minimum age to rent a car from most corporate car rental agencies. Independent rental companies rent to drivers as young as 18 if they can supply a deposit, a valid driver’s license, and pass a credit check.

Understanding Pricing

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There’s a lot that goes into the final price of your rental car. Between the base price, insurance, and various surcharges, everything gets confusing quickly. The best way to understand how car rental works, is to break down the pricing structure. Here’s a quick rundown.

Base Price

The base price of a vehicle is the daily rate multiplied by the number of days you rented the car. In general, booking for several weeks or a month at a time will get you a discounted daily rate. The daily rate is primarily based on the type of car. Cars are typically categorized by class, size, luxury options, and specialty uses. Basic, fuel efficient sedans, compact cars, and SUVs make up the economy class. Intermediate and standard models include larger SUVs, newer cars with more features, and family vans. The Luxury and Prestige class models usually include top-of-the-line luxury cars, sports sedans, and unusual vehicles.

Standard Surcharges

Depending on your rental agreement, you may have to pay a distance charge. Most agreements specify a daily mileage, and charge you for going over that distance. Some specialty rental agencies offer unlimited mileage. Along with mileage, where you rent your car from can change your bottom line. Airports often have additional fees and administration surcharges for booking at the terminal. Also, if the car is not returned at the end of the rental period, additional surcharges may be added.

Taxes and Fees

Taxes can differ by state, but you should expect to pay at least the state’s standard sales tax on top of your rental. Depending on where you are, there can be a variety of different taxes and surcharges that get added to your bill. This is outside the control of the rental company. Some cities and states also impose a tourism fee on all car rentals.

Along with taxes, you might see a few other miscellaneous fees on your bill. These are often called administrative or booking fees. These are more common among corporate car rental chains. Some companies require that the rental car stays in the region or state of origin. Taking the car outside its operating range can result in heavy fees and other penalties. Make sure to talk with your car rental agent about your travel plans so they can draw up a contract that works best for you.

Insurance and Your Liability

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Insurance might seem pretty straightforward, but this is where things can get confusing. Under a standard rental contract, you are personally liable to the car rental agency if anything happens. This includes damage to the car, if the car is stolen, and injuries to other people. On top of that, some corporate car rental chains might tack on extra administrative fees and surcharges if you get into an accident. The best way to minimize your liability, is to purchase insurance from the car rental company.

There are many different types of insurance, and they all have similar sounding names. Here’s a breakdown of the most common types of rental car insurance.

Collision Damage Waiver (CDW)

This is also called a Loss Damage Waiver by many companies. This type of insurance directly reduces your personal liability to the rental car company if your car is damaged, totaled, or disabled. This insurance doesn’t completely remove personal liability, only past a fixed amount called a deductible. This means that you are still personally liable for any damages up to the deductible limit.

Some rental agencies offer and all-encompassing version of the Collision Damage Waiver called Super CDW. This can either lower your deductible  or remove your deductible entirely. Naturally, this option is more expensive than a standard CDW because it can partially or fully remove personal liability.

Theft Liability Waiver

Although it may seem redundant, a Theft Liability Waiver is necessary. Typically, a Collision Damage Waiver (Loss Damage Waiver) doesn’t cover the theft of your vehicle. If your rental car is stolen, you’re still responsible for the total value of the car. A Theft Liability Waiver specifically covers theft, while a Collision Damage Waiver covers damage to your car during the rental period.

Liability Insurance

The main purpose of Liability insurance is to cover monetary damages to other drivers and pedestrians if you get into an accident and are found to be in the wrong. In some cases, your personal car insurance will cover Liability. It’s a good idea to consult with your insurance agent before renting a car.

Miscellaneous Insurance

Along with the three main types of insurance, rental car companies offer a insurance to cover specific incidents. For instance, Windscreen Breakage Insurance is specifically for windshield damage. You may also see Personal Effects Insurance. This covers any of your personal items in the car in case of theft or damage.

How to Rent a Car

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Now that we’ve covered the basics of rental terminology, let’s break down how the actual car rental works. All that’s left is choosing a car that suits your needs, booking your rental, and then returning the car when you’re done.

Choosing the Right Car and Options

When picking out your rental car, it’s important to keep a few things in mind. Along with your budget, you should consider the driving conditions in the area and personal needs. Will you be traveling with several passengers? Are there any dirt roads? Will you need room for luggage? A standard economy car might not be the best fit if you’re driving in the snow or on country roads. On the flip side, an enormous SUV might not be the best choice for city driving. If you’re unfamiliar with the area, consider renting a car with a built-in GPS system or a separate GPS.

Keep in mind that airport rental companies often overbook, so they might not have the specific car your wanted when you show up. In this case. It’s standard practice for the rental agency to upgrade your vehicle for free.


Now that you’ve picked out your preferred car, it’s time to book your rental. There are two main methods for booking a rental car. You can either book in advance, or show up on the day of to book in person. Booking in advanced is the best way to guarantee that a car will be available for you when you arrive. On the other hand, some people prefer to show up in person for last-minute deals. Either way, once you arrive it’ll be up to your rental agent to handle any paperwork and get you on the road.

If you’re booking through a travel agent, things go a little differently. Since your travel agent is making arrangements for you, you’ll be required to pay them in full before your trip. The travel agent will supply you with a voucher to give to the rental car desk, or call ahead to confirm your arrival. Simply show up at the rental agency to pick up your vehicle.

Returning the Car

At the end of  your trip, be sure to return your car with the same amount of fuel as when you picked it up. This can save you money in penalties at the end of your trip. Along with refilling the tank, make a cursory inspection of your vehicle to ensure there are no new scratches or dents. 

Ask your rental agent if there’s a specific drop-off point at the end of your rental period. Some rental companies will have a staff member on hand to guide you through the final steps. It’s also common to drop your rental car off in a parking lot with a drop box for the keys. You remain liable for the car until it is returned to rental staff, so be sure to return it to the correct location.

Accidents and Tickets

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Don’t panic if you scratch your rental car or get into a fender bender. Even the most careful drivers get into accidents sometimes. Your car rental company will have a standard process for handling damages to one of their vehicles. After you bring the car in, a staff member will help you fill out any forms and guide you through the process. Typically, the rental company will place a hold on your credit card for the estimated cost of any damages to the car. This hold might be greater than the actual value of the damage. After the car is repaired and administration costs are factored in, you will be refunded the difference or charged more depending on the situation.

If you receive a parking or speeding ticket, get in contact with your rental agent to let them know. Physical and electronic tickets are billed to the vehicle’s owner, i.e. the rental car company. Even if you don’t tell them initially, your ticket will arrive at their headquarters eventually. If you don’t let them know ahead of time, there could be a flurry of administrative charges and penalties on top of the initial fine.

How Car Rental Works at Value Rental Car

At Value Rental Car we want to help you get to your destination quickly and safely. We offer clean and affordable rental cars for local driving in Los Angeles and Pasadena, with complimentary pickup and drop off service within seven miles of our two locations. If you’re a college student, we want to help you get on the road. We rent to drivers under the age of 21, and we offer cash and debit card car rentals.  Check out some of our other articles to learn more about how car rental in Los Angeles works.

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