Rental car rates soar with vehicles in short supply as travel rebounds

Be prepared to spend a small fortune to rent a car for your next trip — if you can find a vehicle at all. 

Rental cars in Hawaii this spring are going for an average of more than $900 a week, while the most affordable vehicles in Denver cost $568 on average for one week, according to a survey conducted by Cheapcarrental.net, a site that helps consumers rent cars for less. 

Across the U.S., rental car rates are on average roughly 30% higher compared to May 2019, according to the same survey, while in in Hawaii and Florida rates are up more than 50%.

"We are seeing some extremely high prices in Hawaii, upwards of $200 a day — and that's if you can find a rental at all. In some areas, rentals are super sold out for the entire summer," said Jonathan Weinberg, founder and CEO of Auto Slash, a website that helps consumers save money on auto rentals. 

Rental cars in Anchorage, Alaska, are already booked through the end of the summer. "You really can't get a rental car at any price right now," Weinberg said. 

What's behind the rental car shortage? 

Rental car fleets sat idle during the coronavirus pandemic when worldwide travel ground to a halt last year. At the time, cars in Hawaii were renting for as little as $5 per day. Some car rental outfits went under, while those that survived sold off up to half of their vehicles to generate cash flow, Weinberg said. 

"The net effect was fewer rental car companies with bare-bones fleets. For most of 2020, that wasn't a problem. Demand was down and the rental companies did not envision a quick recovery on the horizon," Weinberg explained in a recent blog post. 

Indeed, air travel is starting to rebound as the number of vaccinated individuals continues to rise. More than 1.7 million passengers were screened at airports on May 7, making it the busiest travel day since March 12, 2020, according to the Transportation Security Administration, CBS News travel correspondent Errol Barnett reported.

"Rental car companies are caught flat-footed by this," Weinberg said. "They sold off hundreds of thousands of cars when COVID hit and demand was down 90%. They figured it would take a while for demand to come back, but they were caught by surprise when people started to get vaccinated and demand came roaring back."

Chip shortage

Rental companies can't quickly add to their fleets, either. Auto manufacturers are facing a shortage of semiconductor chips — which control a car's critical systems — forcing them to pause production lines. 

Car rental prices were already sky-high over President's Day weekend in February — costing up to $3,000 a week in Florida and ski destinations in Colorado, for example, and foreshadowing the looming national issue. 

"It really comes down to a classic supply/demand imbalance," said Chris Woronka, a leisure analyst at Deutsche Bank. "The reality is that the car rental operators simply cannot get enough supply into these markets fast enough to meet demand."

Rental cars are still in stock in urban business centers like Milwaukee, Wisconsin, as business travel has not yet resumed in earnest, according to Woronka. In beach and mountain resort markets, however, demand is outstripping supply. 

"The way rental operators adjust for imbalance is raise price, and people are continuing to hit the bid on higher prices because they need a car," Woronka said. 

It's also tough for rental companies to move their fleets around in an efficient and cost-effective manner. Hiring a car carrier to move vehicles can be slow and expensive. 

"The car rental companies can't just snap their fingers and get a car from Nebraska to Florida. They have the ability to move fleet around but it has to be cost-efficient," Woronka said. "They don't want to be in the business of losing money."

Weinberg recommends that consumers book a rental vehicle before locking in flights and hotel. That can help avoid overpaying for a car or having to rely on Lyft or Uber for the duration of their trip.

"We've heard of people renting U-Hauls, pickup trucks — and people in some cases have said they'll rely on Uber and Lyft, but we've heard waits for Ubers and Lyfts can be upward of two hours," Weinberg said.