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I'm just checking some car rental options for May and June in California. Avis for example offers the pay now and the pay later option. When you chose pay now, you have to pay the full amount while booking it and when you chose to pay later, you have to pay when picking up the car.

Normally, the pay now price is significantly lower, because you take the risk on your side. However, I now see that the pay now prices are significantly higher than the pay later prices. Is there any drawback I don't know?

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I agree with your assessment of why the pay later price is usually lower. The only reason I could think of the 'pay now' price being higher is that they have too many reservations for the cars available: if you pay now they will have to find one, or upgrade you for free, whereas if you show up without paying they will tell you they don't have anything. –  DJClayworth Mar 28 '13 at 13:47
    
That could be possible. But I'm not sure if this is a legal thing to do. Even if I do not pay now, I have a contract with them. –  RoflcoptrException Mar 28 '13 at 13:55
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2 Answers

up vote 6 down vote accepted

I'm not going to try and answer this any better then FoxNews Article did.

The gist of the story is basically that car rental companies are getting at least some money from their fleet even if you cancel or don't show up. From what I just gathered on Avis the cancellation fees are $25.00 if you do it more then 6 hours before or $100 if you are a No Show or doing it less then 6 hours before the pick-up time.

The article also mentions that there are potential discounts that you could be missing out on once you prepay.

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As with any pre-pay rate, the answer is "it depends".

Car rentals are one of the last areas of travel where you can cancel a booking at the last moment or even "no-show" without paying any penalty. Try that with a flight, a hotel, a tour, etc and in almost all cases you're going to be out at least a percentage, if not the entire cost.

Rental car pre-pay normally means that if you want to cancel or even change your booking, then you're going to have to pay at least a fee. So in effect, you're giving up some flexibility and taking some (financial) risk in order to get an (apparent) saving.

So what it really comes down to is how much is the savings? Normally pre-pay savings are only 10-15%, which is frequently no more than you can get using other promotion codes with the rental company, or affiliate discounts like AAA (car club) membership discounts that are offered by many rental companies.

For such as small (if any) discount, the answer if simple - no, Pre-pay rates are NOT a good idea and should be avoided at all costs.

However, there are exceptions. For example, consider this quote from Hertz :

Hertz quote

In this case pre-paying drops the price from 68 British Pounds to 39 Pound - a saving of around 43%! Unless you think it's likely that you'd be likely to cancel/no-show for the reservation, then obviously the pre-pay rate would be a great deal!

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