Car Rental Terms You Need to Understand

If you’re planning a trip away for business or pleasure soon, you may be looking to hire a car so you can continue to enjoy the flexibility and freedom that comes from having a set of wheels to use.

However, if you haven’t rented a vehicle before or for a long time, all the terms that get included in contract paperwork can be overwhelming. To help you out, here are some of the key car rental terms everyone needs to understand when hiring a vehicle.

car rental terms
photo from Jimmy Emerson, DVM

Collision Damage Waiver

If you’re searching online for “rent a car, LAX” or “hire cars, NYC” or the like, you’ll likely see that many of the options that present themselves have additional fees to pay for extras and insurance. When it comes to the latter, you’ll probably see the term “collision damage waiver” pop up a lot. This optional insurance waives your responsibility to pay the car rental company for the damage to the vehicle if you get into a crash with another car.

Before signing up for this cover, though, check if it’s already included via the credit card you use to pay for the service, your personal car insurance, travel insurance, or some other program you’re a part of. Also, note that the collision damage waiver is basically the international version of the loss damage waiver that protects drivers from paying for repairs due to accidental damage in the United States. These terms are often used interchangeably, so it’s helpful to know both.

Unlimited Mileage

Another term to understand relates to the number of miles you drive in the vehicle you hire. If this phrase is a part of the agreement you sign, you can drive as far as you like and take the car anywhere without having to pay for mileage surcharges. This is very handy if you plan to do a big road trip or if you’re not sure yet where you might end up and how far you’ll travel.

Related to this term is “excess mileage,” which happens if you don’t have unlimited mileage as the standard term on your agreement. If the mileage is limited to a certain amount for the period you have the car for or per day, you’ll have to pay a surcharge for any miles driven above that. These costs can end up being quite prohibitive, so it’s always best to ask about extra charges per mile before you take a car out of the lot.

Diminished Value Fees

If you don’t take out a collision damage/loss damage waiver and have an accident in your rental car, you may be slugged with diminished value fees. This is a fee for the difference the business claims between the car’s resale value before and after the incident. They will look to recoup the loss of value that occurs due to the accident and subsequent damage to the car. Note that many auto and credit card insurances don’t cover diminished value, which is another reason why you might like to have a collision damage waiver in place from the start.

One Way Rental

Rental car companies want to know if you plan to hire a vehicle and drop it back to the same location you picked it up from or if you need to leave it somewhere else. If you’re opting for the latter option, this is classified as a one-way rental because you drive the car one way from point A to point B and leave it there.

Almost all car hire firms charge higher rates or extra fees (the drop charge) to allow customers to leave a vehicle somewhere different. Also, if you take a car to a return location different from the one agreed upon with the rental business, you may be charged what’s known as an unauthorized drop. In this case, the fees will be even higher.

Fuel Purchase/Service Option

Most rental car companies expect customers to return vehicles with a full tank of gas. If you don’t, there can be extra charges to pay. A fuel purchase option is a term used for the setup where you prepay for this tank of fuel when you first pick up the car. You get charged no matter how much gas you use, and there’s no refund for unused fuel or discounts if you could have found gas cheaper elsewhere yourself.

A fuel service option refers to the choices you have about what to do regarding fuel. You can prepay the company for gas and they will sort it out, or you can fill up the tank yourself and show the firm your receipt for the purchase (which can save you some money). If you choose neither option, you’ll typically see a fuel service charge added to your bill to cover the cost of petrol.

These are some of the critical terms to wrap your head around before hiring a vehicle. Learn as many details as required to have a positive rental car experience at every step of the way.

Jasper has been an enthusiast of the automotive and IT industries since the age of 16. He independently writes on the auto industry's recent happenings.