Summer holidays overseas should be cheaper this year thanks to car hire costs dropping by more than 40 per cent on last year to almost the same prices seen before the pandemic, This is Money exclusively reveals.

School-holiday getaway costs went through the roof in the last two years, with the rental price for a compact family car in favourite summer destinations costing an average of £652 for just one week in 2022.

However, prices across the same 12 locations have readjusted to £380 per week for this summer, which is only £70 higher than in 2019, data shared with us by iCarhireinsurance.com says.

The reason prices have come down is the increase in availability of new cars that has allowed rental firms to replenish their fleets following vehicle shortages seen for months after the pandemic.

The average cost to rent a family car for one week across 12 popular holiday destinations (listed above) has fallen 27% year-on-year and is almost down to pre-pandemic prices. And it’s primarily due to hire firms being able to restock their fleets with new models

The study of car rental costs worldwide found that a week’s car hire this summer is 27 per cent cheaper than in 2023 and 42 per cent less than 2022.

The average price holidaymakers faced last summer was a whopping £520 for a week’s rental, which was 68 per cent higher than people were paying before the pandemic.

This summer, the price is just 23 per cent higher than five years ago (£310 in 2019), the study reveals.

The car hire excess insurance provider reviewed the costs for a week’s hire from 27 July to 3 August 2024 at 12 popular travel destinations using the average quoted prices from six popular rental providers: Avis, Budget, Enterprise, Europcar, Hertz and Sixt.

The 12 travel locations used for the study are Barcelona (Spain), Crete (Greece), Dalaman (Turkey), Dubrovnik (Croatia), Faro (Portugal), Florida (USA), Geneva (Switzerland), London (UK), Milan (Italy), Munich (Germany), Nice (France), and Sydney (Australia). 

The investigation found that Australia (£297), Spain (£306), Germany (£311) and Turkey (£360) are the cheapest places to hire a car this summer.

In contrast, Italy (£446), Switzerland (£460) and France (£523) were found to be the most expensive.

Car rental costs come down: Exclusive data shared with This is Money shows that a week’s car hire this summer is 42% less than 2022

Car rental costs come down: Exclusive data shared with This is Money shows that a week’s car hire this summer is 42% less than 2022

The study looked at prices for family cars from six rental firms - Avis, Budget, Enterprise, Europcar, Hertz and Sixt - in 12 popular European destinations this summer, comparing the costs to the same week in 2019, 2022 and 2023

The study looked at prices for family cars from six rental firms – Avis, Budget, Enterprise, Europcar, Hertz and Sixt – in 12 popular European destinations this summer, comparing the costs to the same week in 2019, 2022 and 2023

The location with the biggest year-on-year declines are Sydney, down a massive 46 per cent.

Barcelona (down 29 per cent), Milan (down 28 per cent) and Faro (down 28 per cent) are also far cheaper to hire a vehicle than they were a year earlier.

In terms of the smallest declines in the last 12 months, prices for rental cars in Florida and Nice are down just 10 per cent and 13 per cent respectively.

Foreign visitors to London can expect to pay 37 per cent less for hire car this summer compared to last, with a compact family car for a week costing £366 (down from £577 in 2023).

Foreign visitors to London can expect to pay over a third less for hire car this summer compared to last, with an average compact family car (like these pictured) costing £366 for a week

Foreign visitors to London can expect to pay over a third less for hire car this summer compared to last, with an average compact family car (like these pictured) costing £366 for a week

And holidaymakers could strike even better deals in they wait closer to the time they want to go away.

Ben Wooltorton at iCarhireinsurance.com, said: ‘It’s good to see car hire prices almost back to 2019 levels. 

‘Hiring a car is an excellent choice for people wishing to explore their holiday destination and it’s good to see that prices are stabilising again after the high costs we’ve seen since the pandemic. 

‘However, there might be more bargains closer to the summer, so it’s worth checking closer to your holiday and taking advantage of the free cancellation 48 hours before collection that a lot of the major companies offer.’

Explained: Why car hire costs soared in previous years 

Major car rental providers are benefitting from vehicle production returning to full capacity in the wake of parts shortages in the last three years which triggered a significant decline in new car supply

Major car rental providers are benefitting from vehicle production returning to full capacity in the wake of parts shortages in the last three years which triggered a significant decline in new car supply

The cost to rent a vehicle skyrocketed in the immediate wake of Covid.

This was due to rental firms selling their fleets of vehicles to stay afloat in 2020 when demand hit rock bottom as flights were grounded and people were restrained from travelling overseas.

However, when restrictions were eased and travel was once again permitted, hire car companies were unable to replenish their stock due to the huge decline in new vehicle production.

This was a consequence of the semiconductor shortage that continued to cripple the car manufacturing sector for months, forcing many car makers to reduce shift patterns, pause assembly lines and even close down for periods due to a shortfall of computer chips needed to go into their latest models.

But now that car makers are back to full production capacity, rental firms have been able to turn over their vehicle fleets as per the pre-Covid norm.

Mike Hawes, Society of Motor Manufacturers and Traders chief executive, explained: ‘After two challenging years of Covid, component shortages and production constraints, new vehicle supply is largely back to normal with delivery lead times significantly reduced.’

Iain Reid, head of editorial at car buying and selling platform Carwow, said it has also seen positive signs for rental fleets to boost their stock.

‘Our own data suggests lead times for brands are coming down from where they were a year ago. 

‘On average, lead times have improved by 25 per cent for electric cars and 5 per cent for petrol cars, with the average lead time for EVs down from 7 weeks in June 2023 to 5.3, and for new petrol and diesel models, it is now 5.7 weeks down from 6.

‘The fact lead times are coming down – whether that is down to increased production capacity, stabilised supply chains for key components, higher inventory levels or a combination of different factors – indicates a return to full production capacity, and it seems that it is car rental market that is benefiting the most.

‘Because, as recent registration figures show, it’s the fleet and business sector that is pushing new-car sales in the UK. If car makers have the capacity, it’s no surprise that they will be pushing these new cars on to big fleet buyers such as car rental companies where demand is high.’

Holidaymakers need to watch out for pricey hire car add-ons

Although the main rental prices have fallen, one area where customers are still faced with significant charges are the optional extras that are offered at the rental desk, including car hire excess protection (often referred to as theft and collision damage cover).

This alone amounts to £168 for just one week, the study found.

Excess protection is typically forced on drivers at the rental desk, offering the assurance that holidaymakers do not need to pay excess liability, which is the amount a driver is liable for if a hire car is stolen or damaged, even if it is not the driver’s fault.

The average cost of hiring a child car seat for one week in popular summer holiday destinations is £67, iCarhireinsurance says

The average cost of hiring a child car seat for one week in popular summer holiday destinations is £67, iCarhireinsurance says

Cover for tyres and windscreens also averages £33 for one week, the study found. 

Travellers are urged to save money by purchasing this type of cover in advance from specialist providers.

For instance, iCarhireinsurance.com, which charges from £33.15 to cover damage, theft, and tyres and windscreens for a week in European destinations, which is a sixth of the price quoted by major rental firms for this summer (£168 excess protection and £33 tyre and windscreen cover, amounting to £201).

And there’s even more hire car add-ons that can push holiday costs higher.

Extra protection and perks, including adding another driver to the policy (£64), renting a sat nav (£71) and hiring a child seat (£67), mean drivers could be paying up to £403 in extras for seven days on a summer break.

‘Don’t get caught out buying expensive extras at the rental desk and ensure you bring your sat nav and child car seats with you and consider buying car hire excess insurance from a specialist insurance provider,’ Ben tells us.

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