Is this car’s value really “diminished” – or is this a money grab?

By | March 16th, 2016

Peggy Smith admits she was involved in an “accident” with her Budget rental in Salt Lake City last year.

“The car had only cosmetic damage,” she says.“I self-reported it to the police because, since I used American Express to pay for the rental, I was under the impression that American Express would pay for the damage.”

It didn’t cover the damage. American Express only took care of the deductible. The rest was up to her.

“I do not want to make a claim with my own insurance,” she says. (More to the point, she probably can’t — the accident happened almost six months ago.)

But if she had an accident, so did Budget. Its slip-up was charging more for the repairs than it should have, says Smith.

She recently received a bill for $3,392. Here’s how it breaks down:

  • $1,692 for damages
  • $139 for “loss of use”
  • $135 for in administrative fees
  • $377 for “add on”
  • $1,047 for diminished value

“My major issue is the diminished value,” she says. “Once a car is fixed, it’s fixed, particularly if the damage is cosmetic. It’s absurd. It should be zero.”

These junk fees, including the mysterious “add on,” the administrative fees, and the “diminished value” are common car rental industry charges. Now, no one is saying a rental car company doesn’t have expenses, but these fees really look like a money grab.

I mean, a bill like this begs several questions:

  • How, exactly, do you measure “loss of use”? Do you have evidence the car would have been rented if it hadn’t been in the garage?
  • What are administrative fees? Can you show you me a bill for them?
  • And an “add on”? Add on to what? For what purpose?
  • Can Budget prove that the car was devalued by $1,047?
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“It’s unfair,” says Smith.

I agree. The diminished value charge is particularly troublesome because there’s no follow up when the vehicle is liquidated. I mean, is there someone who, at auction says, “Hang on – this car would be worth $17,000 if had not been in an accident, and we got $16,850. We need to send Smith a refund for the difference!”

No, that doesn’t happen. The car rental company just pockets the difference.

I’d like to assist Smith, and I certainly could by contacting Budget on her behalf and asking it to, at the very least, explain these fees to her. I think she deserves an answer.

But how do we help others who have suffered this fate? That’s hard because car rental companies are regulated at the state level. In those legislatures, there are no consumer advocates to stand in the way of “business-friendly” regulation that allows car rental companies to charge whatever they want. (Diminished value isn’t recognized by all states — yet.)

I put the words “business-friendly” in quotes because I think laws that let car rental companies impose junk fees hurt businesses in the end. Customers end up hating them, and that actually harms car rental companies in the long term. They should be careful what they ask for.

Anyway, with car rental companies effectively able to pass whatever laws they want in many state legislatures, it’s virtually impossible for advocates to help consumers like Smith. The only hope we have of fixing this? Regulating car rental practices at the federal level. If that happened, we’d have a real chance of ending these shenanigans once and for all.

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