Prepay Fuel For A Rental Car? BAD IDEA

Have you ever rented a car from a rental company and been harassed to prepay for your fuel at the counter when you are picking up your rental? They make it sound like it's a such a great deal and that you'd be crazy to turn it down, but what you may not know is that most likely, they are making money off of you hand over fist if you agree to prepay for your fuel ahead of time.

A few months back, I was renting a car in San Diego for my family for the week. I had a very friendly interaction with the guy at the counter. When he saw my driver's license was from Minnesota, he asked if I was a Minnesota Vikings fan and we started chatting about my local football team and about how great Adrian Peterson was playing. We were having a nice friendly conversation.....until we got to the part of the rental where he asked if I want to prepay for my fuel. I politely said, "No thanks." as I know why the numbers are not in my favor to do so.

Did he move on? No - he continued to push me on my decision. He laughed, as if to make it seem like I was the first person in the history of the world to decline their prepay option. How could I be such an idiot? Here was our interaction:

Rental Car Worker: "You know the price of gas is cheaper when you prepay with us than when you fill up at the gas stations near the airport, right?"

Me: "Yes, I'm aware that can be the case."

Rental Car Worker: "The price of gas is going to be going up in the next week. You probably should lock in the price now before it goes up."

Me: "No, I'm ok. Thanks."

Rental Car Worker: (More harshly now) "You're going to go through at least a tank of gas in a week. If you don't bring it back full, you'll have to pay over $8.00/gallon for us to fill it up."

Me: "Yes, I'm aware of that. I still don't want to do it."

From there on out, the rest of the transaction was veiled in tension from the rental car worker because he was upset that I didn't take the bait. You may be asking, why isn't that a good deal when they offer me cheaper gas? I don't get it? Let me break it down.....(cue cheesy rap beat)

Let's say, for example, you rent a car with a 15 gallon tank and the price of gas in the area of your rental is $4.00/gallon:

You decide not to prepay for fuel and you go through 10 gallons of gas during your trip. You stop at a gas station just before returning your rental and you fill up for $4.00/gal. Your total cost for your fuel: $40.00. Sound good?

What if you had prepaid your fuel? Let's give the rental car company the benefit of the doubt and say that they gave you a great deal on gas and let you buy gas on the front end for $3.70 - a "savings" of $.30 per gallon! Sound like a steal? The problem is that you have to pay for an entire tank of gas (yes, it is in the fine print). Because of that, you buy 15 gallons at $3.70, which comes out to $55.50. You're spending an extra $15.50 to prepay for cheaper gas.

Hey, that doesn't sound fair? You're right, it doesn't. They get you because instead of telling you that you have to pay for all the gas you don't use (which wouldn't be a good sales tactic), they say "If you prepay, you don't have to worry about your fuel level when you return it." (a much more soothing sales tactic). Plus, they try to to scare you by charging you often over $8.00/gallon if you don't top it off before you return it, you feel like this is the lesser of two evils. Imagine how much more revenue the rental car company is making by getting an extra $15.50 off of each customer that elects the prepay option.

I bet you're wondering how I came out by declining my prepay option on my trip to San Diego. My wife and I used it for a full week and didn't even have to fill up the tank once. In fact, we only used about half a tank. Oh, and you know how the guy at the counter told me the price of gas was going up? I ended up filling up for less than the prepay option he offered me at the beginning of the week, because the cost of gas had actually gone down! Since I only paid for the fuel I used and filled up on my own, I saved myself over $25 by declining the prepay option.

When I went to return the rental, my "friendly" rental company worker was at the desk right next to me. I wanted to go up to him and tell him how much better I came out by not falling for his pushy sales pitch. Instead, I took the high road. Hopefully all of you know now to not be persuaded by the rental car workers. They push HARD to convince you you're an idiot for not doing it, but unless you're planning on driving the car back on fumes, the numbers usually don't work in your favor to prepay for fuel you're not using.

Do you have an interesting story to share about prepaid fuel? Leave a comment below!

Get Cash Now - Tips To Free Up Some Money

Is your monthly cash flow in a bind? Do you need to free up some money for a larger purchase? Here are some tips to help you get started. (Note: I know that sites out there suggest many different spending tips, but these are ones that I’ve tried or have had friends try that have produced success)

1)       Avoid Beverages or Alcohol While Eating Out: Not only is this a financial tip, but it’s also a health tip. Ordering water when going out to eat instead of soda or alcohol can trim your budget as well as your waistline. This is a consistent battle for me as I’m trying to live a healthier lifestyle and “drop a few.” These two high-margin add-ons can go a long way to boost the bottom line of your local pub or restaurant. Note: If you work at a restaurant, I’m still thankful for you and your service and you can pretend I didn’t write this one :)

2)      Take on an extra roommate: If your budget is in a bind, perhaps it’s worth looking into finding another roommate. Yes, you may sacrifice some “me” time, but you have someone else that is right there with you to help pay for utilities and who you can blame when guests come over and your place looks like a mess.  If you have kids, they can also serve as your scapegoat for a messy house :)

3)      Appeal Property Tax Assessments: Homeowners – did you know that when your property tax assessment comes each year, you can appeal the value they placed on it? As home prices continue to settle and stabilize, if you feel like your value is still too high its worth appealing. A couple of years ago I thought my statement looked a bit high. I called to appeal and it turns out there was an error on their end and it ended up reducing my taxes. They recognized it on their end without even coming out to the house. All it took was a two minute phone call.

4)      Lower Car Repair Maintenance Costs: Who likes paying a ton of money to fix their car? Sometimes a big repair will come out of the blue, but a quick internet search for a coupon from  your local auto shop will cut the bill down. Oftentimes something along the lines of “Save $10 on your next purchase over $50” or a “$10 off your next oil change” coupon can be found right on their website. It’s not a lot, but it is worth 2 minutes of your time and the cost of printer ink to check it out. If you want to cut costs even more, talk to a buddy to find out how to do an oil change yourself.

5)      Shop Around For Health Club Membership: Spending money to stay fit is a great way to utilize your budget. However, do you really need all of the frills that your local club provides? Is it worth money at a place that has a big pool if you hate to swim? Do you really use that hot tub or sauna that always seems to have people twice your age hogging it? Does your club offer childcare but you don’t have any kids? If you don’t use them, you’re still helping to pay for them. Perhaps it’s worth looking at a different solution. Low-cost health clubs are popping up all over the place and it may be worth moving your membership.

6)      Raise Your Insurance Deductible: A deductible on an insurance premium is the amount that you have to pay out of your pocket if you’re making a claim. While a $100 deductible may be great piece of mind, do you know how much lower your premium would be if you took on a $250 deductible? If you plan ahead and build a little emergency fund, it may be well worth your while to take on the added risk. If you have more saved up, what about bumping that deductible to $1,000? One thing is for sure, the insurance company isn’t losing money by giving you a nice low deductible since it is more risk for them to take on. If you take on just a little bit more risk, it may be well worth the boost to your pocketbook.

7)      Adjust Your Tax Witholding: Do you have trouble making ends meet for 12 months out of the year, but then enjoy going hog wild with a big fat tax rebate? Perhaps it’s worth adjusting your tax withholding so that more of that money goes into your pocket each month. If not, you’re essentially giving the government a nice hefty loan with your hefty rebate. The IRS has withholding calculators on their website that you can use to run the numbers. Plus, just think if you could invest that extra money each month instead? It’s a baby step to boosting your retirement account. Don’t trust that extra cash burning a hole in your pocket each month? Put it right into an automated savings account so that you don’t even have to see it month to month.