Apples and Oranges: The pitch for pre-paid gas option
By Rajesh Setty on Thu 22 Oct 2009, 10:36 PM – 9 Comments
Yesterday I was at the Hertz counter in Los Angeles and there were about half a dozen people in front of me in the line.
I was surprised (actually shocked) to see four of the six people in front of me choose the pre-paid gas option.
For those of you who don’t know what is pre-paid gas option, you pay for the entire tank of gas and you can return the car with an empty tank.
A quick side note: I know there are some nit-pickers who might be reading it. You can’t return a car with an EMPTY gas tank (you will need to get it towed, literally) so that is not the point of the blog post.
Now, the pre-paid option seems like a convenience option. But let us look at this in a bit more detail. You can drive about 300 miles with a full tank of gas. So if you want to make the most of the pre-paid option, you have to drive about that distance and return the car without filling the tank again. If you return the car with half a tank of gas, you literally paid twice the price per gallon on the gas. Pretty good for the car rental company.
After the first person chose the pre-paid option, I listened to the story with care. The story was well-crafted and staged:
There was a big board that showed two prices:
Average gas price in LA: $3.06 per gallon
Price with pre-paid gas option: $2.63 per gallon
There was another big board that said if you don’t take the pre-paid option, you would be paying a fee of $7.99 per gallon ( this included the re-fueling charge)
The agent would simply show the board and say that if the customer wanted to save money (?????) on gas, they might want to choose the pre-paid gas option.
It was simply brilliant piece of storytelling.
Really, there was no time to think. In a few seconds the customer has to decide whether he or she wants to take the pre-paid option and the entire story was staged in such a way that taking the pre-paid option made a lot of sense. The gas price was cheaper than the average gas price in LA.
The price shown was per gallon (around $2.63) but what was being charged was for a tank full of gas (around $45.00)
We can debate whether the car rental companies are using ethical practices in pitching the pre-paid gas option. Rather than worrying about them, it is best for us to be vigilant on the stories that we are being told to influence our decisions.
Photo Courtesy: Mr.Beaver on Flickr
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9 Comments so far, Add Yours
Rajesh Setty on October 24th, 2009
Hi Mohan,
Thank you for the comment.
I am sure we both will agree that this is an exception and even during business trips, you can opt to fill the gas yourself.
However, this is precisely the kind of exceptions that the car companies want to bank on. They want people to feel that this might happen (more often than not) and pre-paid option is a better way to go.
My $.02 of course.
Best
Rajesh
bdanks on October 26th, 2009
Raj,
I figured this out but ended up on the wrong side of the price equation. I got caught in the valley and it took forever for me to get to the airport. Filling the tank of my rental took about 15 minutes longer than it should of because of congestion at the gas station and a weird pay model. I ended up missing the gate on my flight and had to stay over in LA!!!! It cost me hotel, taxi and a night away from my family.
I would have made it with pre-paid.
In other words, take your advice AND show up early with your rental car!
Cheers,
Brad Danks
Rajesh Setty on October 27th, 2009
Thanks Brad.
I have to tell you that the odds are still hugely in the favor of the rental companies. More people who will choose pre-paid option will return with gallons of gas in the tank.
Adding to this, car rental companies can use examples (of exceptional cases) and make people feel that pre-paid option is a no-brainer.
My $.02
Best,
Rajesh
RaviC on October 27th, 2009
Even if you choose self filling option, more likely you may favor the rental car companies with excess gas in the tank.
There is always an apprehension of returning your car with lower gas reading and being charged at fancy price (a form of subtle threat from the rental company) for the difference.
Frequently, I chose to fill the tank. I ended up returning the car with more gas in the tank – not by design, it just happens.
You can win in self filling option, when you return the car with slighly lower gas reading than the recorded reading when you rented
– can be tactical/costly to accomplish!
Paying for gas based on mileage used would be most desirable and it is a win for the customer. But, the rental companies do not have
business incentive to do that unless there is some legal regulation which levies hefty fines on rental companies.
In summary: I speculate in either of these options, the game is in the favor of rental companies.
Rajesh Setty on October 27th, 2009
Thanks Ravi.
Personally I never sign up for the pre-paid option. The logic I use is quite simple (my bird brain can’t process complex logic anyway)
Option #1: Pre-paid will cost me about $45 for the full tank.
Option #2: Self-fill. The risk is that I return the car with less gas and they will charge me about $8 per gallon.
Let us assume that nine out of ten cases I return the car with full tank of gas. So I have already saved close to $400.
In the last case, if I do return with less gas, I might lose. But let us dig deeper. If I have to pay for a gallon of gas ($8) I still don’t lose. Actually I don’t lose until I have to pay for more than 6 gallons (6 * $8 = $48 which is more than $45 for the full tank of gas)
Best,
Rajesh
RaviC on October 27th, 2009
Thanks for your illustration Rajesh.
The point I was trying to make: self fill option, they record fuel meter at the time of rental(prone to visual error), and when you return the car they expect the fuel meter should close to the fuel meter reading at the time of rental. Rental car return with the same fuel meter reading is a challenge – most of the time I had invariably filled in excesss to avoid fancy charges.
To turn the game in your favor: you have to return the car with fuel meter slightly below the recorded fuel meter reading ( and hoping that they won’t notice this…) – can be tactical/costly to accomplish.
Rajesh Setty on October 27th, 2009
Yes Ravi. that’s a good point.
Now a days when you rent a car most of the time you have get a car with FULL tank of gas. So you are expected to return the car with a FULL tank of gas.
Best,
Rajesh
RaviC on October 28th, 2009
Thanks for your patience in dealing with this old man 
Looks like I was frozen in time capsule.
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Mohan on October 24th, 2009
Raj,
The road warrior in me says you just can’t beat the system.
I prefer to decline the prepaid gas option but on occasion – running late for a flight after a client meeting or just plain forgetfulness – I have driven back to the airport returns only to realize: I didn’t fill the tank. At times like these, one cannot turn around and opt to refill since:
a) Either they have closed the ‘contract’ and will not allow the car out or
b) Don’t have time to do it: got a flight to catch
Being screwed over by having to pay $7.99 or 8.99 a gallon: one has to learn to live with it I guess.
Kind of explains why business travelers on expense-accounts opt for prepaid option; right?