Terminology explained

We like to be transparent and open, so we've written a jargon-buster to explain common car-hire terms – and there are tips to help you save money, too. If you can't find what you're looking for, tell us and we'll add it in!

Car hire insurance

Your hire car will already be insured as part of the hire fee. However, there's almost always an excess to pay* – just like on domestic car insurance in the UK. However, the excess on hire cars is very high. It's normally between £1,000 to £3,000, depending on the car, the country and the deal. If you return the car damaged, or it's stolen or written off, you'll have to pay some or all of the excess.

Providing you've fulfilled all the terms of your hire agreement, the excess is the maximum amount you'd have to pay. The car hire company may take payment from you in advance for the full amount of the excess when you collect the car, and will refund any unused portion later. Or they may pre-authorise or block the excess amount on your credit or debit card, instead (see 'Pre-authorised charges').

If you take out excess reimbursement insurance (see 'excess reimbursement insurance'), you'll be refunded for any excess you had to pay out.

You can avoid having an excess blocked on your credit card by booking a car rental that includes Premium Cover.

Insuring the excess on your hire car's insurance policy means you'll be reimbursed for any of the excess you have to pay to the rental car company. This will happen if the car hire company has to make a claim on the car's insurance, or it could cover the cost of repairs which aren't worth claiming for.

This cover refunds any amount you have to pay for the excess on the the CDW/LDW (see 'Collision damage waiver'), or for any damage not covered by the CDW/LDW.

Excess reimbursement insurance also tends to cover other potential costs, such as towing, cleaning or admin fees, or misfuelling costs. So it lets you breathe easy, and could save your thousands of pounds should an incident occur. We provide Essential Cover and/or Premium Cover to protect your excess and pay for other potential costs.

This is always included as part of the insurance on your hire car. It will pay for bodywork repairs if you return the car damaged. However, it covers bodywork alone – not windscreens, tyres, or keys, for example, and it may not even cover all bodywork. Depending on the hire company, mirrors, roofs and undercarriage may not be included. And the CDW is subject to an excess, which means you'll have to pay the first part of any claim (normally between £1,000 to £3,000, depending on the car, the country and the deal).

When you insure your excess with our Essential Cover, however, you'll be reimbursed for any or all of the excess you have to pay, or for certain things that the CDW doesn't cover (such as misfuelling or towing costs).

This is always included as part of the insurance on your hire car. It represents the maximum amount you'd have to pay if the rental car were stolen. It's subject to an excess, which means you'll have to pay the first part of any claim (normally between £1,000 to £3,000, depending on the car, the country and the deal).

When you insure your excess, however, you'll be reimbursed for any or all of the excess you have to pay. Or with Premium Cover your excess will be reduced to zero.

This is always included as part of the insurance on your hire car. If you cause an incident, it could injure or kill other people (such as your passengers, pedestrians or people in other vehicles), or damage their property (their vehicle, house or possessions, for example). Since they need to be protected, you'd be responsible the cost of any damage, or treating injuries or covering their loss of earnings, as well as the third party's legal costs and any court costs.

This could cost you a fortune, but third-party liability on the rental car's insurance policy will cover you for that. However, it's subject to an excess, which means you'll have to pay the first part of any claim (normally between £1,000 to £3,000, depending on the car, the country and the deal). When you insure your excess, you'll be reimbursed for any or all of the excess you have to pay. Or if you take out Premium Cover, your excess will be reduced to zero.

While third-party liability cover will pay your costs if another person is injured or killed due to a hire car accident you cause, personal accident insurance pays out if YOU are seriously injured or killed in an accident while you're driving the hire car. It isn't always automatically included, so check the hire agreement; usually you can buy it as an optional extra. Plus, you may already be covered on your travel insurance, so check that carefully, too.

Whenever you take out any kind of insurance (including home insurance or life insurance, for example), there will be a policy. The wording in the policy determines what the insurance covers you for and what it doesn't (what it doesn't cover is usually called the 'exclusions'). The content of the policy is called the 'policy wording' and you should always read it. If the very worst came to the very worst, and you ended up in a dispute or even in court, everything could hinge on the policy wording and its interpretation. You should always read any policy wording carefully, because it will tell what you can and can't do and which actions might invalidate your insurance.

Unfortunately, if you buy your excess reimbursement insurance at the desk when you collect your hire car, you're unlikely to have time to read and digest the policy wording. That's why it makes sense to insure your excess in advance (for example, we offer Essential Cover and/or Premium Cover on all the rental cars we arrange). Knowing what's in your hire car policy wording you're much less likely to unintentionally get yourself in a pickle.

Things get a bit more complicated with the insurance of the car itself, the cost of which is included in your rental agreement. You're unlikely to see the whole policy wording for this, just a summary of key points (such as not driving off road or not getting the car repaired yourself – and in some countries, you may not be allowed to drive on certain roads at certain times of the year). So always take extra care with a hire car – if in any doubt as to what you can and can't do, ask the agent on collection or give the rental company a call.

At the car rental desk

This is where you collect and return the car. This could be a city centre or suburban location, but sometimes there are multiple collection points in the same city so do make sure you go to the right one. Some are located in airports, train stations or ports, and these are often called on terminal locations. (See 'On terminal' locations.)

During opening hours, the counter is manned by rental agents. Before they hand over your keys, they'll check your paperwork, go through insurance issues with you, and almost certainly take an excess and/or security deposit from you (or pre-authorise it on your credit card). Always check carefully whether you need the excess reimbursement insurance, because you may already have your own, like our Essential Cover.

You normally return the hire car to the same location. If it's out of hours, you might pop the keys into a drop-box.

Car hire companies often ask for a security deposit instead of, or in addition to (or even bundled in with) the excess. In Europe*, this usually covers a tank of fuel and the excess. The car hire company may take payment from you in advance for this, when you collect the car, and refund it later if not used. Or they may pre-authorise or block the cost on your card, instead (see 'Pre-authorised charges').

When you collect the car, the rental company will almost always ask for your credit card and 'block' a refundable payment to cover the excess and/or security deposit. This is a sum held in reserve (a bit like escrow), which you then can't 'spend' within your credit card limit. The blocked sum won't transfer to the hire company, but may be deducted after you return the vehicle if it's needed – in full or in part – to cover any excess, costs or fees. If you have a debit rather than a credit card, the company is more likely to actually take the advance payment from you rather than blocking that sum.

While the block is in place, the spending limit on your card will be reduced by that amount. However, unlike us, most comparison websites and car hire companies don't tell you this in advance, or don't tell you how much is involved. It could easily be as much as £3,000, which could cause you problems with collecting the car if there isn't enough credit available on your card, or if you need that extra credit margin to pay for expenses while you're travelling. Always ask about the excess in advance – or book through us, because our website always tells you what the excess is, and provides Premium Cover as a way to avoid the excess.

If you're overseas and currencies fluctuate, you could find yourself out of pocket by as much as £30 or £40 by the time you get your pre-authorised costs refunded.

'On terminal' or 'in terminal' car hire is where the rental desk is located in a transport hub such as an airport, a railway station or even a ferry terminal. It can make it much more convenient than a town-centre or suburban location, but see 'Location surcharges'.

Potential extra costs when hiring a car

A rental contract is between the car hire company and the one individual who signs the contract and will be the named driver. This means you have to ask for any other drivers to be added, and this usually comes with a cost (which can be up to £10 a day or even more). However, there are occasional promotions where extra drivers are free. Beware of being asked if you'd like to add a driver without being told about the cost.

You'll need to carefully weigh up cost versus convenience. For example, if you're doing long and tiring journeys, it's safer to split the driving between more than one person. And it may be fairer if it's not always the same person who is the designated driver – remember, in some countries you can't have any alcohol at all in your blood when you're behind the wheel.

Some car hire companies will charge older drivers (usually 70+ or 75+) an extra fee, which can be significant. The surcharge can vary between countries, even with the same hire company. It's because older drivers are often seen as a greater risk, so the cost of insurance goes up. A very small number of car hire firms won't rent a car to older drivers at all.

As with older drivers, younger drivers can be seen as a greater risk, although usually for very different reasons! There's a minimum age before they'll even hire you a car (often 21), and then an extra charge for those under a certain age. This extra charge can be significant; in the UK, it can be around £30 extra per day. The charge is usually payable on collection. It can vary according to:

  • your age (under 21, under 23, under 25, under 30, etc)
  • how long you've held a full driving licence
  • each hire company's own policy
  • the country where you'll be driving
  • the type of car you'll be renting (for fancier vehicles, the minimum age or surcharges may be higher).

To keep costs down, or avoid them altogether: shop around, hire a smaller car, or have someone else drive. Never lie about your age when you book, because you'll be asked for proof of identity/age when you collect the hire car.

When you arrive at the car rental desk, there are two scenarios in which you might be offered an upgraded vehicle.

First, you may be offered an optional upgrade to a more premium car. It's your choice as to whether you accept this, but bear in mind that you'll be paying more for a fancier car. And fancier cars come with costlier insurance, costlier insurance excesses, costlier security deposits – in fact, they're usually more expensive wherever an additional cost applies. They may use more fuel, too.

Second, if the car you booked is no longer available (it may not have been returned yet or may be in for repairs, for example), you may be provided with an upgraded car instead. There should be no extra charge for this.

If your car hire company needs to refill the fuel tank after you're returned your vehicle, they'll have to provide a refuelling service. Check carefully what this entails and what you'll have to pay for. The fuel prices they charge can be a lot higher than if you filled the tank yourself, and you may have to pay a flat fee as well (see 'Full-to-full, full-to-empty').

Your car hire will usually come with a full tank, and your rental agreement will state whether you need to return the car with a full tank (full to full) or whether you're permitted to return it with minimal fuel (full to empty).

If you return a car on empty when it should have been full – for example, if you run out of time getting to the airport or can't find a petrol station – the car hire company will charge you to refill the tank. They will deduct it from your service charge/excess, or take it from your debit/credit card. And the fuel price they charge you could be significantly higher than you'd have paid yourself at the pump, plus they're likely to charge you a flat refuelling fee which could be around £30.

Terms and conditions can be more complex than this and they vary between companies and rental periods, but this is the essential information you need to know. To save money, it's best to go for full-to-full.

Sometimes, a hire car automatically comes with unlimited mileage, so you can head for the horizon without a care in the world. However, sometimes your mileage is limited and you'll have to pay a surcharge for any distance you drive above that – and it can vary by company and even by country.

If you have limited mileage, you'll need to pay for any extra miles when you return the car. This can be quite expensive and could even be a surprise, so always ask the question – what's the mileage basis, and what's the extra charge per mile or kilometre per day?

If you return your rental car on a day before the one you'd previously arranged, as bizarre as it seems you could be charged a surcharge. If you think you might return the car early, ask the car hire company before you make your decision. Even if you're not billed for an early return, you won't get a refund for any unused days.

Car rental companies often have a tight turnaround for checking your returned hire car for damage and then cleaning it inside and out for the next customer. As a result, they'll build in a penalty for late returns – even if the car isn't booked out again immediately afterwards.

Car hire firms usually have to pay higher rates and other costs – even parking fees – at busy places like airports, railway stations and city-centre locations. That's why they often require a surcharge or tax, sometimes called a 'premium location fee'. This can be quite substantial – like an extra £30, or a percentage of your total car hire (such as 15% or more).

To avoid this cost, you could rent your car from an off-airport location and get a bus or cab from the airport, as long as there's a saving. And if the airport desk charges a percentage rather than a flat fee, cut the extra cost by buying your excess reimbursement insurance in advance from us, and by taking your own satnav, child car seat, etc.

This can be a catch-all for a variety of extras that the car hire company has to pay, such as road tax and vehicle licensing fees, road safety fees and related costs. They vary according to the country where you'll be driving, and could be as much as £5 a day more.

It may seem convenient to hire a car simply to get you to a destination, and to not have to return it to the location where you collected it. However, one-way car hire is usually extremely expensive. If you really do need to do it, compare the costs in advance before you make your decision. One-way car hire can also be called the vehicle return fee or a 'drop' charge.

This means putting diesel in a petrol car, or vice versa. The car will immediately need to be drained, flushed and refuelled by a specialist. However, if you've already driven on the wrong fuel, the damage could be extensive – and expensive. It could mean replacement parts like a new fuel pump, injector, filter and tank, or even a new engine, plus associated costs like admin, engineers' reports and loss of rental income on the vehicle during repairs.

Yet misfuelling isn't covered by the vast majority of car hire companies' own insurance. In 2015, a man who misfuelled a rental car was billed £9,200 to pay for the damage.

That's why our Essential Cover excess reimbursement policy includes misfuelling cover. If you misfuel, you MUST stop the engine (or don't start it) as soon as you realise your error. Contact the car hire company and your misfuelling cover provider immediately.

If your rental car is involved in an accident, you may be charged an administration fee. This can cover almost anything related to the incident, like liaising with the local police, other authorities and any towing and recovery operators; engineers' reports; contact with repair centres; correspondence with their insurer; and even correspondence with you.

* Except in the USA

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