Here’s Something Your Collision – And Credit Card Rental Insurance – May Not Cover When You Rent Cars

A reader shared how they got stuck with $1289 in charges after their rental car got hit by someone else, even though they had insurance, the other driver had insurance, and they used a credit card with rental car collision coverage.

When renting from Hertz, my rental car was rear-ended. The other driver was at fault, so his insurance company paid for the vehicle damage. Hertz told me I still had unpaid fees including:

Administrative Fee: $150.00
Loss of Use: $315.00
Diminished Value: $1289.01

I filed a claim with Chase Sapphire Preferred, who is reimbursing me $465, which apparently covers the first 2 fees, but not “Diminished Value.”

‘Administrative fee’ is a bit squirrely. When you or I get hit, we don’t get to bill the other driver’s insurance a fee for dealing with them even though it’s quite a hassle. On the other hand, the rental company does have to deal with this. And thankfully Sapphire Preferred’s coverage picked it up.

“Loss of use” represents the days out of service for the car, when it couldn’t be rented out to other customers.

  • For these charges to be ‘legitimate’ the rental location needs to have been fully committed, if they had cars to rent but just not this one they aren’t really losing money
  • And a car being out of service for a period of time could just mean that the car is held longer and rented out more later (at least if the rental company chose to do so)

An insurer may insist on fleet usage logs to show that the rental company really lost out on the opportunity to rent a car, because they didn’t have enough cars, while the damaged vehicle was out of service. Thankfully Sapphire Preferred’s collision coverage picked this up, too.

However ‘diminished value’ is another category of charge, which can be billed in some states. This represents the rental car company’s theoretical loss on the asset, how much less the car is worth even after it is repaired.

“Diminished value” after repairs stems from one of two things,

  • Poor repairs that don’t fully restore a car to its prior condition
  • Stigma people may value a car less that has had to be repaired than one that’s never been damaged, even if they are in the same condition
  • The rental company is responsible for the repairs and can hardly argue that they had the work done poorly. So here we’re talking about ‘even though the car has been restored a theoretical buyer wouldn’t be willing to pay as much for it.’

    Diminished value can be valid, depending on the state. Many insurance companies won’t pay it and do not have to. My advice was to talk to the reader’s own insurance about it, to see whether their policy covers it (though the value here may depend on the relevant deductible). It could be covered under collision or liability. And the insurer might go after the at-fault driver’s insurance for it.

    I’d also press Hertz for a copy of the appraisal documenting the diminished value. There are several ways of calculating diminished value, and some can be aggressive. If you have a prepaid legal plan or other access to inexpensive legal counsel, it could be worth a lawyer letter arguing over the calculation or amount – since it is largely subjective, and assuming the car goes back into service won’t be known until quite some time in the future when the car is actually disposed of (and will likely see diminution of value from numerous future incidents that cannot be disentangled).

    I don’t buy rental company collision damage waiver, relying on primary collision coverage from my credit card and my own insurance. While I like to joke that primary credit card collision coverage lets me play ‘adult bumper cars’ this strategy doesn’t actually mean I am covered 100% all the time – even when I’m not at fault. The credit card agreement you ‘sign’ leaves you on the hook even for potential charges that would be disallowed by an insurer, and at a minimum having to fight the rental company over it.

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