Take the forward fuel price!

If you had the option to buy a full tank of petrol at A$1.51 per litre for 7 days time would you take it? (For those outside of Australia, the current price is around $1.68) Looks like a no-brainer in this environment.

The question is: who would offer such a deal? Hertz car rentals that’s who. That is the offer we were given when we rented a car in Sydney today. We could either fill the car up before we returned it or take the deal. As I would normally pay a premium not to have to worry about filling up, we would do this anyway. But a discount! What a gift.

So this isn’t the norm so what is going on here. My first theory was that most cars were returned with some fuel; maybe a quarter of a tank. That is a valuable commodity to Hertz who pocket that amount multiplied by $1.51. And at prices this high, it is worthwhile pushing people towards that option. (That is, 20 litres in the tank is worth twice as much to Hertz now and, even at high petrol prices, is not likely to change very much).

Of course, that theory is potentially questionable as I read a form with a red circle and highlighting around one passage: “if you have opted for fuel pre-purchase do not re-fuel prior to returning your vehicle.” One would have thought that goes without saying and to the extent that it doesn’t, why would Hertz want to remind you of it? So I guess there might be something more going on here.

4 thoughts on “Take the forward fuel price!”

  1. Or are they just not very organised? A friend of mine wondered how well they kept their petrol prices up-to-date in the current environment. Unfortunately for him, the penal petrol price was a horrific $2.50. But I can imagine a company that sets up a quarterly review system and forgets to check in between times.

    Choose incompetence over conspiracy every time.

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  2. I worked for a Hertz competitor. Refuelling rates are set by the local branch manager and it’s up to them to remember to change it to suit their circumstances.

    The reminder is there because people forget that they bought the tank. Pretty frequently as it happens. And then get irate and blame the evil front counter staff for being tricksie hobbits.

    There’s a lot of economics at work in the car rental business, but the high cost of owning cars and the amount of staff you need, plus the cut throat competition, means that there’s not much room for funny business.

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  3. More thoughts.

    The penalty rate is usually set quite high because it’s more trouble to refuel the cars than it’s worth. You need to pull someone off other duties to do it, and it adds 10 or 15 minutes to the turnaround. That may mean the car gets to the next customer late.

    Car rental is a throughput business. It’s not worth skimming one customer if there’s 10 who will get annoyed because their cars and service were held up.

    For contrast consider the Berlin air lift. A plane landed every 3 minutes: if a plane was running late they would turn it around rather than disrupting the rest of the queue. The same thought applies in car rental: get it in, get it clean, get it back out.

    Bear in mind that petrol prices have surged in the past 6 weeks by a lot. Like Jennifer says it’s best to apply Hanlon’s Razor to these things.

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  4. Even with the reminder it’s very difficult to return a car with a completely empty fuel tank. So they don’t need to resort to trickery to get customers to return a car still containing petrol.

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