I got this picture this week. What is interesting about this price menu is that the “Fuel and Service,” priced at $9.29, is so off the scale (and so outrageous) that perhaps it makes the pre-paid option of $3.65 look attractive. After all it is about 1/3 the price of the Fuel and Service.
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I don’t even understand the FSC option, won’t Hertz have to refuel your car anyway in the FPO option? Also, do they mean one has to pay the fuel they will use to refuel your car in addition to the $9.29 (which then is even more outrageous), or do they mean the price pays for the refuel (i.e. includes it), so FSC is just the same as FPO but more expensive?
What of course you need to realize is that if you pay for the whole tank in advance, unless you are very careful you will likely give some of that purchased fuel back. Indeed it is hard to imagine how you could run the tank to empty so you get all of what you have paid for. And of course if you give the car back with say a half full tank of petrol you are also paying an outrageous price, so actually unless you are in a frightful hurry, the third option is the only one to go for. Refill tank before handing back.
I think I understand this. In all cases the car is given to you with a full tank when you rent it. The first option charges $3.65/gallon for every gallon in that full tank — which is fine if you’re going to return the car with an almost empty tank, but since that’s very unlikely you’ll end up giving them some gas for free. The second option charges $9.29/gallon for *only* those gallons that you used up during the rental, and is the same as the third option except done by them and at a high price.
Only the third option doesn’t waste money, but the others might get used by people who don’t care because they’re travelling on business and their company will pay whatever rental fee is charged. And I imagine that the second option often ends up used unintentionally, by people who had wisely decided at the time of rental to use the third option but as it turns out don’t have time to refill the tank without risking missing their flight — or who have simply forgotten to do it.
I disagree, Eds. Unless Hertz is siphoning off the gas when you get back, you’ll have the half tank (more or less) left from the last person at the time you fill up. So if you fill up from a half to a whole and use half, you’ve paid $3.65/gal which is what gas costs where I live. The issue is how much is in it relative to when you got it, not how much is in it when you give it back.
@Rebecca, its always full when you pick up and you pay for the whole tank if you go that option regardless of how much the previous folk left fyi.
@Rebecca: In the first option they charge you for every gallon in the tank, even the ones that were left behind by the previous renter, and that’s how they make a profit even when charging just $3.65/gal. (It couldn’t be any other way. Suppose the previous renter had used the third option and returned the car with a full tank. If you chose the first option, they wouldn’t add any gas to the tank but they’d still charge you, because otherwise you’d get a full tank of gas at zero cost.)
I agree with Eds. I have used all three options one time or another (albeit from Enterprise, and not from Hertz) and here’s what I noted. You always give back some gas to the renter – in the first option – you just try to get it as close as possible to Empty.
Rebecca – Usually, when i get a car, the gas is topped off- and i have a tank full, so i am not sure i agree to your point.
I guess the logic is to try and convince the user to go for option 1 ( and if i add the assumption that this is from an airport location) – chances of the user trying to be safe and going for option 1 is very high. ( some airports dont have a fuel station nearby rental returns, so if you miss a fuel station, your option is only to return the car as it is.. )
unless your rich and dont care fill it yourself then tell them the air conditioner didnt work and ask for a refund.Last year went to avis they promised one car switchhed me to another for more money. asked them to honor price on smaller car they said no. walked next door to smaller rental joint got the smaller car and it was actually 100 bucks cheaper.it pays to shop?
Did you present a reservation confirmation number for a rental of the class you expected? I’ve yet to experience a situation where the facility was out of stock in the reserved class, then expected me to pay for an upgrade. Involuntary upgrades, because of the “inconvenience” and have always been free to me n matter which agency I’ve used in the past.
I have, however, overheard walk-ins (without a reservation) who expected a certain class then, when they discovered there were none available, expected a free upgrade to the next class at no additional cost.
Were the only two choices pre-purchase (at $3.65) or the very expensive option to let the rental service people fill the tank (at $9.++) you are correct. But, as long as the self fill prior to return option remains that is by far the best choice. I’ve done the pre-purchase and always leave too much gas in the tank upon return, thereby making the “effective” purchase price far more than the stated rate ($3.65 in this example).
If my time is worth $150 an hour (it is) and it takes me 20 minutes to stop and refuel a car to save $20 I have to ask myself, which gives my life and time more value? If I’m only looking at what I’m PAYING and not what I’m SAVING or GAINING, then it does seem a bit outrageous. It’s a lot of money compared to what you pay at an outside station in the US, but not in Great Britain. If you accept it’s the cost of doing business (renting a car), then it’s also not outrageous. If they tacked it onto the rental contract you wouldn’t mind. It’s the idea you’re being expected to pay three times what it normally costs that frosts your chaps, not the price itself.
Where are you that it takes 20 minutes to fill a gas tank? It takes me about 5 minutes, tops. Enter credit card, fuel up, and go.
Any big city (in this case Maryland and DC) near an airport. Are you taking into account the time you take getting off the highway, traffic, sitting at an exit ramp light or stop sign, pulling in, gassing up and pulling out, or just the 5 minutes from the time you swipe your card?
Frankly it doesn’t matter Becky. Are you wired and working 24/7? Are you in a role that permits you to accomplish work-related tasks while you are at or on your way to an airport? If not, then the opportunity cost has little to do with your rates. We bill at five times that rate and I still gas up my rentals. It mostly has to do with convenience and whether you feel it’s worth it to you to spend 5, 10 or 20 minutes gassing up, or perhaps relaxing in some other manner, or even choosing to wait until the last minute to leave for the airport.
Genius! As Americans, we love the freedom to choose. We only lose when we forget to make conscious choices. In this instance, the rental agency has placed themselves in a position to win in each case; with consciousness, we can too, no matter our station in life. Perfect!
All of these schemes are aimed at the business traveler who is paying with someone else’s money.
For me, the super high gas prices cause a “pain of paying” reaction and I always top off myself even if someone else is paying. Maybe it comes from years of owning my own business, but I feel a strong need to deny the rental companies the extra margin from unjustifiably high gas prices.
I think it would be interesting if one company broke ranks and advertised “market-price” gas, much as Southwest has tweaked their competition about their checked bag fees.
If you only use 40% of your tank when you return the car, it’s a breakeven between the two bad choices. I’d fill the car up myself!
I think the comments are missing the point of your post. I read your post as saying that Hertz appears to be trying to trick people into choosing the worst option by manipulating the way the choices are framed. I think you are right. For almost everyone the better option will be the second or third. Only people who can bound their gas usage to no more than 100% and no less than 60% of a tank will come out ahead with the first; but that’s got to be a pretty small number.
If Hertz were not trying to trick people, they would frame the choices differently:
1) Do you want to minimize the amount you pay for gas even if you have to fill the tank yourself? If so, select the option to return the car with a full tank of gas.
2) Do you want to avoid having to worry about whether the gas tank is full when you return it, and do you think you will probably return the car with more than 2/5 of a tank? If so, select the option to pay to have the gas tank topped off at $9.29 per gallon.
3) Do you want to avoid having to worry about whether the gas tank is full when you return it, and you think you will probably return the car with less than 2/5 of a tank? If so, select the option to pre-pay the entire full tank of gas at $3.65/gallon.
My hypothesis is that such a framing would result in a significantly smaller number of people selecting the first option, and that Hertz is deliberately exploiting this framing effect.
I have no problem with the options Hertz gives. They provide a range of choices that suits a wide range of circumstances and preferences. I’ve chosen all three myself under different circumstances and never felt cheated.
The problem is not what the choices are, but how they are framed in such a way as to induce systematic error that redounds to Hertz’s advantage.
Good analysis, Marc. “Cheapest,” “Easiest,” and “If you won’t drive much.”
This reminds me of your first chapter in ‘Predictably Irrational’.
i’m surprised that they don’t have a price for self-refueling..
Tammy, they could borrow Verizon’s strategy and charge a “convenience fee” for customers who gas up themselves!
“What is interesting about this price menu it is that the “Fuel and Service” priced at $9.29 is so off the scale (and so outrageous) that perhaps it makes the pre-paid option for $3.65 look attractive.” – reference dependency in action
at least this is what they hope for
I always try to do option 3 and just bring it back full, but one time in Dallas in 2003, I was running late for my flight and accidentally drove past the last opportunity to buy gas before getting too far out in the boonies around DFW. I’d only used enough to get downtown and back to the airport, maybe 2 gallons tops.
Back then, gas in Dallas was under $2 a gallon, so the horrible inflated price of having them top it off was about $8 or $9, and I didn’t have to spend the whole day trying to get on a standby flight home.
One of the best $5 I’ve ever spent!
I’ve noticed that most gas stations that are close to the airports price their gas significantly higher than their suburban competitors but typically just above the price for option A. It’s a nice way (for them) to maximize revenues since they know that the consumers have limited options and will face a much higher fee (option B) if they don’t fill up the rental car’s tank. So the gas retailers use the rental car policies to reduce the price elasticity and shift the consumer’s price points higher than the market equilibrium away from the airport.
Ahhh, I saw this too, when I was in Boston. The irony of it for me was that I was conversing with the clerk about my career when he mention the fuel options. We had a good laugh about the fact that there is a gas station at the airport on the way into hertz. The gas station is the only place where you can buy low priced E85 in all of the greater Boston area despite the tens of thousands of hybrid and flex fuel cars around. Yep. These are facts.
When you rent, refill the tank yourself. Cheapest option.
Seems perfectly rational to me. The logical error being made ( I believe ) is that people are viewing the middle option as a “choice”. This is not a case of walking into a shop and choosing to buy 1 of 3 things. This is a case of choosing to buy 1 of 2 things, with one of those things containing a requirement on the buyer, which has a penalty if it is not upheld.
A. You agree pay for the fuel up front. When you return the car, you give them back the keys, and you be on your way.
B. You agree to fill the car up before you bring it back. When you return the car, someone gets in it, quickly looks at the fuel gauge, and if it’s full, you’re on you’re way.
C. You agree to fill the car up….. but you fail and are required to pay the penalty. In this case, the penalty is to have them go fill up the car, find out how much fuel was needed, and then pay for that. An inconvenience for both sides.
So option C ( the expensive one )isn’t a choice you make when you rent the car, it’s a contingency for if you fail to hold up your end of the bargain.
It seems like a perfectly reasonable scenario from the viewpoint of the rental agency, and not simply a case of placing an expensive unreasonable product, next to the one you’re actually trying to sell.
After reading most of the comments, perhaps a better question would be, why so many people look to find complicated, academic related answers for situations that are easily understood if you simply look at it from someone else’s perspective.
Is it because when people approach an irregular situation that doesn’t instantly make sense, they’re forced to reconcile that in one of three ways?
A. Assume that they are missing something.
B. Assume someone on the other side of the equation is missing something.
C Assume that there are random elements involved and the situation doesn’t seem logical because it isn’t.
Sorry for the wall of text, just thinking out loud.
Recently, at the Hertz in Dayton, OH they told me that if I put less than 100 miles on the car, they would top it off at the lower price, rather than the higher one.
I was surprised by this option and I assume it must be local to that branch. I’ve yet to come up with a compelling reason why they would offer this option. The labor of putting in a few gallons or a full tank is roughly the same. Why charge at a different rate for a top off?
They save on maintenance and depreciation because you didn’t put many miles on the car.
Is it just me or do most of the comments missed the point Dan was trying to make re: ‘middle option’ pricing (http://www.ted.com/talks/lang/en/dan_?ariely_asks_are_we_in_control_of_our_own_decisions.html)
I have a question.
Will this work for very high value product?? for example real estate or expensive sports car or is it restricted to lower denomination??
Any Ideas or thoughts??
(I am convinced it works for cheaper products, have experienced it myself)
I think that sales systems like the one under discussion ( though I don’t believe it’s actually being used in this hertz instance ) are more contingent on the point of sale rather than the price of the options.
From what I understand, this type of.. comparative influencing ( sounds like as good a term as any ) is most useful when people are making a choice, between a relatively small number of products, all of which basically fulfill the same purpose, but are of differing quality and price.
When it comes to real-estate, I don’t believe this is as useful. Primarily because the purchase of homes are usually a far more personal choice. There are a lot more variables that determine relative value to individuals, its far more complicated than a simple price vs quality decision. Furthermore, when looking at buying houses, people are usually looking at MANY different houses. So, having one or two that are at an artificially high price ( as would be required comparative influencing to be effective ) they would just stand out as being unreasonable and outliers when compared to the 20 other houses all priced similarly.
With respect to sports cars, I think they suffer a similar issue to real-estate, far too large a portion of the purchase choice is determined by personal preference, and the range of choices made available is quite large. I think however, comparative influencing CAN be useful within a range of options on a specific car. i.e. It probably won’t play much of a role in determining WHICH car you buy, but could be used to great effect when determining which MODEL of that car you want, and what optional extra’s you’re willing to pay for.
If price does play a role in the usefulness of comparative influence on products, I think it’s only because people buying higher priced options will have a tendency to look at a larger number of potential options.
It’s a good strategy. Give the renter three bad options so if they don’t like the result they are more likely to blame their bad choice rather than the company charging extra fees.
Option 1: You pay for unused fuel which could easily be and extra $30-40 or more on your bill but the cost is somewhat hidden so you don’t notice it as much.
Option 2: You pay three times the price for gas but perhaps not as much as overall as in option 1–and if you don’t like it just remember that you CHOSE this option to pay too much.
Option 3: Sounds good in the rental office but is not always possible as gas stations are usually near the airport (and if you are in an unfamiliar place its difficult to know) so it often becomes option 2 by default. And, if your meeting runs late, you hit traffic on the way to the airport, or you’re just running late paying–too much for fuel is a better option than missing your flight.
Three good ways to blame the customer for charging extra fees.
This is off the subject but apparently typical of the manner in which Hertz handles their customers. On 12-2-11 I reserved a Hertz auto for Birmingham AL pickup on 12-20-11. It was prepaid at that time with my debit card (I have no credit cards). Upon my 12-20 arrival I was notified that there were additional charges but they wouldn’t accept my debit card nor would they accept cash. My debit account always has a minimum balance of $3000+. Since then I have been trying to reach someone, anyone to refund my prepaid less $25 with no results. The Birmingham office simply says there is nothing they can do…that’s up to corporate. I may have to resort to filing a small claims suit. Ask me if I will use Hertz again!
Is it just me or do most of the comments missed the point Dan was trying to make re: ‘middle option’ pricing
Dan – Here’s another interesting gas station tidbit. Look closely at the price levels. Keep in mind that this is in Wall, South Dakota, a place most people just drive through once, fuel up and move on.
http://pics.livejournal.com/ryesview/pic/000363b2/
I’m guessing you’re pointing out that (besides being much cheaper) the “plus” is cheaper than the “regular.” I remember seeing that when I was back in Iowa a few years ago – the government subsidies for corn ethanol were sufficient that you could get higher octane fuel for about a nickel less.
In unrelated news, I would seldom go for the “premium” grade of gasoline – my owners manual even says it’s really not necessary, but when gas out here in CA was trending towards $5/gal a couple of years ago, I noticed that the old standard of a nickel or a dime or so between grades held right up to the peak, so that instead of being $2.65/$2.75/$2.85 it was $4.65/$4.75/$4.85, and so all through the worst of the terrible gas prices, I paid for premium thinking “Well, proportionately, that’s 20 cents well spent,” while people told me I was insane to spend more when gas was that expensive.
Full disclosure – I only drive about 3000 miles a year – I live 1.5 miles from work and I come home for lunch most days. For me, it meant going 4 or 5 weeks between fill-ups instead of 3 1/2. I love a good $2 worth of laziness.
I have to believe that Hertz, and by extension, all the major rental agencies, know exactly how the presentation affects outcome. Excluding academic and philosophical analysis, the two purchase options resolve to buying a product (FPO, tank of gas) or paying for a service (FSC, refuel). Each option is framed by one common variable, fuel quantity, but the potential costs and results are wildly divergent when calculated across all potential outcomes. When real data and circumstances are considered, “off the scale” really isn’t. The price comparison can’t be framed around the posted dollar figures since neither represents the absolute cost. Option 1 (FPO) presets your fuel cost at $54.75 (based on 15 gallon tank). Regardless of your consumption, you will pay $54.75. Option 2 (FSC) has a bounded limit of $139.35. The rational choice would appear to be Option 2 since the absolute cost can be controlled by the renter. If the fuel consumption is less than 6 gallons, Option 2 is cheaper. If more than 6 gallons, pull over and pump gas. A data point to consider: 6 gallons @ 20 MPG = 120 miles. Mixed city/freeway mileage @ 30mph average speed = 4 hours of drive time. How many corporate renters put in that much seat time on business trips?
externality warning. i used to work in what was affectionately called the tank yank business as a geologist investigating environmental damage from leaking fuel tanks. During the 90s the industry shifted away from mom and pop fueling stations (many of whom were put out of business by environmental impacts of these “investigations”) … so i can’t help but wonder – slightly askew from the dialog…but from an environmental perspective…does Hertz refuel on site? many sites are too small to support onsite filling. Do they use a nearby gas station? i get messaged about carpool shopping on delivery boxes from online shopping …and in that vein stopping to fill on the way – (no extra trip) appeals some how