A ‘perfect storm’ is causing massive rental car shortages and prices are skyrocketing up to $700 per day in popular destinations

• A "perfect storm" has created a car rental shortage across the US.
• Car rental prices are hitting up to $700 per day in some markets, becoming more expensive than airfare and hotels.
• If you want to avoid these skyrocketing prices, plan ahead.
• See more stories on Insider's business page.

A rental car shortage is currently pummeling the US, and may only get worse as travel continues to increase across the country.

Mass vaccinations and easing travel restrictions have been pushing more people to travel again. As of now, airline and hotel costs are still relatively low compared to pre-COVID-19 prices, according to a report from USA Today. But if you're currently planning a last-minute "revenge vacation" to a warm destination, you might want to check the local car rental prices before you book any flights or rooms.

Right now, hot tourist locations like Hawaii, Florida, Phoenix, Arizona, and Puerto Rico are being hit by what some headlines are calling a "car rental apocalypse."

Two to three years ago, the average car rental price in Hawaii sat at around $50 a day. Now, they're going for as high as over $500 a day, Jonathan Weinberg, founder and CEO of AutoSlash told Insider. And in extreme cases, some prices have risen up to $700 a day, more than doubling 2019's numbers, Chris Woronka, a senior hotel and leisure analyst at Deutsche Bank, told Insider.

Procrastinators looking to book a rental vehicle just one week in advance in locations like Florida could see prices at around five to 10 times higher than the average, according to Weinberg. But even travelers who are planning ahead may still see double or triple the typical costs.

"People are quickly realizing that they need to take the cost of the rental car into account because it's no longer just an add-on," Weinberg said. "It literally could be the majority cost of your trip, so folks who are planning things last minute are unpleasantly surprised by it."

What the rental car companies are saying

Rental car company Hertz is now expecting "strong demand" through the summer, resulting in decreased vehicle availability in certain parts of the country, according to an email statement sent to Insider.

Enterprise echoed these sentiments, adding that it has been "working closely with our manufacturing partners since last summer to continue to add vehicles to our fleet to meet the ongoing increase in demand," according to an email statement sent to Insider.

Hosts with Turo, a car share company, have also seen a surge in demand as traditional vehicle rental companies have become too expensive, Andre Haddad, Turo's CEO, said in an email statement.

"2021 has definitely been a huge turnaround for the car-sharing industry in Orlando," Anthony Paulino, a Turo host in Orlando, said in an email statement. Paulino is now seeing bookings as far into the future as November. "Half of my guests have told me they will never return to another traditional rental company again."

How a"perfect storm" created the shortage

This rental car shortage can be attributed to several factors, which created what Woronka calls "a perfect storm."

When the COVID-19 pandemic first halted travel around the US, rental car companies like Hertz - which filed for Chapter 11 bankruptcy in 2020 - and Avis had to sell off chunks of their fleets in order to save money. While this move may have originally cut costs, it's now become an issue as people are scrambling to book "revenge vacations" in warm destinations after a year of no travel.

To resolve this problem, rental car companies like Enterprise have been shuffling vehicles from less popular locations to more frequented hotspots. While this could temporarily alleviate the immediate shortage issues, locations that had their cars removed could begin seeing some limited availability in the future as well, creating a "balancing act" issue, Woronka said.

This reshuffling could also be why rental cars are now selling out or selling for very high rates, in markets like Charlotte, North Carolina, Charleston, South Carolina, and Montana's Glacier Park National Airport, Weinberg hypothesizes.

"You start to wonder 'why those areas,' and the only real logical explanation is that they're pulling vehicles out of there and they're leaving those areas with a short supply," Weinberg said. "No matter how much shuffling the rental car companies do with the vehicles that they have on hand, I just don't think it's going to be enough."

As for buying new cars, well, that's not a simple possibility either. The computer chip shortage is already beginning to negatively impact the auto industry, making it difficult and expensive for these rental car companies to acquire new vehicles.

This chip shortage is the "number one issue," according to Woronka, and it's preventing these companies from quickly restocking their fleets due to skyrocketing used car prices and a decreasing number of new cars.

"It's like everybody going to the fire exit at once in a movie theater," Woronka said. "It's an unusually broad and quick surge in demand that's being exacerbated by this shortage of new car availability."

As a result, these rental companies may likely hold onto their existing vehicles for longer than usual. This means rental vehicles with over 60,000 miles, a once-rare occurrence, could become a typical sight in the coming months.

However, there could be light at the end of this tumultuous tunnel for rental car companies - in a few months, that is. Demand for rental cars often slows down in September, which could give these companies some "breathing room," according to Weinberg.

But if you don't want to wait until September, and you don't want to pay more for a rental car than a flight, just considering planning your vacation ahead of time.