Hazards for hire if you drive overseas

Sue Hayward looks at the potential problems with excess charges when you rent a car for your holiday

If you're heading to sunnier climes this Easter for your first holiday of the year, be careful if you're hiring a car: if you have a prang, you could end up shelling out more then the cost of a holiday.

People who book their hire car before leaving home might think that all they will have to do on arrival is pick up the keys and go. But the chances are that when they arrive exhausted at a foreign airport, they will be faced with a hard sell from the car rental office to shell out on extra insurance.

Collision Damage Wai-ver (CDW) is the insurance you usually get when you book a car, and this covers most of the cost if the vehicle is damaged. "But what many people forget is that you're still liable for the excess. This is typically around £500 but can be as high as £1,000," says Larry Ursich, founder of the specialist website Insurance4carhire.co.uk.

And it doesn't have to be a big accident to leave you out of pocket on the excess, "The damage could be something as simple as scratched paintwork, yet some companies impose the full excess for any damage," adds Mr Ursich.

As a guide, Avis charges an excess of between £600 and £700 on rental vehicles across Europe, and Hertz around £500.

This is where Damage Excess Waiver (DEW) comes in. "This is an optional extra which covers the cost of the excess if your vehicle is damaged," says Kelly Ostler-Coyle at the Association of British Insurers. Offered under many different names, including "super cover", "reimbursement excess" and "car hire excess", it's often given the hard sell when you collect your car: "You're at the mercy of the local office, who want to grab every extra bit of revenue they can," says Bob Atkinson from price-comparison site Travelsupermarket.com.

Among the potential risks if you buy this cover abroad is a higher local tax. "You'll usually be liable for VAT, which may be higher than in the UK," warns Mr Ursich. "Italy, for example, charges 20 per cent VAT."

A policy to protect your car-hire excess for two weeks in Spain with Avis costs around £135, yet this doesn't wipe out your liability; it merely reduces it to £100. Hertz charges around £120 for two-week protection, which covers the full cost of the excess.

And remember that some branches of the big-name companies abroad will be franchisees. Car-hire firm Budget, for example, has franchise outlets across Italy and Germany and Avis operates them in countries including Malta, Tunisia and Greece. "We don't have total control over charges at a local level," admits Daniel McCarthy, Avis's commercial director.

The best advice with any insurance, says Mr Atkinson, is to sort it out before you travel. "It's nearly always a better deal."

While the big car-hire chains say they can't sell you prepaid DEW, you can buy an annual policy before leaving with Insurance4carhire, at a cost of £49 for European cover and £59 for worldwide protection. This policy also covers damage to the roof, windows, tyres and wheels – all of which are often excluded on many DEW policies. Alternatively you can buy daily cover at £3.99. Other companies in this market include Carhire-excess.com, which offers cover from £1.99 a day.

And for added protection, always pay your hire costs by credit card if more than £100. The Consumer Credit Act makes the supplier and card firm jointly liable in the event of problems and covers purchases both in the UK and overseas.