Before driving off, give the hire contract due care and consideration

Rental companies can pepper their agreements with many hidden charges which could cost the incautious driver dear.

Care hire firms are cashing in on this year's extra royal wedding holiday being so close to Easter. Hiring a car should be relatively straightforward for those planning to make the most of the extended break, but firms have all kinds of sneaky charges so if you're not careful, you could face a nasty bill when you return home.

The first rule to keeping costs down is to book in advance and use price comparison websites such as Travelsupermarket.com and Carrentals.co.uk to search the car hire firms for you. They don't cover all firms so you should check a few companies directly to see if you can get a better deal overall, particularly if you want any extras thrown in which the comparison sites may not cover.

You may even be able to find a better price with a small, local car hire company so if you're travelling to a place you visit regularly, ask around for recommendations. If you can speak the language, use a search engine to browse for local firms and see how prices stack up.

"It is essential to shop around when booking your car hire to get the best prices. While airline and tour operator sites offer this product they usually use one company and these are never the best prices in the market," says Bob Atkinson from Travelsupermarket.com.

As well as deciding what type of car you want – whether it's a cheaper economy manual car without air conditioning, or a more expensive people carrier with power steering and extra luggage space – think about the distance you're likely to cover. If you think you'll be using the car for long distances, look for unlimited mileage as some firms will impose a mileage cap and you could incur a hefty fee for breaching it.

Once you've got the basics covered, look at the details of your rental agreement. One problem is that most car rental companies offer basic Collision Damage Waiver (CDW) insurance which only covers the vehicle in the event of an accident. If you have Super Collision Damage Waiver (SCDW) your liability is reduced to zero and you'll be covered for damage to tyres, roofs and windscreens.

However, you can still come unstuck with the excess level, which is the amount you pay towards the cost of repairing damage. Unlike car insurance, where you pick the excess levels which typically ranges from £200 to £500, car rental firms dictate how much you pay with many charging a minimum of £500 – at Hertz, for example, the excess ranges from £550 to a staggering £1,400, depending on the vehicle group.

"When you hire a car in the UK, Europe or further afield your car rental agreement will typically cover the collision damage waiver, theft and third party liability, but should anything happen to the vehicle during your rental agreement you will be required to pay an excess, which could be as much as £2,000," says Stephen Ebbett, director of online insurer Protectyourbubble.com.

Most companies will try to persuade you to add a top-up policy to get rid of this excess but you should steer clear of this as it will often cost way over the odds. Instead, use Moneymaxim.co.uk to compare prices for a standalone car hire excess insurance policy.

Policies are available from insurers such as icarhireinsurance.com, Dailyexcess.com and Protectmybubble.com with prices starting from as little as £2.42 per day. In contrast, rental companies can charge an eye-watering £10 per day for this extra insurance and even worse, you may still not be covered for damage to the windows, tyres or undercarriages, which most of the standalone providers cover as standard.

As well as sorting out the excess, think about who else will be using the car – you could face excessive charges of up to £60 for child car seats and some firms will also charge for additional drivers.

Always ask the rental firm about their breakdown procedures too and make sure you have an emergency number to call. However, be wary of paying for cover you don't need, for example, you should already have Personal Insurance (PI) and Personal Effects Cover (PEC) on your travel insurance policy.

Fuel is yet another potential trap and policies vary from one company to another so check before you sign up. Many will charge up front for fuel so that you can return it empty, but then inflate the cost of that fuel by up to 30 per cent. Ideally, look for a deal that will allow you to hire the car with a full tank and return it with a full tank.

When you finally get round to picking up the car, inspect it for any scratches, bumps or missing pieces – and don't forget the interior. For peace of mind take a few photos to prevent any disputes later on.

"Check thoroughly for damage; there is usually a condition report which should show any marks and if you find anything that isn't on there you need to report it because they will put a charge on your card – the onus is on you to check and if you have any doubts raise it with the firm before you take the car away," says Paul Watters, a spokesman for the AA.

At the end of the rental period, make sure you get it back on time or you could be charged extra and if possible, ensure that you are present at the inspection or take some more photos so that there is no chance you'll be blamed unfairly for any new damage.

Colin Spencer, 59, retired

Colin Spencer has lived in Spain on the northern Costa Blanca with his wife, Ingrid, for more than seven years but hires a car in the UK three or four times a year to see family and friends.

Three years ago, the couple hired a car through EuropCar, which they picked up from Luton Airport at midnight, when it was too dark to check the car over. They were advised by the manager there to take the car anyway and check it in the morning.

"The next day we realised there was a three inch crack in the windscreen and a flat tyre. I called the manager immediately and she said the crack in the windscreen wasn't a problem, but that the flat tyre was our fault and we'd have to pay for a replacement," says Colin.

The replacement tyre set them back £120, but then things went from bad to worse when they later received a bill for £250 for the crack in the windscreen, despite the manager's assurances that they wouldn't have to pay for the damage.

"After a lot of perseverance, we were finally reimbursed, but not until six months later – and we were never reimbursed for the flat tyre," says Colin.

Colin now plays it safe and pays £38.03 for annual car hire excess policy with Protectyourbubble.com and can name up to six drivers on the policy.

"I have recommended car hire excess cover to dozens of our friends in Spain and the UK and have been surprised by how few people know about this type of insurance. Our next door neighbour is an insurance broker, and even he hasn't heard of it."

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