Defending Against Car Rental Chargebacks

by Justt Staff
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Published: July 31, 2022
Steps car rental companies can take to mitigate chargebacks to protect their bottom lines...
How Justt can help defending Against Car Rental Chargebacks featured image

While chargebacks have become increasingly common across nearly all industries over the past decade, car rental businesses have been hit particularly hard. With the proliferation of the ride sharing services like Uber and Lyft, margins in the car rental industry have been squeezed, making chargebacks an even more painful experience. In today's age of simplicity and convenience, consumers have come to expect a streamlined and hassle-free car rental process. Any deviation can result in a payment dispute, which has the potential to erase any profits made on a rental and, in some cases, leave a car rental company owing money to the cardholder. Fortunately, there are steps car rental companies can take to mitigate chargebacks and protect their bottom lines so that they can remain competitive in today's market. In this article, we'll outline a few of the most common causes of car rental chargebacks and provide ways to help prevent them.

No-show chargebacks

One of the most common chargebacks car rental companies face is the no-show chargeback. No-show chargebacks occur when a customer rents a car, doesn't show up to pick it up, and then disputes the charge with their credit card issuer. This can happen for a variety of reasons, but often it's simply because the customer changed their mind or found a better deal elsewhere. However, there are also instances where the customer may have rented the car with the intention of never picking it up. It's estimated that between 20% and 30% of customers who make car rental reservations never actually show up to pick up the car. This leaves car rental companies scrambling to fill the empty slot, often at a lower rate than what was originally agreed upon.

There are a few different ways car rental companies can combat no-show chargebacks. First, it's important to have a clear and concise cancellation policy that is easy for customers to understand. The policy should state what the cancellation fee is and when it is charged. It's also important to make sure that the customer understands the policy before they complete the rental agreement. Car rental companies can also combat no-show chargebacks by requiring a credit card deposit at the time of booking. The deposit can be applied to the cost of the rental if the customer shows up, or it can be used to cover the cost of the cancellation fee if the customer doesn't show up.

Late return chargebacks

Another common type of chargeback car rental companies face is the late return chargeback. Late return chargebacks occur when a customer doesn't return their rental car on time and proceeds to dispute the resulting late fees. The customer may simply have forgotten to return the car on time or may have attempted to intentionally keep the car for longer than they were supposed to, expecting to dispute the case with their banks at a later point. In either case, car rental companies often suffer financial repercussions if they're unable to collect the late fees.

Car rental companies can combat late return chargebacks by being clear about their late return policy from the start. The policy should state what the late fee is and when it is charged. Similar to no-show chargebacks, it's important for rental companies to ensure that the customer understands the policy in its entirety before they complete the rental agreement

Damaged vehicle chargebacks

Customers often debate whether or not to purchase the loss damage waiver (LDW) that is offered by car rental agencies. While this may be unnecessary for customers with coverage through their existing insurance policies, those without insurance or with insufficient coverage may be left with an unexpected bill for damages if they don't purchase the LDW. These customers may attempt to dispute the damage fees if they feel that the car was damaged prior to their rental or if they believe that the car rental company is overcharging for the repairs. In either case, car rental companies may find themselves on the receiving end of a costly chargeback.

Car rental companies can reduce the risk of damaged vehicle chargebacks by providing a clear description of the car's condition at the time of pickup. A thorough inspection of each vehicle before and after each rental will help to determine if there was any pre-existing damage of the car or if the customer is responsible for any damages. Taking photos of any existing damage can also help to prove that the customer was made aware of the damage and that it occurred during their rental period. LDW policies should be clearly explained so that customers understand what is and is not covered. When damage does occur, rental car companies should document all repairs and attempt to resolve damage disputes directly with the customer before involving the credit card issuer. A lack of response can be used as an argument in favor of the car rental company if a chargeback is filed.

How Justt can help

While accurate record keeping, documentation, and communication may help prevent many instances of friendly fraud, they can be difficult and time-consuming for car rental companies to manage on their own. Justt can help by providing a comprehensive chargeback mitigation solution - one that is designed to fit the specific needs of any business to provide the best possible outcome. With Justt, car rental companies can automate the chargeback mitigation process and glean insight into the root causes of legitimate chargebacks using powerful data analytics. Justt's experts will then create a customized chargeback prevention plan that helps mitigate future risk by optimizing checkout flows. And best of all, car rental merchants face no risk when signing up for Justt's services - we earn only if you win.

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