(FORTUNE Magazine) – DECIDING WHERE to rent a car should be one of life's easier questions. It does not rank with whether to send your firstborn to private school, or even if you should buy term or whole life insurance. All you want is safe, clean, reliable transportation at the right price. What could be simpler? Answer: Almost anything. Getting the best deal requires the intuition of Sherlock Holmes and the persistence of Sisyphus. The dozen or so largest rental companies can all offer you safe, clean, and reliable transportation. The question of price is far more complex. There are good reasons why the chart on page 76 looks like a Calcutta railroad schedule. Car rental rates vary from city to city, and even by neighborhood. They can reflect the day of the week or the month of the year, rising for example in the summer and falling when vacation travel slackens. Definitions of car sizes vary. One company's cramped compact is another's roomy intermediate. Even the employees cannot keep the rates straight. You may get one price quotation from an 800 number and another from a local office. The extra-cost options are more bewildering still. Several companies offer no fewer than four different kinds of insurance: the collision damage waiver, liability insurance, personal effects coverage, and personal accident insurance, which covers medical bills and provides death benefits. Depending on whom you rent from, you will pay more for two additional doors, a second driver, or a remote drop-off. The budget-priced subcompact you saw advertised may have been driven off the lot just before you walked up, leaving you to wait several hours for another one or rent a land yacht at double the daily rate. If you try to reserve one of the loss leaders, you may find they are available only at some locations, or they are so few in number that practically speaking they don't exist. JUST A COUPLE of years ago, life was relatively blissful for the renter. The four major operators -- Hertz, Avis, National, and Budget -- were cutting prices furiously and tempting customers with gifts that ranged from toy koala bears to computers. When Hertz and Budget were dueling over supremacy in the Houston market, Budget cut its daily rate to $1.05 and Hertz went it one better by going all the way down to $1. Such suicidal maneuvers aside, the majors were often competitive with outfits such as Thrifty and General, whose fleets were miles from the airport terminals. The majors could survive the brutal price competition because their goal was market share, not profits. Their car fleets generated huge investment tax credits and accelerated depreciation, which provided valuable offsets to profits earned elsewhere by their conglomerate owners. That game ended with the repeal of the tax credit and tightening of the depreciation rules in 1986. Since then, the structure of the industry has changed dramatically. RCA sold Hertz to UAL Inc., which has put Hertz up for sale again. Wesray took Avis private in a leveraged buyout from Beatrice and is now contemplating a public offering. Similarly, Paine Webber bought National from Household International and could soon take it public. Last September Transamerica sold Budget to the New York investment bank of Gibbons Green van Amerongen, which took it public in May. Except in the case of Hertz, the new owners were saddled with heavy debt from leveraged buyouts and had no deep corporate pockets. They have thus had to squeeze more cash out of the actual business of renting cars. Says Vincent Wasik, National's chief executive officer: ''The elimination of the investment tax credit is the best thing that ever happened to National. Now we can't do things for tax reasons. We have to do them for profit.'' Meanwhile a seller's market has developed. Business and vacation travel are up strongly, and foreign tourists are flocking to the U.S. One Thursday in mid-July, Avis Chairman Patrick Barrett announced that his entire 125,000-car fleet was sold out. Price wars are over, except in a few hotly contested vacation markets. Industry consultant Fred Mudgett expects revenues to reach about $7 billion this year, up 12% to 15% from last year. Profit margins will be in the 10% to 12% range, vs. about half that as recently as two years ago. Budget, the fourth-largest firm, with 100,000 cars, reported profits up 180% for the first half of 1987. Perhaps the most dramatic indicator of change is the asking price for Hertz, the industry leader with 150,000 cars. UAL was accused of paying too much for Hertz when it bought the company for $587.5 million in 1985. Now First Boston is conducting a spirited bidding for it among more than 100 companies, most of them financiers angling toward a leveraged buyout. The expected sale price this time: around $1 billion. There's one piece of good news for the consumer in all this. The combination of strong demand and higher prices has made room for the minors to grow. You can still find good deals -- in fact, your odds are better than ever if you can make your way through the thicket of companies and the maze of rates. You just have to work harder at it.

First stop for most car renters is one of the airport terminal counters that account for 50% of the business. Hertz and Avis control three-fifths of the airport traffic. National and Budget have been slowly increasing market share, and together now hold about 38%. Generally you will fork over more at these locations, because the companies pay up to 12% of their in-terminal gross revenues to lease space. Indeed, some airports make more money from rental car companies than they do from airlines. What you get in return is convenience, especially if you find your car right outside the door. Because of their size, these companies also offer more locations for remote drop-offs and quicker service if you break down or get in an accident. Arrayed around the perimeter of the airport are companies such as Alamo, Dollar, Thrifty, and General. Since all are privately owned, reliable market share figures are not available. The off-airport companies charge about 20% less than the majors because they do not have to cut the airports in on their sales. That makes them attractive to vacationers who are willing to trade convenience for price. Off-airport renters are growing fast. Thrifty's revenues have more than quadrupled since 1983, to around $50 million. Nowhere to be seen at the airports are a third tier of companies, the insurance replacement firms, which serve people whose cars are wrecked or stolen. Rentals -- only to people who can prove they have insurance claims -- run a week or longer and cost about $16 to $20 per day, less than half what the majors charge. St. Louis's Enterprise, the largest in this group and the seventh-largest rental company overall, runs 42,000 cars in 275 locations. Those who value image over price can indulge in exotic rentals. Nowhere are they more popular than in car-crazy Southern California. The largest is the ; Budget Rent-A-Car outlet in Beverly Hills, where the raciest cars go for $1,000 a day if you can get a special binder from your insurance company and demonstrate that you can drive a supercar competently. For other exotics, which range downward from a Rolls-Royce Corniche at $400 per day, all you need is money. Budget's owners say their high-image business is up 15% this year. Other Budget franchisees with fancy cars can be found in Atlanta, Denver, Miami, and San Francisco. The bargain basement of the business is filled with thousands of local firms that operate out of car dealerships, garages, taxi companies, or even parking lots. Some offer new models, but their staples are used cars ranging from low-mileage cream puffs to clunkers that rent for as little as $5.95 per day plus mileage. The only guarantee is that the vehicles meet state registration standards and can be driven off the lot. A number of these outfits are linked up with national franchises such as Rent-A-Wreck, whose licensees have 325 locations. Rent-A-Wreck has spawned several eponymous competitors, including Rent-A-Dent and Rent-A-Heap. But Tucson-based Ugly Duckling, with nearly 600 outlets, has passed them all (see Careers). Founder Thomas Duck Sr., a retired life insurance salesman, provides liability insurance for his franchisees that they would have a hard time finding as independents. FOR YEARS, the in-terminal companies have concentrated on business travelers. Hertz, for instance, makes 70% of its sales to business customers. Your company has probably negotiated a corporate discount with an in-terminal company for up to 30% off the standard or ''rack'' rate paid by travelers who just walk up to a counter. If your company has no special deal, you can still save money by booking your rental car in advance. And if business is slow, you may get a discount anyway. Lately, off-airport renters have been picking up some of the corporate business. As airports run out of space, more travelers are discovering that the car they rent from a major is also several miles from the terminal. Texaco recently switched its account from Avis to Dollar because it gets better service in Houston, where it rents 17% of its cars. Cost-conscious corporate travel departments also want to rent for the lowest rate possible, even if it means some inconvenience for the traveler. Alamo is looking for locations at the New York airports, which it had shunned because of high operating costs, so it can win corporate customers. But the off-airport companies have headaches of their own. Airports in Sarasota and Palm Beach, Florida, are trying to capture revenue from them by charging 8% to 10% of their sales for the privilege of picking up customers in shuttle buses. Alamo claims that the charges amount to $1 million annually at Palm Beach alone, and it has passed the extra cost along to its customers as a surcharge. It wants the fees rolled back because other airport users, such as hotels and limousine operators, are not paying them. It has brought suit in Florida federal courts and formed a coalition called Americans Against Unfair Airport Fees to lobby for federal government action. At the same time, the in-terminal crowd is prospecting for added vacation travelers, who are more profitable because they pay a higher rate and keep their cars longer. ''We're like the church that is built for Easter Sunday,'' says Frank Olson, chairman of Hertz. ''We are designed to handle the business crowd from Monday to Thursday, and we need somebody to rent the cars from Friday to Sunday.'' Hertz cut costs at Houston's Hobby Airport by moving its operation off the airport, where it will attract more vacationers. Avis's Pat Barrett is thinking about moving some of its outlets for the same reason. ''You can't ignore it,'' he says. ''I think the majors have missed a lot of business there.'' No company has done a better job of snaring vacationers than Alamo. The scrappy Fort Lauderdale-based corporation, which had only 400 cars in 1976, shrewdly targeted booming destinations in Florida and Hawaii to grow into the industry's fifth-largest renter. It has 70,000 cars in 67 locations. Alamo's promotional leader is a two-door Chevrolet Chevette that can be rented in certain Florida cities for $39.99 per week with unlimited free mileage. But Alamo's advertisements contain a lot of small type, and some of the provisions are singular. For example, most companies give you a full tank of gas and charge $1.50 to $2 per gallon to refuel the car if you return it empty. Alamo charges $11.99 for a partially filled tank when you drive away and tells you to bring the car back empty because it gives no credit for unused gas. If you rent a Chevette, you're getting about $9 of gas; how little you leave for Alamo upon your return depends on how willing you are to risk being stranded by the side of the road as your plane takes off. Alamo's competitors claim it has a reputation for limiting the availability of low-priced cars and for aggressively inducing customers to trade up to more expensive models. Says Frank Olson: ''Their pricing is unethical. I call it bait-and-switch.'' Olson estimates that the cost of just keeping a car in a rental fleet is $12 per day: $9 a day in overhead and $3 in interest charges. Says he: ''You can't make any money at $39 a week.'' (Hertz rents some cars at $49 a week, which by Olson's own arithmetic means he can't make money on his price leaders either.) Hertz is running advertisements in travel industry magazines warning that ''Alamo ads should be read from the bottom up.'' It concludes that when you add up all the fees and restrictions, ''You may not think that Alamo is such a fine deal.'' Alamo chairman Michael S. Egan, 47, a onetime instructor in hotel and restaurant management at the University of Massachusetts who is the firm's principal owner, calls Hertz's charges ''bull.'' Says he: ''We don't get any complaints from customers -- just from competitors. I state everything in my disclaimers. If the car they reserved is not available, I'll rent them a Cadillac at the same price if I have to.'' Ingenuously, Egan insists that people like the arm-twisting they get because ''they want to be sold.'' When all the extras are included, Alamo still has a price advantage. In Orlando you would pay $189.91 per week for one of its four-doors vs. $243.65 at Hertz. ALAMO'S HARD SELL has gotten it in trouble. After receiving complaints from 76 renters, the Florida attorney general accused it in 1984 of bait-and-switch advertising on a $29 weekly special, as well as forcing extra-cost insurance on customers by implying that it was mandatory. Alamo agreed to reimburse the renters without admitting wrongdoing. Nothing is more confusing than the different kinds of ''insurance'' the rental companies try to sell you. Lately attention has been focused on the collision damage waiver, a provision in the rental contract that exempts you from repair charges if you bang up the car. Companies charge anywhere from $3 to $10 per day for the CDW. The annualized cost ranges from $1,080 to $3,600 -- far more than conventional auto insurance to cover similar damage. According to the National Insurance Consumer Organization, about 60% of car owners carry collision insurance that covers rental cars and do not need the CDW. Car rental officials concede that the CDW is expensive and often duplicative. But they argue that it spares you the hassle of filing a claim with your own insurance carrier, as well as the risk that your premium might be hiked or your coverage canceled in the event of a claim. You're almost sure to hear the argument from the desk agents if you decline the waiver, since sales of CDWs are a big profit center. According to a survey conducted by the consumer affairs committee of Americans for Democratic Action, ''only four of the 27 firms questioned indicated the CDW was optional and that the renters' own insurance might cover it.'' The ADA group also compared Fourth of July weekend ''specials'' offered by rental car companies this summer. It found that of the 17 that advertised them, eight -- including Avis and Thrifty -- charged the regular weekend rate or a higher one. Two others, Amerex and Arrow, offered merely a 5-cent savings over the usual weekend rate. Rental companies often catch you when you are vulnerable: after a tiring airline flight (more than likely delayed) and en route to a destination. How can you get the best break? The first thing is to know what you need before you get to the rental counter -- how big a car you want, how long you intend to keep it, how far you expect to drive it, and where you will drop it off. Having made these decisions, you can shop around to figure out roughly who offers the best arrangements. You should also read your insurance policy or check with your agent to find out what your automobile coverage is. If that sounds like a lot of trouble, chances are you will be renting a car more than once in your lifetime, so the time invested will be spent wisely. Unnecessary insurance could triple the cost of a week-long rental. The best advice is to be careful and use common sense. Intellectually you may appreciate and applaud the rental car companies' new focus on making profits. But knowing how they do it should put you in a better position to make sure you do not contribute a disproportionate share.

CHART:

CAR RENTAL CITY COMPACT CAR RATES COMPANY DAILY WEEKLY WEEKDAY WEEKEND Hertz NEW YORK $59 $45 $239 ORLANDO $41 $41 $174

Avis NEW YORK $60 $54 $239 ORLANDO $36 $36 $159

National NEW YORK $57 $51 $229 ORLANDO $34 $23 $159

Budget NEW YORK $56 $50 $215 ORLANDO $33 $33 $119

Dollar NEW YORK $50 $50 $218 ORLANDO $28 $26 $109

Alamo NEW YORK N.A. ORLANDO $31 $25 $100

Ugly Duckling NEW YORK N.A. ORLANDO $15 $15 $69

WEEKDAY MILEAGE SECOND COLLISION FREE SUBSEQUENT DRIVER DAMAGE MILES COST/MILE CHARGE WAIVER PER DAY Hertz NEW YORK 100 35 cents None $8.95 ORLANDO 100 30 cents None $9.95

Avis NEW YORK 100 30 cents None $8.95 ORLANDO 100 30 cents None $8.95

National NEW YORK 75 30 cents None $8.95 ORLANDO 100 30 cents None $8.95

Budget NEW YORK 75 30 cents $5 Total $8.99 ORLANDO Unlimited $5 Total $8.99

Dollar NEW YORK 100 30 cents $3 per day $8.95 ORLANDO Unlimited None $8.95

Alamo -- -- -- -- ORLANDO Unlimited $1 per day $9.99

Ugly Duckling -- -- -- -- ORLANDO Unlimited None $7.00

CREDIT: ILLUSTRATION BY JAVIER ROMERO CAPTION: Unlocking the Mysteries of Rental Car Pricing Here's a sampler of what you pay without advance booking. New York generally has the highest rates in the U.S., Orlando the lowest. But extras such as insurance add up everywhere, and rates are not always what they seem. Definitions of ''compact'' vary; figures here are for four-door Ford Tempos, Chevrolet Cavaliers, or Chrysler K-cars. Dollar and Alamo make you buy gas; Alamo charges $21 per week less for a two-door. DESCRIPTION: See above.