California car rental law: a guide for rental companies

Most of the rules sit in one place: Civil Code sections 1939.01 to 1939.39, the chapter on passenger vehicle rentals. It covers any business renting passenger vehicles to the public, and a "renter" is anyone on a contract of less than 30 days, so a five-car operator is covered exactly like an airport chain. A renter can sue under it and recover attorney's fees (section 1939.25), and any clause that waives it is void (section 1939.29).

What can I charge a renter for damage in California?

Section 1939.03 is a ceiling, not a menu. Your agreement can make the renter responsible for no more than:

• collision damage, whatever the cause, up to the car's fair market value;
• theft, up to fair market value, but only if you prove by clear and convincing evidence that the driver failed to take ordinary care. The renter is presumed not liable if they return the key and report the theft to the police within 24 hours;
• vandalism linked to a theft, on the same terms;
• vandalism not linked to a theft, up to $500 in total;
• the towing, storage and impound fees you actually paid;
• an administrative charge.

Loss of use is not on the list, so a "daily rate while the car is in the shop" clause has no basis in California.

Section 1939.05 limits how the bill is built. Parts are the estimated cost to you, and labour is the rate you usually pay times the estimated time. Every discount you receive comes off. The administrative charge is capped:

Section 1939.07 adds two more limits. The claim may not exceed what the repair actually cost, or the estimate if you choose not to repair, and you must mitigate. If the renter's own insurance covers the damage and confirms it during business hours, the renter can require you to deal with their insurer.

Can I charge the deposit for damage after the rental?

Not on your own say-so. Section 1939.15 says you may not recover any part of a damage claim by charging the renter's credit card, or by placing a debit or block on it, without express permission the renter gives after the damage. A deposit hold you capture at return for a scratch, without that permission, is exactly what the section forbids.

Section 1939.13 adds that you may not require a deposit, or block a card for an amount equivalent to a deposit, because the renter declined your damage waiver. A bigger hold for customers who say no to the waiver is out.

What wins a damage dispute is evidence the renter can check: dated photos at pickup and return.

How much can I charge for a damage waiver?

Section 1939.09(d) caps the daily price for the five smallest car categories (economy, compact, intermediate, standard and full-size, or terms with a similar meaning) at $25 per full or partial 24-hour day. Since 1 January 2023 the cap rises each January with the CPI-U. The statute does not print the indexed figure, and we did not find an official page that does, so check it before you set a price above $25. Larger categories have no cap in the section.

What the waiver must cover matters more than its price. A damage waiver covers all damage, loss and loss of use, and every exclusion is void except those the section allows: intentional or reckless conduct, driving under the influence, towing or pushing, unpaved-road damage caused by the road, commercial hire, felony use, speed contests, unauthorized drivers, driving outside the US, and fraudulent or false information.

If you sell a waiver, you must:

1. Disclose, in the contract and on a sign where the renter signs, the nature and extent of the renter's liability, that their own insurance or card may cover it, and the range of waiver prices.
2. Tell every renter orally that the waiver may duplicate their own auto insurance, and get their initials next to accept or decline.
3. State next to that box that the waiver is optional.

You may not require the waiver (section 1939.13) or pressure anyone into it.

Which fees can I add on top of the rental rate?

Section 1939.19 allows only three kinds of mandatory charges on top of the rate: the rental rate, "additional mandatory charges" and a mileage charge. Additional mandatory charges are government-imposed fees tied to running a rental business. Section 1939.01(c) lists the customer facility charge, the airport concession fee, the tourism commission assessment and the vehicle license recovery fee. A cleaning fee every renter must pay, or a mandatory "admin fee", is neither.

The quoting rules:

• Give the total early. As soon as the customer gives dates, location and vehicle class, give an estimate of the total for the whole rental, including all government taxes and fees. Online, the total must be in type at least as large as the rate.
• Hold to it. What you charge may not exceed a confirmed quote unless the customer changes the rental.
• Ads carry a disclaimer that additional mandatory charges such as airport and tourism fees may apply, and that optional items such as a damage waiver cost extra.
• Optional is fine. Insurance, accessories, a one-way return and refuelling a car returned with less fuel can be charged, because the renter could avoid them.
• Young drivers. You may add a charge "based on reasonable age criteria" you set. The chapter sets no minimum renting age and no cap on that charge.
• Additional drivers. You may charge per driver, but not for the renter's spouse, child, sibling, parent or grandparent, or an employer or coworker on business. An unauthorized driver you discover may be charged up to twice the fee.
• Delivery. No charge for the time before you deliver the car, or after the renter asks you to collect it.
• Fuel source. State whether the car runs on petrol, diesel, electricity and so on before the reservation is completed.

Do I owe the tourism assessment and sales tax?

The tourism assessment funds Visit California. Government Code section 13995.92 says the commission sets the passenger rental car rate, at no more than 3.5 percent. Whether a small off-airport operator is assessed is decided by the Office of Tourism's own rules, which we could not open, so ask them directly.

Sales tax applies to rental receipts. The CDTFA's guide for rental companies treats required charges such as excess-mileage, documentation and late-return fees as taxable. Customer facility charges, vehicle license recovery fees and airport concession fees are generally not taxable. Rates by city and county are in car rental taxes by state.

What do I need to check before handing over the keys?

• The licence. Vehicle Code section 14608 requires you to inspect the renter's licence and compare the signature or the photo with the person. Section 14609 requires a record of the plate, the renter's name and address, licence number, issuing jurisdiction and expiry.
• Insurance. Every owner must be able to show financial responsibility (Vehicle Code section 16020). An owner's liability for a permissive driver's negligence is capped at $15,000 per person, $30,000 per accident and $5,000 for property (sections 17150 and 17151). The federal Graves Amendment (49 U.S.C. 30106) shields a rental owner from liability merely for owning the car, when the owner was not negligent. It does not remove your duty to carry insurance.

How do I pass a toll on to the renter?

Vehicle Code section 40264 lets you return an affidavit of non-liability with the rental agreement within 30 days of the toll evasion notice. The agency then pursues the renter. Section 1939.19 does not mention toll admin fees, but a fee every renter pays would be a mandatory charge it does not allow. More in charging rental customers for tolls.

What Renviq does and does not do here

Renviq records each rental on a dual-signed agreement with a PDF audit trail and the renter's own auto insurance details. It checks minimum age, years licensed and licence class per vehicle at booking. Young-driver fees run as fee rules, and pickup and return photo inspections give you the evidence 1939.07 claims rest on. Sales tax is a rate per pickup location, and a fee can sit outside the tax base or belong to one location only.

It does not check your agreement, fees or waiver price against the Civil Code. It does not sell damage waivers or insurance, and it does not ask for the renter's permission before you capture a deposit hold. Section 1939.15 leaves that permission to you.

California checklist

1. Agreement liability clause no wider than section 1939.03; no loss-of-use charge.
2. Administrative charge within the 1939.05 table.
3. Damage waiver priced within the indexed cap, with the written notice, sign, oral disclosure and initials.
4. Same deposit whether or not the renter buys the waiver; no damage charge to the card without permission given after the damage.
5. Quotes show the total with government fees; no other mandatory fees.
6. Licence inspected and recorded; insurance in force on every car.
7. Toll affidavits returned within 30 days.