Car rental in the 21st century is a ferociously competitive industry, which can provide travellers with outstandingly good value. For £20 a day or less, you can get unlimited use of an asset that is worth £10,000 or more. But like many dimensions of the travel industry, the whole business has become distorted and opaque since the internet intervened between the holidaymaker and their wheels. This guide can help you get good value — and avoid the pitfalls.

Where do I start?

Like everything in travel, car rental rates vary dramatically depending on supply and demand; in the short run, supply is fixed, while demand is highly volatile. In summer on Spanish islands, prices can go through the roof, while in winter the same car might cost only a few euros a day.

To get an idea of price levels, enter your requirements at a price-comparison website, such as Skyscanner or Travelsupermarket. But be aware that the very lowest quotes may have some or all of these features: a very high excess on damage; a fuel policy that isn’t “out full, back full”; and awkward access arrangements.

Having established the prevailing price level, either ask a travel agent to book a car as part of your trip, or pick up the phone. This last recommendation is based on a couple of things. Clicking through to the best deal on a price comparison site may take you to a broker; both these enterprises will collect a margin, so in general firms prefer to sell direct. And if there are problems it helps to cut out the middlemen.

Talk to the UK office of two or three of the big multinational car-rental firms, such as Hertz, Avis and Enterprise, and any local companies that have been recommended to you; for example, I find Cicar is very good in the Canary Islands. In addition, if you belong to an airline or hotel loyalty scheme, it is well worth seeing if there are discounts or special deals, such as a second driver free.

After decades of renting cars abroad, and being clobbered for unexpected extras on several occasions, I have concluded that I would rather pay a few pounds extra and have the chance for a proper conversation with someone.

What do I ask?

1 The price. It should include everything, including airport surcharge, taxes and basic insurance (typically the minimum legal requirement of the country you are in).

2 The excess: how much may I have to pay in the event of damage? If I choose to take out separate insurance for that excess, will you accept the policy? And can you guarantee that I won’t be asked for a deposit?

3 Can I add a second driver for free? If not, how much will it cost?

4 What’s the fuel policy? The traditional plan is out full/back full. Many internet deals, though, insist on out full/back empty. You pay an inflated amount for the tank of fuel, and are cheerfully told to bring it back empty – which, of course, is an impossibility. Every drop of fuel that you leave represents profit for the provider. If it’s not an “out full/back full” policy, I will politely decline.

5 Tolls. In locations such as Portugal and Florida, there are sometimes-complex toll systems in place. I ask: can I pay tolls manually? If I can, I do. If not, I ask if I can enrol online for a scheme rather than take a more expensive option.

Having phoned around, simply take the best deal.

Anything else to bear in mind?

Plenty, in particular when you pick up the car up. In many cases, car rental staff are incentivised on the extras they can persuade you to take when you pick up the car. My rule is politely to decline everything. They are mostly absurdly overpriced insurance options. Roadside Assistance Plus, for example, is not necessary. If your car breaks down, it's their problem, not yours, and they need to sort it out. Decline the chance to pay for this benefit.

Even then, in the US, in particular, I’ve been one of the many unwitting fools who don’t spot that they’ve been upgraded and are paying a small fortune for something they didn’t ask for.

Talking of the US, the cheapest quote is for a “sub-compact”. How tiny is it? Quite large. “Sub-compact“ or ”economy“ car in American terms is a perfectly respectable size for a European family. So politely ignore the salesperson's assessment of your pre-booked vehicle as being thoroughly unsuitable for the journey you plan (”You're not seriously thinking of all sharing that car, are you?“), the costs swiftly increase; the upgrade fee is itself uprated by a range of additional charges. And experience suggests you stand a good chance of a bigger car than you ordered anyway. On about half the occasions I hire in the US, there is not a single ”economy“ or ”sub-compact“ car in the rental lot, and I get a vehicle built like a Sherman tank without paying a penny more.

How can I keep prices down?

Don’t rent at an airport. Airports recognise the value of car rental to passengers and know they can extract a premium. This is passed on to the customer — with lots of other people trying to get a slice. When I tested an Enterprise rental in San Francisco, the rate was one-third more than from the firm’s office in the city centre. The discrepancy was made up of a whole range of fees, including a $20 flat fee per rental for “Airport Transportation” and an 11.11 per cent “concession recovery fee” that the airport charges the rental company. There was also a 3.5 per cent “tourism fee” (heading for the California Travel and Tourism Commission) and a 2.5 per cent San Mateo County Business Licence fee.

In a two-week rental, those charges can add hundreds of dollars, but you can avoid them by hopping on the train from the airport and hiring downtown.

My package holiday to Florida includes “free basic car rental”. Is it free, and how basic will it be?

Many Florida — and California — packages include the offer of a car. But my understanding of the business model is that the supplier of the vehicle expects to extract a reasonable amount of money from the person who rents it. By steadfastly refusing all offers of options, you can make it genuinely free.

I’m booking a budget flight, and the airline says it has a deal with a car-rental firm that guarantees the lowest rates. Should I take it?

If you have straightforward requirements (eg one driver only) and you are satisfied it is the best price, then do. Plenty of people speak highly about the easyJet/Europcar tie-up, for example. But be fast off the plane: if you have taken up the deal, the chances are that plenty of other people have, too. It’s worth the named driver going straight through to the desk, while the rest of the group waits for the luggage.

What about GPS?