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why are rental cars so expensive?

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renting a compact Ford Focus with a manual transmission for 15 days in Ireland will cost around $570. The insurance will cost an additional $550 for a total of around $1100. If I were to get a car with an automatic trans. it would cost an extra $500. I don't understand why this has to be so expensive. Is the insurance so high because they figure you're probably going to be damaging the car or have it stolen? I understand the streets are narrow and you might lose a mirror or 2 but come on!! I could buy a Ford Focus for that price here in the States. To get to where we want to go when we want to go will necessitate renting a car. I just want to understand why so expensive.

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