Can anyone tell me, if an IDP is required to rent a car in Germany? Also need to know if it would be cheaper to set up the rental before leaving the US, and the best insurance option to cover possible damage? Will need the rental for 2 days in July, and would go to Austria.
Some rental companies require one and some don't. I have rented from Hertz and Autoeurope and neither asked for it. If you are going to drive in Europe, it may be a good idea to have one, if for no other reason than to have an easily understood document that could be useful in certain situations (and, of course, if you happen to have an encounter with the local police). I have rented through Gemut.com twice and highly recommend them. They will advise you to use your credit card insurance for auto rental, but American Express sells a good policy for a great price. If you use your credit card's insurance, be sure to pay for ALL charges related to the rental with that card (not including fuel etc.). If possible, arrange to pick up the car at the agency's local office as there is an additional 20% tax for picking up at airports and rail stations. This tax does not apply to dropping off at those facilities, however.
If you only need a rental for two days, it is probably best to pick it up at the airport. Save yourself the time and hassle of taking a bus or taxi to one of the neighboring towns and then locating and walking to the rental location. In some cases, they are sometimes hard to spot, with the cars parked behind the building. For a weeklong rental or more, the 20 percent saving is worth it, but not for a couple of days. It is usually best to rent from the U.S. before starting your journey, but for two days, it may not make much difference, anyway. (I am speculating here, but I did ask a similar question a while back and did not get an answer.) As for insurance, I agree that American Express is the best option, provided you have an AmEx card.
Usually, it costs more the closer to your rental date. If going to Munich, Avis and Hertz have offices there. Suggest you check with the various rental agencies for prices both at the airport and the town you will be first visiting. Getting rates for both places will give you an idea if the extra cost at the airport is worth it for you. I am renting a vehicle in September with Avis in Munich. Hertz was 700 more euros than Avis for the same vehicle category and insurance. We always get an IDP and it is not required to rent a vehicle only if you get stopped by the police for a traffic violation or accident. I think Austria requires one. You also need a vignette to drive in Austria on their autobahns.
What is a "Vignette" ?
A Vignette is a toll sticker that is required for driving on super highways - each country has its own. You can purchase one at gas stations close to the boarder. Not all countries require one - like Germany - but others do. DO NOT cross into Austria on the Autobahn without one as the police very often are waiting and they have no sympathy (at least that is what I have heard from other travelers).
As far as I know you won't need an IDP to rent a car in Germany. You also don't need the vignette to drive on the Autobahn in Germany. When you cross the border into Austria, you have a choice. You can avoid the Autobahn and not worry about a vignette. If you're only going to Reutte, for example, you won't need one because you won't be on a major road. If you're going to use the Autobahn, you need both a vignette (window sticker) and a orange safety vest. Both can be picked up at the border truck stops. As was mentioned, Austrian police actively check for them. We stopped and picked up our vignette at the border going toward Salzburg from Munich. When we got back on the road, there were patrolmen checking for them. They're cheap to buy, maybe a few minute wait in line, but expensive to be caught without.