Choosing the right ownership model is a key decision for every taxi and PHV driver.
Buying a vehicle is a long-term investment and offers greater returns for drivers who spend their career behind the wheel.
Renting tends to be favoured by drivers who are just starting out, as well as those looking for part-time taxi work.
The key is finding the right option to suit your circumstances.
In it for the long-haul
Career taxi drivers tend to choose the vehicle ownership route because, in the long run, it is more profitable.
This option does involve paying large sums up front, either paying off the cost of the vehicle in full or finding a sizeable deposit as part of a finance deal.
This is before you consider running costs such as fuel, Vehicle Excise Duty (VED), servicing and repairs, licensing and taxi insurance.
The major appeal with this option is that once the final finance payment is made, the vehicle is yours to do with as you please. Your vehicle has become an asset and depending on trade-in prices, some drivers might look to upgrade, while others will carry on working with the same vehicle and enjoy the extra earnings.
Vehicles lose their values quickly, especially those with high mileage, such as taxis and PHVs. But a well-maintained vehicle is not only likely to last longer, it will hold its value more than one that hasn’t had much TLC.
This all features as part of a taxi driver’s business plan, which includes the cost and age of the vehicle, licensing requirements, and budgeting for a replacement.
Owning your own vehicle means you are responsible for the cost of wear and tear, which is set against the long-term financial benefits.
But in the long run, the cost of ownership usually decreases, providing drivers with higher profit margins.
On the road quickly
For drivers who are new to the trade, can’t meet the upfront costs of ownership, or those who aren’t sure about their long-term future on the road, renting is a popular option.
You usually pay fixed weekly fees which cover vehicle costs, maintenance and licensing. There are various options with different leases but, once agreed, you pay the same fee for the length of time you rent the vehicle.
Although this model gives you stability, it means in the long term you are paying more for using the vehicle. This means that your profits depend on how much you work beyond that figure.
Renting a licensed taxi or PHV allows drivers to start work quickly, especially if they don’t have the money to buy their own vehicle, and it also allows them to hand it back without huge financial implications if they decide it isn’t the career for them, or are only working part-time.
Rental agreements can also include servicing, maintenance and breakdown cover, which means drivers aren’t hit with unexpected bills, but there are usually mileage restrictions which could see drivers who go over having to pay more.
These are the sort of details you need to be aware of before committing to an agreement.
Neither choice is automatically better than the other. The benefits, as well as the drawbacks, depend on your circumstances and the type of taxi business you operate.
And with the switch from petrol and diesel to electric vehicles under way, drivers who currently own their cars might consider leasing an EV to help them decide which one is right for their business before making the huge financial commitment of buying an electric cab.
Whatever you decide, it has to be the best option for you.
