If you’re thinking about becoming a taxi driver – or operating a fleet of taxis – the first thing you need to weigh up is whether you can afford it financially. Start-up costs can prove extremely expensive – none more so that the vehicle, or vehicles, that you’ll be transporting passengers in.
In this article, we’ll offer our advice on buying a taxi: whether to buy new or used; luxury or functional; finance or outright purchase. We’ll also help steer you on what vehicle to buy if you want to keep your taxi insurance premiums down to a minimum.
Should you get a new or used taxi?
The first decision you need to make about your choice of taxi is whether it’s going to be used or new. There are advantages and disadvantages to both – a large part of your decision will come down to budget.
Obviously, a used car is cheaper than buying new. The value of a new car can fall at an alarming rate – although this varies across manufacturers and models – so there’s plenty of value to be found in picking up a car that is a few years old. A used car is unlikely to see anything like the depreciation of a new motor.
While in the past, buying a used car might have been seen as taking a bit of a risk, that’s not really the case when you’re talking about modern vehicles. While it’s true that you can’t be completely sure how a used vehicle was treated by its previous owners, modern cars are built to last and if you choose a car carefully (low mileage and full service history) the risk of buying a problematic motor is slim.
However, if you’re really concerned about reliability, you might be better off going down the new car route. A new taxi, straight off the production line, is less likely to break down than a used car – even if it does, it’ll be under warranty.
Buying a new vehicle means you get to choose exactly the specification you want and it’s hard to beat that ‘new car smell’. You’ll also enjoy access to a wider range of hybrid and electric cars, which is great news if you’re considering going green.
Another upside of buying new is that you don’t necessarily have to put down the money outright. There are plenty of good finance deals out there for new taxis, which can help you to spread the costs if you’re just starting out in a new business.
Finance versus outright purchase
On the surface, obtaining a taxi on finance can sound pretty appealing.
As the Money Advice Service explains, personal contract purchase (PCP) is a popular, if not a little complicated, way of financing a car. It’s like long-term rental, allowing you to use the vehicle until the contract ends. At the end of the contract, you can:
- Return the car
- Pay the resale value and keep it
- Put the resale value towards a new car
PCP agreements last three to five years, depending on what financial terms work for you. You’ll have to pay for a deposit upfront and you’ll be limited in the number of miles you can do – a pretty important part of the agreement if you’re a taxi driver.
Buying a car on a hire purchase (HP) agreement means that you’ll own the car at the end of the contract, but the finance company retains ownership while you’re still paying.
Alternatively, you can just lease a taxi, without any obligation to buy it at the end of the agreement. You might even be able to negotiate so that you don’t pay much of a deposit upfront – although this will likely increase your monthly payments.
Some leasing companies can also take care of the servicing and maintenance for you, giving you one less thing to worry about.
While getting a taxi on finance can make a lot of financial sense if you’re only considering one or two vehicles, it can take its toll on cash flow if you’re talking about an entire fleet.
A lot of factors influence whether it's cheaper to buy or lease a taxi, such as the number of miles you drive and how well the car retains its value.
If you think a car will retain a good resale value, then consider buying it rather than leasing. If it’s maintained properly and in good running order, it can give you years of good service and still be worth something at the end.
Choosing the right taxi
Prior to scoping out the car market, you need to ask the local authority where you’ll be operating for any specifications that they stipulate for vehicles that will be used as taxis. Typically, they will specify on engine size and seat width, but it varies from authority to authority.
There are lots of cars on the market that would make good taxis. But the right ones for your taxi fleet depend on what’s important to your business.
If you’re going to sell your service on its comfort, you might want to opt for cars that have some nice added extras such as climate control, which would allow passengers to set a comfortable temperature inside the car.
If it’s luxury you want, something like the Mercedes E-Class – the best-selling taxi of all time globally – would tick all the boxes. As you might expect from a Mercedes, it’s packed with high-tech features that help to make journeys run more smoothly.
If you’re looking to keep your taxi fleet insurance premiums down to a minimum, however, Hyundai's stylish, spacious supermini-sized hatchback the i20, could be the taxi for you. Although it’s classed as a hatchback, the i20 is available with three and five doors and plenty of rear legroom and boot space (326 litres). Read our recent blog on what the best cars are to buy for your taxi fleet.
Other taxi costs
As a taxi driver, it’s not just the cost of the car you have to consider.
Getting your taxi licence, maintenance costs, the salaries of the drivers, fuel and taxi insurance are all other things to take into consideration when you’re planning your finances.
Once you’ve found the right taxi
Once you’ve weighed all the different options available and chosen the right taxi for you and learnt all about taxi fares. It is now time to pick get some taxi insurance.
Here at Taxi Insurer, we can help you find a taxi insurance policy that suits your needs and we can work out a payment plan to make your payments manageable alongside all your other expenses.
Benefits of arranging taxi insurance through Taxi Insurer can include:
- Unique rates for public and private hire vehicles
- Low deposits
- Public Liability cover
- Employer’s Liability cover
With Comprehensive, Third Party Fire & Theft, and Third party only cover available, get a quick quote for taxi insurance today.