Buying versus Leasing a Taxi/Limousine

If you want to start a Taxi or Limousine business and not sure if you should buy or lease a Taxi or Limousine licence in Canada then here are some words of caution and information about how to go by with it and whether to own or lease a limousine or taxi business.

A limousine in Las Vegas, Nevada.
A limousine in Las Vegas, Nevada. (Photo credit: Wikipedia)

Leasing a Vehicle And License

  1. When you lease a vehicle and license, these costs can be tax deducted from the business and hence your profit will not be taxed as extensively. That means though that you are just leasing and the license and vehicle are not yours to own and the money you pay monthly to lease them is a complete waste.
  2. Your business value is reduced due to the fact that you have no assets and the business is based on leased equipment. If one day you decide to sell the business, its value is less than if you had real assets. The owner of Limousine Montreal Limos VIP explained the concept to me and i was surprised with what he told me.
  3. The fee for renting the license of the taxi or limo may increase at any time and there is nothing you can do about it. You are only leasing and have to abide by their terms.
  4. Leasing means you can start your taxi and/or limousine business with very little capital and provides opportunities for anyone to be in the industry. It’s a good way to start in the business to know if you will make it or not, instead of investing a large amount of money and not seeing returns for many months to come.
  5. Leasing a vehicle could be better than owning cause you can keep updating your inventory for years to come and will have the latest and greatest models of cars. You will need less maintenance costs and your customers will be more impressed because of the age of your taxi or limo car.

Buying a Vehicle And License

  1. When you buy the limousine/taxi and you buy a license then in the end you know you will eventually be debt free and all the profits from the business will be yours and considered income. This is good thing though could be bad as well as the income you will receive eventually is high and there will be taxed higher. You will not be able to expense any lease costs and that means all the money is full taxable profit.
  2. In some cases, the license for the limousine and taxis has actually went up in value over time. Though we are not sure this is still the case, if you did purchase it a while ago, the license value has almost doubled in 10 years.
  3. If you decide to own a vehicle , then you need to be responsible to upgrade it in a few years, specifically in the limousine business looks are very important and so the one you already own will be almost worthless.

In summary, in order to determine whether you will profit more by owning versus leasing a limousine or taxi business will depend on many conditions, including the fee to lease the license, the fee of leasing a vehicle and the projected sales.

Once you determine all your expenses and projected income, you can then calculate if its worth it to own or lease in this business.

There are many business owners, that I have spoken to and they are more than willing to share their experiences in this business and educate newbies of what is involved in terms of costs and which route is best. It also is very dependent on which province you live in. The reason is some provinces the tax burden on income is so high, it is better to have expenses and hence will reduce their taxed income.

An update to this topic requires me to inform you that the government is limiting the licence for limousines and hence value of the licence might go up soon.