Should you Buy New Car or a Used-Car for Trotro and Taxi Business?

Whilst passengers would always want to ride in the finest of cars for the same fare they pay for any other commercial car they ride in, it is not financially simple to invest in new cars for commercial transport in Ghana, Nigeria and many West African countries. Most commercial transport business owners (individual and corporate bodies) prefer to invest in used-vehicles (often called home-used cars in Ghana) for the business, simply because they’re cheaper. Here are some highlights to guide you in choosing which one to buy. Imported used-vehicles usually cost about a third or less of the price of brand new cars. These cars are often 4 years old or older.

Same fares

Passengers are willing to pay you only the approved or widely accepted fares for the routes they use. Passengers would not pay you more for investing in brand new buses for trotro and would not pay you less for using old and bad-conditioned cars either. The situation is slightly different for taxis and rented cars as drivers usually price their journeys and can decline to pick you if you’re unwilling to pay their fares.

Maintenance

The home-used cars often have higher maintenance costs than brand new cars in their early years of use. The cost of repairs and maintenance can be so high, as the car gets older and older and at some point, it can wipe all the profits made at the end of each month. For taxis, repairs and maintenance can hit GHc600 each month after their third year on the road, especially when it plies bad roads.

Payback period

Owners of used-cars in the commercial transport business in Ghana could recoup their investment after just 12-15months if they opt for work-and-pay arrangement (a form of finance lease) with their drivers. On the other hand, brand new cars would take at least 36 months for investors to recoup their initial investment.

 

Residual Value

You’re most likely to be able to sell your vehicle at a higher price after four years if you bought a brand new car for your business. Brand new cars can sell for about a third of their value after two or three years of use. Used-cars usually are sold for very small amounts and sometimes for almost nothing.

Commercial transport business in Ghana is quite lucrative but risky too. One of the ways of maximizing gains in the sector is to choose the right vehicle in terms of make and age. If your vehicle is going to run long routes such as intercity trips, then you’ll want to go for a brand-new car which would deliver you long-term benefits.

If you also plan to stay in business for a long period without disposing of your cars often, then you would have to consider brand-new cars. The used-cars are best for commercial transport if they’re running short intra-city routes and intend to sell the vehicles after two or three years of use.

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1 comment

Eli June 27, 2016 at 9:13 pm

This is the kind of Business content i need in Ghana.Kudos

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