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How Much Does a Limo Cost to Buy?

How Much Does a Limo Cost to Buy?

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How Much Does a Limo Cost to Buy?

How Much Does a Limo Cost to Buy?

Few manufacturers mass-produce limousines, particularly stretch limousines. As a result, most limousines begin life as a regular automobile such as a sedan or SUV. A business known as a “coach builder” then converts the standard automobile into a limo. This process involves many costs, and entrepreneurs considering entering the limo business should weigh the different costs involved in purchasing and operating a limo.

Related: Guide to starting a limo business 

The Costs Involved in Purchasing a Limo

Purchase Price

The initial purchase price of a new limo varies depending on the base model chosen to convert, the number of new seats added to the interior (consider the difference between stretch limos and smaller variants), and other customizations which can enhance the luxury appeal of the vehicle. A new limousine will start around $100,000, though custom-build limos can reach close to $1,000,000. Used limos are considerably less expensive, generally starting around $10,000 for something serviceable, and the costs go up depending on the age, mileage, and wear-and-tear. Other types of limos include limo mini-buses, limo vans, limo buses, and standard luxury sedans.

In addition to the purchase price, entrepreneurs should consider the initial purchase price of the vehicle, maintenance costs, insurance, taxes, and other fees such as additional licensing when starting a limo business.

Ongoing Maintenance

The ongoing maintenance costs a limo typically incurs include regular mechanical maintenance, safety inspections to conform to state and municipal regulations, and any additional repair work. Since limo passengers often rent a limo for the purposes of attending a special event, spills and accidents often constitute a sizable amount of the ongoing maintenance costs with respect to cleaning. 

Insurance

Several factors determine the cost of insurance for a limousine business, including state, type of business, and accident history. Necessary coverages include primary liability, general liability, physical damage, workers’ comp, and medical payments. While these costs can reach a significant level with a new limo business, steps such as requesting a higher deductible from the insurance carrier can help to defray costs if a business has the necessary cash backing on the balance sheet to cover emergency scenarios. 

Taxes and Fees

As with any business, a limousine operation will need to pay all necessary federal, state, and local taxes, including sales tax, payroll taxes, unemployment, FICA, and in some cases corporate income taxes depending on the business entity. Other fees may include commercial fees charged by municipalities and expressway costs for the right to use a particular highway. 

Licensing 

Depending on the size of the limo and the municipality, limo business operators may need to acquire additional licensing. In New York City, for example, the local government requires drivers of limousines to have a special “Class E” license or CDL. These types of licenses may also require entrepreneurs to pay additional fees and acquire more training.  

Other Limo Business Costs

A limo business or limo rental operation cannot grow without customers, garage space, and other general and administrative support functions. When starting out, the operator may take on most of these tasks, but if the business achieves a degree of success then the operator may need to acquire these additional resources.

Other costs to consider include advertising and marketing expenses such as running Google or Facebook ads to acquire customers, website hosting fees, domain name registration, and other miscellaneous fees such as business registration costs and bookkeeping services. 

Calculating Profitability for Your Limo Business

Calculating the profitability of a limo business involves taking into account sources of revenue, fixed expenses, and variable costs:

  • Revenue: How will you charge for your services? By the hour? Or a flat rate for an entire evening? Several pricing structures exist for limo and cab businesses. Owners should consider raising prices during peak demand seasons such as for local school proms. Other sources of revenue include an extra charge for waiting, beverages, and additional fees such as fuel surcharges.
  • Fixed Costs: Typical fixed costs include maintenance, support staff wages, and other expenses which do not vary by the level of customer demand. 
  • Variable Costs: These costs include fuel, transaction fees for accepting customer payments, driver expenses if drivers function in a part-time or on-demand capacity, and other expenses which depend on the level of activity in the business, including tolls.

Keeping track of this information will help entrepreneurs to avoid losing money in a highly-competitive industry. 

Getting Started

When starting a limo business, consider the type of customers you want to bring into the business. Typical target segments for a new limo business include school events such as proms, bachelor and bachelorette parties, weddings, and executive services or black car functions if sufficient demand exists in the local area. Having a solid understanding of the local market and demand for limo services plays a key role in the ultimate success of the business.

How Much Does a Limo Cost to Buy?

How Much Does a Limo Cost to Buy?

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