• Jan 14, 2025 12:00
• Transportation
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Passenger Ground Transportation Cost And Price

Everything comes at a cost. Passenger ground transportation, whether it be a Sedan, Taxi, Rideshare or other options do have their cost specifics. By understanding what the costs are, how the costs are calculated, what determines the costs it is possible to have an objective view of the price of passenger ground transportation, developing a fair understanding of what is expected to be paid for the rendered services.

Passenger Ground Transportation Fixed Costs

Like any other business operation, passenger ground transportation has it’s fixed costs. These costs are determining the minimum which is required to keep the business operation ongoing. The main components of a passenger ground transportation provider’s company operation which determine the fixed costs are vehicle, insurance, registration.

Vehicle. Any passenger ground transportation provider has to purchase a vehicle which is suitable to accommodate their passengers. Vehicles come at a cost. A smaller vehicle would generally cost less than a larger vehicle which offers enhanced safety, space and comfort, more leg room and a cargo area, equipped to accommodate more luggage.

Main considerations of a passenger ground transportation provider when it comes to the vehicle are purchasing cost, maintenance cost and operating cost. A standard vehicle used to provide Taxi Service or Rideshare, would be an entry level vehicle with basic features priced at an entry level market price. A standard vehicle used to provide Sedan Service would be larger in size, would be more presentable, would be more comfortable, would offer more leg room and accommodate more luggage. The purchasing cost of an average vehicle used to provide Sedan Service would be higher than the one used for Taxi Service or Rideshare.

Most of the modern cities have regulations in place, clearly defining how long a vehicle can be used for public commercial passenger ground transportation purposes. One of the factors which is used to determining the length of time is the type of operation, whether it is a Taxi, a Rideshare, a Sedan …etc. The cost of the vehicle divided by the number of years of being in service determines the cost of operation of that vehicle per year of service, which is amortized by the passenger ground transportation provider and used to determine the price of the service.

Since their business models differ, a vehicle used for Sedan Service can be used longer than a vehicle used for Taxi Service. A Sedan Service vehicle will be mostly used for highway driving, long distance commutes, short city rides which require on call waiting time. These determine a longer lasting use of the vehicle, an esthetically cleaner condition, particularly the fact that it is being used by fewer people. A Taxi Service vehicle, or a Rideshare vehicle on the other hand, is on the road most of the working time, being used by more people, has more starts and stops. These determine it to be worn faster, requires more detailing and maintenance, causing the esthetical condition to deteriorate faster.

Although the costs differ, Sedan Service using higher priced vehicles, the difference in their business models, longer period of time of service, and less demanding esthetical maintenance reduces the cost of the vehicle per year of service, bringing it close to the cost of the vehicles used for Taxi Service and Rideshare. This allows Sedan Service Providers to price their service competitively, being able to comfortably accommodate their passengers at a fair price.

Insurance. Sedan Service, Taxi Service and Rideshare are bound to carry commercial insurance which will offer adequate protection for their drivers, passengers and other traffic participants in case of an unexpected occurrence. Due to their different business models their insurance requirements are different.

Rideshare and Taxi Service, assisting to more people per day and being in traffic more hours are required to carry more insurance and consequently at a higher cost. Sedan Service is less involved in assisting to a large number of people, more of the travelled distance is on highways, exposing it to a lower risk of an unexpected occurrence. Consequently insurance costs are less than the ones carried by other passenger ground transportation providers.

As in the case of the vehicle, the cost of insurance being lower, Sedan Service Providers are able to absorb it and offer a competitive fair price to their passengers, providing them the same or more protection at the same time.

Registration. The highest registration costs are seen within the Taxi Service community. Most of the large cities do have a fixed system in place which limits the number of licensed taxis allowed to operate within it’s jurisdiction. The limited number of licensed operators determines a certain market price for each license. To be registered as a Taxi, one must either be granted a license, or purchase an existing license on the market for the current price.

On top of the license cost, there are annual license renewal cost, which must be paid to renew the license and keep it active on the road, and road taxes which are either included in the renewal cost of the license or paid separately at the same time.

To be registered as Rideshare or Sedan Service does not involve the purchase of an active license, it requires just annual renewal and road taxes to be paid. Most of the cities do not have a limit on how many operators can register as Rideshare and Sedan Service.

Being exempt of licensing costs, Sedan Service is priced accordingly to offer a competitive price to their passengers, conveniently accommodating their ground transportation needs.

While fixed costs are unavoidable, each passenger ground transportation provider having to incur same or very similar costs, variable costs are directly dependent on the way each provider operates and are individual to them. The main components of a passenger ground transportation provider’s company operation which determine the variable costs are managing costs and marketing costs.

Managing costs are directly dependent on the volumes of operation. Each unit of transportation requiring higher costs when providing more service. These are fuel cost used to operate the vehicle, parts and labor cost used to keep the vehicle in good working order and esthetic conditioning costs used to maintain the vehicle in attractive and presentable condition.

Taxi Service and Rideshare are catering to many people every day. On average they would do 20 to 30 rides per day, transporting 30 to 45 passengers. Sedan Service, on the other hand, would do 4 to 8 rides per day, transporting 6 to 12 passengers.

In these circumstances the cost of the fuel, repair and maintenance are significantly less for a Sedan Service provider, which enables them to render passenger ground transportation service at a competitive yet fair price.

Marketing costs significantly impact the cost of operation. A small company or an individual provider will have to incur a higher cost per operational unit than a company having a large fleet, which allows for a more efficient amortization of the total cost.

The permanent need to be noticed, accessible and reached by new clients makes Sedan Service need to use a variety of marketing channels, which comes at a higher cost per unit when comparing other passenger ground transportation providers. Because of running larger fleets, larger companies are able to reduce their cost per unit of operation.

In spite of a higher marketing cost, Sedan Service is able to integrate it in the current price of the service and stay competitive with other passenger ground transportation providers, offering their clients good service at a fair price.

Conclusion

The price paid by the consumer inevitably includes the costs incurred by the passenger ground transportation providers of carrying business operation. Among the determining components which form the costs are fixed costs as the vehicle, insurance, registration; and variable costs as managing costs and marketing costs.

Depending on the size of the company providing passenger ground transportation service, and the nature of it’s operation, the costs will be calculated and amortized into the price charged for rendering transportation service.

The larger the company the lower the cost per unit of service, the more the vehicle is on duty on public road, the higher the cost per unit of service.

Sedan Service is the passenger ground transportation option which, due to it’s business model, requires less maintenance costs, lower insurance costs, lower registration costs, higher marketing costs and higher vehicle acquisition costs. These, summed up together, allows Sedan Service providers to render quality transportation service at a fair, competitive market price.