How to decrease costs in a taxi business: 2024 UK Guide
Cutting costs in your taxi business involves considering electric vehicles, being a fuel-efficient taxi driver, scrutinising your taxi insurance policy, and investing in advanced technology – among others.
Small things like grabbing a quick coffee between drop-offs might seem like a good idea but these habits eat away your profits more than you’d think. But how can taxi companies reduce their running costs and boost profit margins?
This article is your go-to guide, covering everything you need to know about reducing expenses to improve your bottom line.
Tip #1: Upgrade your vehicle
Upgrading your vehicle is a smart choice, as newer models are more economical and give less trouble over time. However, we understand this might not be a viable option for some taxi drivers. While you don’t have to buy a new vehicle outright, you could look at leasing options to stretch repayments over longer timeframes to suit your budget.
Modern vehicles have better fuel economy and can significantly reduce carbon dioxide (CO2) emissions, resulting in a smaller carbon footprint. This aligns with the UK government’s ambitious Net Zero Strategy. Lower car emissions also mean you’ll pay less Low Emission Zone (LEZ) and Clean Air Zone (CAZ) charges.
Since 2018, the Transport of London (TfL) has required all private hire vehicles (PHVs) to be zero-emission-capable (ZEC). This means vehicles cannot emit more than 50 g/km of CO2 emissions, and petrol-run cars must adhere to Euro 6 standards.
Here are a few suggestions:
| Car Model | Fuel Efficiency (mpg) | CO2 Emissions (g/km) |
|---|---|---|
| Skoda Octavia | 58.9 – 65.7 | 108 |
| Toyota Prius | 57.6 – 58.9 | 112 |
| Toyota Corolla | 74.3 – 80.7 | 83 |
Using hybrid or electric taxi vehicles can significantly reduce your fuel expenses. Government-led plug-in vehicle grants are a great option to look into as you could receive up to £7,500 off ZEC taxi vehicles.
Bonus read: Best Cars For Private Hire Taxis
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Get QuotesTip #2: Make your taxi more fuel efficient
There are many ways to make your hackney carriage or private hire vehicle (PHV) more fuel-efficient, without having to fork out a lump sum to replace your car. Many drivers enjoy reduced fuel consumption when following these suggestions:
Check tyre pressures
Do this at least once a month and before any long trips. Ensure you use a reliable gauge to get accurate readings, with the ideal reading being around 30/32 psi (pound-force per square inch). Harder tyres are safer and more economical (saving you around 3% fuel consumption), whereas softer/uninflated wheels can result in accidents and increase your fuel bill.
Reduce the weight of your vehicle
Clear out the boot and remove any items you do not need. If you need to carry items on top of your vehicle, avoid using roof racks as they increase aerodynamic drag, impacting fuel expenses. Opt for roof boxes instead.
Practise eco-savvy driving
A few eco-savvy driving tips include:
- Accelerate gradually to avoid increased fuel consumption.
- Brake early and smoothly to avoid sudden stops which can waste fuel.
- Maintain a steady speed as driving faster uses more fuel.
- Consider cruise control for longer distances to reduce fuel costs.
- Avoid idling when parked or stopped for extended periods.
- Keep air conditioning use to a minimum as this can increase your fuel consumption by 8-10%.
Keep up to date with vehicle maintenance
A well-maintained car can cut costs significantly for taxi companies. Service your taxi vehicles at least once a year to keep them in tip-top condition. This ensures they operate efficiently and reliably when transporting passengers. You may find the need for maintenance is more frequent when operating a full-time taxi service.
Standard maintenance costs range between £155 and £395 (excl. labour), depending on the vehicle size. The average labour rate for car services is around £75 per hour.
A few key vehicle maintenance checks include:
- Oil changes – to keep the engine running smoothly.
- Tire rotations and alignments – to ensure even wear and tear and enhance handling.
- Brake inspections – address any issues before they become safety hazards.
- Fluid checks (brake, coolant, transmission) – prevent overheating or operational problems.
- Filter replacements (air, fuel, oil) – maintain optimal engine performance.
- Battery checks – prevent breakdowns.
Neglecting vehicle maintenance can lead to unexpected breakdowns, costly repairs, and lower fuel economy.
Tip #3: Invest In technology
Investing in advanced technology like apps for taxi drivers is a surefire way to optimise your travel routes, find cheaper petrol stations, and find/book parking spots while on the job.
Let’s look at a few apps that can help cut costs and streamline your taxi business operations:
Navigation and parking
A reliable GPS device, like Google Maps or Waze, can help you find the most economical route that avoids traffic congestion, detours and unnecessary delays. These apps also help reduce idle times, streamline dispatching and scheduling and minimise fuel consumption.
Apps like AppyParking, JustPark, and RingGo help taxi drivers locate and pay for on and off-street parking spaces via the app. You’re also able to track, monitor and download your parking expenses which is super helpful when it comes to submitting tax returns.
Fuel and mileage
Online tools like PetrolPrices allow taxi drivers to compare fuel prices from various petrol stations across the UK. This helps you avoid paying premium fuel costs, which can significantly affect your bottom line. Avoid filling up at stations along the motorway as these generally have higher fuel prices.
Apps like MileIQ provide a reliable way to track your mileage while behind the wheel – very helpful when submitting tax claims. Taxi drivers can easily manage business and personal mileage via these apps.
Booking systems and accounting software
A reliable booking system, like Gett, Uber or Addison Lee, is one of the most important features of any taxi business, whether you’re affiliated with ride-hailing taxi firms, operating as a black cab driver or working independently.
By providing a convenient and efficient way for passengers to make taxi bookings, you can:
- Attract more customers
- Streamline your operations
- Reduce administrative overheads and ‘dead miles’
- Improve overall customer satisfaction
Cloud-based accounting software, like TaxiManager, helps you manage day-to-day business operations and pinpoint unnecessary expenses. Keeping track of your business expenditure, real-time data tracking, fare estimation, and payment processing allows taxi companies to monitor income and expenses more efficiently.
Tip #4: Reduce running costs
Here are a few suggestions to reduce running costs associated with operating a taxi company:
- Negotiate fuel prices: Explore options and strike deals with suppliers to obtain competitive pricing for fuel. Fuel cards are becoming increasingly popular among taxi drivers to pay for petrol/diesel. This strategy can also be used to find better deals with servicing workshops and insurance brokers.
- Monitor vehicle performance: Keep track of your vehicle’s performance, including fuel consumption, brake pads, and tyre thread, to identify areas of inefficiency.
- Stay on top of taxes: Whether you opt to file self-assessment tax forms yourself or prefer the help of an accountant, ensure you stay on top of business taxes to avoid penalties. By keeping accurate records of income and expenditure, taxi drivers can claim expenses related to their business which can put more money in their pockets.
- Taxi licences: Whether you have hired taxi drivers or work as a lone ranger, ensure your taxi licences and permits are up to date to avoid hefty fines and penalties.
- Working hours: Cabbies operating during peak hours or driving late at night tend to pay higher insurance premiums due to the risks involved. Consider restructuring your working schedule to generate enough income while keeping premiums low.
- Business premises: Large-scale taxi companies operating from brick-and-mortar buildings could move to smaller premises to reduce overhead costs (utilities, commercial property insurance, building upkeep costs, etc.). Another option is to allow administrative staff to work remotely.
Tip #5: Review your taxi insurance policy
Reviewing your insurance costs is another way for taxi businesses to save money and goes hand-in-hand with the above point. Understanding your cover can help you identify gaps, negotiate better rates and ensure you’re paying for the cover you actually need.
A few ways to cut costs on your premiums include:
- Pay annually to mitigate monthly interest charges.
- Maintain a good driving record, free from licence points and convictions.
- Secure taxi vehicles in garages or private driveways when not in use to reduce the likelihood of break-ins, vandalism, or theft.
- Up the security of your vehicles – immobilisers, CCTV cameras – to deter criminal activity.
- Opt for a vehicle in a lower insurance bracket as high-end cars are more costly to insure.
- Only choose the policy add-ons you need to avoid unnecessary expenditures. A few of these optional extras include breakdown cover, roadside assistance, and named driver policies.
- Opt for black box insurance whereby telematic devices collect driver behaviour data to determine your premium costs.
Compare taxi insurance quotes from multiple insurance providers using SimplyQuote’s 100% free, online comparison tool to find the best deal that aligns with your budget and needs. This applies to all drivers in the taxi industry, whether you’re in the private or public sector.
Tip #6: Avoid buying lunches and drinks
Avoid buying lunches and take away flat-whites if you want to save money as a taxi driver. These daily meals and drinks can quickly add up, costing you hundreds of pounds each month.
To put this into perspective, purchasing a coffee and a baguette sandwich easily costs around £10 per day – multiply this by five working days a week over a month and you’re looking at £200 for just one meal per shift!
While coffee breaks are needed to reduce driver fatigue, consider cheaper options like filter coffee as opposed to fancy iced frappes to save money in the long run. Even better, why not take your own cup, as many coffee establishments across the UK offer refillable discounts?
Alternatively, pre-packed lunches and bottled cold drinks from home can significantly reduce costs in your taxi business.
Pro tip: While not food-related, you can adopt this tactic by washing your taxi vehicle yourself to save money on carwash and valet services.
Tip #7: Be a responsible driver
Responsible taxi driving is not only essential for your and your passengers’ safety but can also significantly reduce costs for your business. Here’s how:
- Prevent accidents: By being a good taxi driver and following traffic laws, you can avoid accidents leading to costly repairs, increased insurance premiums, and potential legal disputes.
- Reduce maintenance: Good driving habits, like sticking to the speed limit and avoiding harsh braking, can help reduce premature wear and tear on your taxi vehicle. This can reduce maintenance and pricey replacement costs further down the road.
- Improved fuel efficiency: Driving responsibly, such as avoiding aggressive acceleration, improves your vehicle’s fuel economy, saving on fuel costs over time.
- Lower premiums: A clean driving record helps lower insurance costs and avoid potential fines or licence suspensions. Advanced driving courses ensure top-class driver performance which can also lower insurance costs.
- Enhance customer satisfaction: Responsible driving can contribute to a positive driving experience for your passengers, leading to repeat business and referrals.
Bonus reads:
Final thoughts
As you can see, there are many ways to decrease costs in your taxi business. By upgrading to modern vehicles, adopting eco-savvy driving habits, reviewing your taxi insurance policy, and investing in advanced apps and software, you’ll be well on your way to increasing your bottom line.
Use SimplyQuote’s 100% free, online comparison to find better public hire or minicab insurance quotes that align with your taxi business needs and budget.
Frequently Asked Questions
The best way to ensure your taxi business succeeds is to have a solid business plan in place from day one. This includes conducting market research, negotiating better deals, finding niche taxi driver markets and building a memorable brand.
Find more helpful hints in our How To Start A Private Hire Taxi Business article.
Increasing profits in your taxi business comes down to keeping track of your business expenses, reducing overhead costs, improving fuel efficiency, negotiating better taxi insurance deals, and optimising your travel routes. Read [How To Increase Profits In A Taxi Business].