What is the ROI on car hire purchase?

Return on Investment (ROI) is a measure used to evaluate the profitability of an investment relative to it cost. It can also be referred to as the ratio between net income and investment. A high ROI means the investment’s gains compare favorably to its cost and vice versa. As an investor or business person who finance cars on hire purchase for drivers, Return of Investment is a very important factor to consider. RIO is the profit you make after subtracting your cost.

For example, you bought a car on hire purchase for N4,000,000 for 2 years. At the end of the 2 years you realize you have earned N7,000,000. Assuming during the process of using the vehicle you used N1,000,000 for fuel, maintenance etc. Your total expenditure is N5,000,000. Therefore, your RIO is N2,000,000.

The same analysis goes for an investor of hire purchase. Assuming an investor buys a car for N3,000,000. You decide to place it on hire purchase to a driver for 18 months at N4,200,000. Your RIO will be N1,200,000 at the end of the 18months. You didn’t even drive, these are some of the smart move investors are using this method to build passive income through car hire purchase in Nigeria.

Factors that can affect RIO

Fuel efficiency/car type

    There are some cars that consume fuel than others. It is advisable that you get a fuel-friendly car like a Toyota Corolla or Honda Civic reduces expenses and boosts ROI.

    Location

      If you are investing in hire purchase focus on areas that have high population and good road system. Drivers in cities like Edo, Lagos, Abuja, and Port Harcourt often earn more because ride fares are higher.

      Commitment

      Ensure the driver you are giving your car to is committed to driving as you are committed to making your money. This is because the more hours on the road, the more trips he will get and the higher income will make which will affect your ROI.

      Payment duration

      The longer your payment plan, the less monthly pressure, but also the more interest you may pay. The shorter your plan, the faster you reach profitability.

      Cost of maintenance

      A well maintained car last longer as poor maintenance can spoil a car and this will in turn affect your ROI. Drivers should take care in driving cars to reduce cos of maintenance.

      Risk of Hire Purchase

      Every business has a risk and hire purchase is not left out. Below are some of the risk factors to consider when going for hire purchase as an investor:

      1. Default on the part of the driver
      2. High fuel price
      3. Theft /Kidnap
      4. Accident
      5. Mechanical issues

      What you should look out for as an investor

      1. Insure your vehicle before giving it out
      2. Make the hire purchase legal
      3. Work with trustworthy drivers
      4. Monitor the vehicle performance as often as you can

      Car hire purchase can deliver a strong ROI, especially for serious and committed drivers. For most drivers in Nigeria, a well-planned hire purchase deal can return 30% to 70% ROI over 1 to 2 years. For investors, it’s a reliable way to make passive income by financing vehicles and collecting weekly/monthly payments.

      • To get started as an investor click on hire purchase car in edo state
      • Register as an investor
      • Choose the car you want to invest in
      • We will handle driver vetting & repayments

      Blogs
      What's New Trending

      Related Blogs