A FEASIBILITY STUDY BUSINESS PLAN ON ROAD TRANSPORTATION BUSINESS IN NIGERIA DEVELOPED BY BRITECH PLUS ENTERPRISES

KINNBAD INVESTMENT PLC
PLOT 9, MAG GEN HU KASTINA ROAD, P
HD ESTATE, KURUDU, ABUJA
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A FEASIBILITY STUDY BUSINESS PLAN
ON
ROAD TRANSPORTATION BUSINESS IN
NIGERIA
DEVELOPED BY
BRITECH PLUS+ ENTERPRISES
AUGUST 2019
FOR
PLOT 9, MAG GEN HU KASTINA ROAD,
PHD ESTATE, KURUDU, ABUJA

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Table of contents
Introduction……………………………………………………………………………….3
Aim and Objective……………………………………………………………………….4
Executive Summary……………………………………………………………………..4
Market Analysis…………………………………………………………….................4
Management team……………………………………………………………………….9
Technical Specifications/Production Plan…………………………………......9
Marketing Plans……………………………………………………………................12
Examination of Risks and Problems……………………………………………..16
Financial and Economic Plans……………………………………………………..17
Evaluation …………………………..…………………………………………………….19
Recommendation……………………………………………………………………….28
Conclusion…………………………………………………………………………………28

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1. INTRODUCTION
Transportation is the movement of people from one place to another. This is indeed
the simplest definition of transportation but transportation goes beyond the
movement of people, it also includes the movement of goods, animals, crops,
machines, equipment etc. from one place to another. Transportation is as old as man
itself. We cannot talk of people without mentioning transportation. As individuals,
there are limits to our capacity to move things from one place to another. Also there
are limits to distance we can cover.
In the olden days, our ancestors transport themselves and their commodities from
one village to another by carrying things on their head or by using animals. As
civilization came to existence such means became useless and insufficient. We are
going to look into the different aspects of transportation, including the ones used by
our ancestors and a brief insight into the advantages and disadvantages.
We have different types of transportation including:
Land/Road transportation
Water transportation
Air transportation
We will focus on road transportation, road transportation is our main reason for this
article/business plan.
Types of Road transportation
Animal: This is the movement of people, goods, crops etc. by using animals including
donkey, camel etc. from one place to another. It is mostly used by farmers to
transport their crops from one place to another and also by travellers to move from
long distance to another. The advantage is that it is cheaper, the animals only need
water and food when compared to other means of transportation that requires fuel.
The disadvantage is that there is a limit to what it can carry, besides the animal can
fall sick or die by the way.
1. Walking: This is still in existence, people still walk long distance and even
transport goods by carrying them on their head.

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2. Automobile: This is a vehicle powered by internal engine. It can also be used to
transport people and goods from one place to another.
3. Cycling: This includes bicycle. This can also be used to transport people and goods
from one place to another. It saves time and it is one of the cheapest means of
transportation.
4. Bus: This is used for transporting people and goods from one place to another.
There are different sizes/capacity. Some bus can carry 8 people or even 32 people
depending on the seat.
5. Heavy duty vehicles: These are vehicles designed for heavy work for example pick
up truck, truck tractor with GVWR of about 26,000 pounds, heavy duty trailers and
tankers. These are used for the transportation of diesel, fuel etc. The goods
transported are harmful to human health. And also when involved in accident can
lead to disastrous loss of lives.
2. AIM AND OBJECTIVE
The aim and objective of this study is to analysis the entire road transportation
business both inter and intra state specially taking Abuja and Lagos into
consideration.
These report also will provide the strength and weakness, the challenges and
expected profit for the business considering one year.
3. EXECUTIVE SUMMARY
Kinnad investment plc is located at Plot 9, mag gen hu kastina road, phd estate,
kurudu, Abuja, they are into business investment and are the sole owner of this
feasibility report.
Kinnad investment plc is involve in inter and intra state transportation covering both
Abuja, Lagos and Enugu.
The study and plan is based on the usage of Sienna Bus, Toyota corolla and tricycles
to transport passengers within Lagos, Abuja and Enugu.
4. MARKET ANALYSIS
Prices of bus tickets from Lagos to Abuja varies. The variation is usually as a result of
certain factors which include prices of fuel at the time of travel, the take-off terminal

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location, number of buses available to travel that route at that particular time, rate of
demand of ticket and some other factors.
Bus/Taxi tickets with terminal in Ajah, for instance, is expected to be more expensive
than a tickets of bus terminal at Jibowu. Deservedly so, there is a significant distance
between these terminals and hence, a differences in prices of bus tickets.
Also, prices of bus tickets depends on the travelling period. Generally, prices of
bus/Taxi tickets increase during festive periods and vacations. During these periods,
large percentage of people move between these cities and the rate of demand of ticket
increases, and so does the prices.
1. ABC Transport - N7, 500 to N9, 000
ABC transport remains a leader in the road transport business across the country.
From its new and standard buses, to luxury experience and very high safety
standards, ABC remains the people’s choice. She offers some really top class services
for an affordable fee.
2. GIGM Transport - N10, 050
God is Good Motors (GIGM) has gradually found its way to the top of the road
transport business in Nigeria with its new and luxury Mercedes Benz shuttles. GIGM
even offers pick up services on some select routes including the Lagos-Abuja route.
The buses offer more leg room, media services and of course, air conditioning.
3. GUO Transport - N6, 750 to N8, 500
These are general contacts of GUO Transport for your reference!
Price: N6, 750 to N8, 500
Take Off Time: 05:30am, 06:00am
Contact: 0807 509 0682
4. Chisco Group Transport Company - N8,000 to N8,500
Chisco Transport operates about 6 terminals in Lagos, so walk in the terminal closest
to you and make your bookings and enquiries
Price: N8,000 to N8,500
Take Off Time: 06:00am, 05:30pm, 07:00pm
5. Cross Country Transport Company - N8,000 - N8,500

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Take note this information if you want to book a Cross Country bus!
Price: N8,000 - N8,500
Take Off Time: 05:30am, 06:00am, 08:00am
6. Oya.com - ₦5.550 - ₦7.550
Oya.com is a subsidiary of Wakanow.com Limited, and they offer travellers the
cheapest available fares. Oya.com doesn't work like the other transport services listed
in this article. They combine the major transport companies in Nigeria in one
itinerary and you have the luxury of traveling with any one of the
7. Ifesinachi Transport - ₦6.050
Address: 2, Road, Jibowu, Yaba, Ikorodu, Lagos, Nigeria
Phone number: 08033321046
Departure time: 06:00pm
Price: ₦6.050
Fig 1. MAJOR COMPETITORS.
SN NAME TERMINALS TAKE OFF
TIMES
PRICE RANGE
1 ABC Transport Jibowu 06:15AM,
07:00AM
3,500 – 6,000
2 Chisco Group Jibowu,Alafia,
Oyingbo,Empire
Terminal
5:30am,
6:15am,
7:00am
6,500 – 7,000
3 Peace Mass Transport
Limited
Ajah, Jibowu 5:30am,
6:00am,
6:30am
4,500 – 5,500
4 Other Buses at Popular
parks
Jibowu, Berger, Ojota,
Yaba, Iyana-ipaja, Ajah
Times
depends on
registration
time of taxis
at terminals
3,000 – 6,000
Transport companies plying Lagos to Abuja & price list
Here is a brief list of the various transport companies plying Lagos to Abuja and their
fares, as shared by Naijauto:
1. ABC Transport - N7,500 to N9,000

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ABC transport remains a leader in the road transport business across the country.
From its new and standard buses, to luxury experience and very high safety
standards, ABC remains the people’s choice. She offers some really top class services
for an affordable fee.
ABC also offers really affordable accommodation for its customers, if you were to be
in need of an affordable lodging on arrival in Abuja.
Price: N7,500 to N9,000
Take Off Time: 06:15am, 07:00am, 04:00pm
2. GIGM Transport - N10,050
God is Good Motors (GIGM) has gradually found its way to the top of the road
transport business in Nigeria with its new and luxury Mercedes Benz shuttles. GIGM
even offers pick up services on some select routes including the Lagos-Abuja route.
The buses offer more leg room, media services and of course, air conditioning.
Price: N10,050
Take Off Time: 05:30am, 06:15am, 07:00am
3. GUO Transport - N6,750 to N8,500
These are general contacts of GUO Transport for your reference!
Price: N6,750 to N8,500
Take Off Time: 05:30am, 06:00am
Lagos to Abuja by road is a lengthy journey, you have to consider your comfort as
well as the varied prices. Check out the best transport companies you can opt for,
price list 2019 & travel tips!
In Nigeria, traveling to anywhere by road can be quite stressful, considering the bad
road and the possible bad condition of buses. When you intend covering a long
distance like Abuja, you have to be extra careful with the transport system you
choose to ride with, weigh your options and know which one suits you best. There are
several transport companies that can offer you good comfort, although the prices
may vary, you will find your budget.
Here comes everything you ever need to know to travel from Lagos to Abuja by road
safely and joyfully.

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Lagos to Abuja by road - How many hours and how many kilometers does it take?
The distance between Lagos and Abuja is 725 - 772 km depends on the routes. Buses
can ply via Sagamu-Benin Expy/A121 and A2, via A122 and A2, or
Expressway1/Lagos - Ojoo Expy/E1.
The travel time greatly depends on the speed of the vehicle, the condition, and the
route the bus takes. You may arrive at Abuja earlier or later, but it usually takes 10-12
hours.
How much does it cost to travel from Lagos to Abuja by road?
The prices vary, choose a transport line that embraces your pocket size. If you want
to save the most on the transport fee, you can choose Young Shall Grow. With
N4,500 - N5,500 you can reach Abuja while save the money for entertainment and
other expense. If you want the most comfortable trip, you can opt for God is Good
Motors, their buses offer more conveniences such as more leg room and media
services. Bus fare for Lagos-Abuja trip at GIGM is N10,050. See the detail price
below:
Transport companies plying Lagos to Abuja & price list
Here is a brief list of the various transport companies plying Lagos to Abuja and their
fares, as shared by Naijauto
Fig 2. Current cost of SIENNA BUS
S/N BUS TYPE MODEL COLOUR PRICE
1 Toyota Sienna XLE 2006 GREY
PETROL
₦2,500,000
2 Toyota Sienna 2005 SILVER
PETROL
₦2,100,000
3 Toyota Sienna XLE A 2008 BLUE
PETROL
₦2,800,000
4 Toyota Sienna 2011 GREY
PETROL
₦3,283,000
AVERAGE COST ₦2,670,750
The cost of the selected vehicle is based on the percentage market increase in
6months to be ₦3,000,000
The cost for 6 Sienna bus = ₦3,000,000 * 3= ₦9,000,000.00

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Fig 3. Current cost of NAPEEP TRICYCLE
S/N BUS TYPE MODEL COLOUR PRICE
1 Tricycles 2019 Yellow 2019 YELLOW ₦680,000 * 4
AVERAGE COST ₦2,720,000
Current cost of Toyota Corola
S/
N
TYPE MODEL COLOUR Condition PRICE
1 Toyota Corolla
2009 Blue
2009
Trim
LE 4dr Sedan
(1.8L 4 cyl 4A)
Blue
Automatic
Foreign Used ₦ 2,700,000
2 Toyota Corolla
2010 Silver
2010
Trim
LE 4dr Sedan
(1.8L 4cyl 4A)
Silver
Automatic
3 Toyota Corolla
2009
2009 Silver
Automatic
4 Toyota Corolla
2013 Blue
2013
Trim
LE 4dr Sedan
(1.8L 4cyl 4A)
Blue
Automatic
AVERAGE COST ₦ 3,062,500
5. MANAGEMENT TEAM
The major team member of this kind of business are the following
1. Business owner/investor,
2. Legal Adviser
3. Driver
6. TECHNICAL SPECIFICATIONS/PRODUCTION PLAN
Transportation business is a very lucrative business, because people transport daily.
Humans are bound to move from one place to another. And they do so mostly with
public transport. Transportation business is mostly in demand during
festive/celebration period like Christmas, Easter and so on. This is because people

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move from one place to another to be with their love ones. Let us look at the various
means of road transportation and vehicles you can get to start your transportation
business. These vehicles comes in their various sizes and prices.
Motorcycles (okada)
This is very popular and affordable to get but its demand has reduced because
Government has bound its use in major cities. It can only be used in limited and
certain areas in the country making it almost unprofitable.
Tricycle (Keke)
This has taken over motorcycles. It is now used in major roads and also in streets in
the country. It can convey as much as 5 passengers.
Town service (Taxi)
This is vehicles used on major roads, it can accommodate as much as 6 passengers.
In some cities it is used as ‘drop’. Drop is when one passenger pays for the whole seat
and he/she is taken home directly.
Bus
This can convey as much as 16 or more people depending on the size.
Haulage
This are heavy duty machinery.
Tricycle (keke) / hiring service
You can purchase a keke for about 600,000 naira or buy a taxi for 1million or less
depending on if it is new or tokunbo. You can hire this vehicle out to people and get
daily returns from it.
Hire Purchase service
This involves buying keke or taxi and giving it out to someone to work and pay you
more than the amount you bought it. For example, you buy Keke 600,000 and the
person is given six months to work and pay 800,000 to you, after which he can take
the keke as his own personal one.

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Transportation services
This is the transportation of people from one place to another and a particular
amount is charged. Here, you get a qualified driver.
Get vehicles
There are various vehicles and their price tags depending on your choice. We have
tokunbo which is cheaper and new ones. You will need 1million or more to get a
vehicle. It is better you go for new ones because they are better and last longer.
Registration of vehicles
It is important that you register your vehicles so as not to encounter problems with
road safety. You can register your vehicle with Federal Road Safety to ensure that
your papers are complete and also with National Union Road Transport Workers.
Location
It is important that you start your business in a good location that people can easily
find it. This means that the transportation business need to have a pick up venue
called terminal.
Employ qualified and experience drivers
This is to ensure safety.
Insurance
Insure your vehicles to avoid unfortunate loss.
AIICO Auto Insurance covers all types of automobiles for both private and
commercial uses. Also covered are motorcycles and tricycles.
Auto insurance is one of the compulsory insurance classes and anyone using a motor
vehicle on the public highway must have it.
Auto insurance which is the most common of all the known classes of insurance is
designed to protect the insured for loss of or damage to his/her vehicle, damage to
Third Party property including bodily injury and death to Third Party caused by an
accident whilst using their vehicle.
Why do I need auto insurance?
 It is compulsory; it is the Law! (Road Traffic Act,1950)
 Provides replacement cost of damage or theft of your car
 To provide financial support for you when you damage other people’s property

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 Re-imbursement of litigation cost
Types of Auto Insurance
Third Party Auto Insurance
This policy covers death, accidental bodily injury and damage to the property of a
third party.
Comprehensive Auto Insurance
AIICO Insurance offers fully comprehensive, cost effective, motor vehicle insurance
that cover all risks related to owning and driving a vehicle. Our motor policies are all
customized and structured to suit your needs.
The Comprehensive Auto Insurance plan covers the loss or damage to insured
vehicles as a result of fire, theft, vandalism, accidental damage or collision. Coverage
also includes Legal Liability for death, bodily injury or damage to the property of 3rd
parties arising out of the use of insured vehicles.
7. MARKETING PLANS
Road transportation do not require any specific marketing plan, however if the
transportation system is to be based on large scale it will require online and internet
marketing this will help to popularize the brand name of the transport system.
But based on the analysis of this report the demand for transportation in Nigeria
cannot be over emphasis, there are always available market for road transportation.

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7.1 ABUJA – LAGOS
The pickup point for the Abuja based on this study is Berger while that for Lagos is
Jibowu.
Fig 1. Inter State Transportation Abuja to Lagos: Based on GPRS google map survey

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7.2 LAGOS – ENUGU
The pickup point for the Enugu based on this study is Holyghost while that for Lagos
is Jibowu.
Fig 2. Inter State Transportation Lagos to Enugu: Based on GPRS google map survey
7.3 Lagos Airport Axis

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7.4 Mararaba Market Axis for Keke Napeep Transportation
7.5 Kugbo Market axis for Keke Napeep Transportation

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7.6 Abuja Airport Transportation
This Commercial Transportation Business Plan can be used to access bank loans,
proposal writing and grant applications etc. The business plan was compiled after a
thorough feasibility study on Transportation Business in Nigeria was done.
8. EXAMINATION OF RISKS AND PROBLEMS
Fig 4. Challenges and Opportunities within the road transportation business
RISK/PROBLEMS SOLUTION
Pricing challenges – the variance between
pricing offered by different standard
transportation company
The price tag is weighed to fall
with the affordable stage in
respect to the market analysis.
Accident The insurance policy has been
considered into this report to
protect accidental financial
loses.
Theft The drivers are to sign an under
taken and submit two
guarantors who worth can cover

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the price of the taxi handed over
to them
Fig 5. Swot Analysis report for the road transportation business in
Nigeria
STREGNTH WEAKNESS
The strength in road transportation is
that people cannot do without move.
And due to the high demand for
transportation the continuous
demand of road transporting
increases as there is increase in the
population of the country.
The fear of accident in during
transportation is the only issue to
encounter in this business.
OPPORTUNITY THREAT
Continuous improvement is the main
opportunity in these business.
Projection for the next five years, the
business has the privilege to become
a standard online booking.
Theft is the only threat due to human
ways of thinking.
9. FINANCIAL AND ECONOMIC PLANS
BUSINESS EVALUATION /FINANCE
 Start–Up Expenditure (Budget)
When starting a road transportation business, there are certain aspects where one is
expected to spend the bulk of the generated capital on, and most of the bulk of this
capital is usually used for stuffs that are majorly under overhead expenses like,
procuring equipment and getting a vehicle. Others may be running expenses such as
maintenance, fuelling and insurance.

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Fig 6. FINANCIAL EXPENDITURE FOR DAILY RETURN
No ITEMS/MATERIALS COST
FIXED COST OPERATIONAL
COST for one
year
1 3 pieces SIENNA BUS 8 passenger ₦9,000,000 N/A
2 Plate number and documentation for commercial ₦300,000 N/A
3 Cost of hiring a business consultant – ₦30,000 N/A
4 Insurance coverage for 5 years ₦112,500 N/A
5 Mechanical Maintenance N/A ₦300,000
6 Fuelling for 6 Vehicles for 365 days N/A ₦7,938,750
7 4 Tricycles 2019 model yellow ₦2,720,000 N/A
8 Fuel price for tricycle for 0ne year N/A ₦7,938,750
9 Mechanical Maintenance N/A ₦300,000
10 3 Toyota Corolla ₦9,187,500 N/A
SUB TOTAL ₦21,350,000 ₦16,477,500
TOTAL ESTIMATED EXPENDITURE ₦37,827,500.00
Fig 7. FINANCIAL EXPENDITURE FOR INSTALLMENT PAYMENT
No ITEMS/MATERIALS COST
FIXED COST OPERATIONAL
COST for one
year
1 3 pieces SIENNA BUS 8 passenger ₦9,000,000 N/A
2 Plate number and documentation for commercial ₦300,000 N/A
3 Cost of hiring a business consultant – ₦30,000 N/A
4 Insurance coverage for 5 years ₦112,500 N/A
5 Mechanical Maintenance N/A N/A
6 Fuelling for 6 Vehicles for 365 days N/A N/A
7 4 Tricycles 2019 model yellow ₦2,720,000 N/A
8 Fuel price for tricycle for 0ne year N/A NA
9 Mechanical Maintenance N/A N/A
10 3 Toyota Corolla ₦9,187,500 N/A
SUB TOTAL ₦21,350,000 N/A
TOTAL ESTIMATED EXPENDITURE ₦21,350,000

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From the above break down, it is obvious that we need the sum of ₦37,827,500.00
in starting the road transportation business in Nigeria. The bulk of the sum will be
going into the purchase of taxi and NAPEEP. The running expenditure covers
maintenance and fuelling.
10. EVALUATION
10.1 HIRE PURCHASE ADVANTAGES AND DISADVANTAGES
Hire purchase is an arrangement. It allows for the purchase of an expensive
consumer good on credit. The buyer is then required to make a down payment on
their purchase, with the balance of the amount due paid off with instalment
payments, plus interest. It is similar to an instalment plan with one exception: the
ownership of the item purchased does not fully transfer to the buyer until all
payments are made.
List of the Advantages of Hire Purchase
1. Items can be repossessed if payments are not made.
A hire purchase arrangement is beneficial because it reduces the risk of the provider
for the consumer goods involved. Because the ownership of the item does not
officially transfer until all payments are made, this plan offers protection to the
vendor for an unsecured item because it can be repossessed. If the buyer is unable to
make payments, losses can be recouped by acquiring the item purchased and selling
it again.
2. It allows for ownership of newer, better equipment.
When using a hire purchase agreement, it becomes possible to afford better
equipment or consumer goods than if the transaction was to buy the item outright.
Although it requires payments from the buyer, which often can last for years, it gives
them the ability to use the item right away. This is despite the lack of technical
ownership. Buyers are still responsible for taxes and other costs associated with
ownership as well, further reducing the risk to the vendor.

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3. It spreads out the costs over time.
When purchasing large consumer goods, it is difficult for some businesses or
households to come up with the necessary cash to purchase items outright. Hire
purchase allows for the payments to be spread out over time to make the purchase
affordable. Buyers can take confidence in the fact that they have fixed monthly
payments which are guaranteed not to increase. Interest rates are locked in with a
hire purchase at the time of the transaction.
4. There are usually no taxes charged on a hire purchase agreement.
If your country has a value-added tax or something similar that is assigned to
transactions, then leasing an item will result in a tax charge being added onto the
buyer’s monthly payments. This issue goes away when a hire purchase agreement is
in force. There will still be a sales tax charge or other upfront taxes as part of the
transaction. The advantage here is that vendors usually permit buyers to roll the cost
of taxation into the overall agreement, reducing long-term add-on costs.
5. Buyers can shop around for better deals.
Buyers can choose which vendor they want to work with when there is a specific
purchase that needs to be made. That allows them to find the best possible price on
the items they require. Financing for the hire purchase may be offered by the vendor.
Buyers can also secure their own financing arrangement with the hire purchase
process, giving them even more flexibility in where they shop. That makes it easier to
avoid borrowing or using corporate or personal savings to secure items that are
required.
6. There are ways to reduce the mandatory monthly payment.
If a monthly payment seems too high, even with a down payment being provided,
there are still options available to further lower the cost of the transaction. A balloon
payment is the most popular method to reduce monthly payments. It will require the
buyer to make a large one-time payment at the end of the hire purchase agreement to
finalize ownership transfer. If that payment is not made, then ownership does not
transfer and the right to repossess still exists.
7. Down payments are sometimes optional with this type of transaction.
For corporations or households with an excellent credit profile, a down payment may
not be necessary as part of the hire purchase agreement. That means it is possible to
take home the items needed without paying anything to secure the right to do so. The
buyer would still be required to make the structured monthly payments to avoid
repossession. Monthly payments with a zero-down option tend to be much higher as
well, so it is usually better to put down some type of down payment if possible.

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8. It can be paid off early in most cases.
Most hire purchase agreements allow the buyer to pay off the contract early if they
have the money to do so. Some agreements may require monthly payments to
continue for 12-24 months to ensure the transaction is profitable for the vendor. This
option is a good way to reduce the long-term cost of the hire purchase transaction
when it can be accomplished.
9. There are few restrictions in place for hire purchase agreements.
Using the example of purchasing a car here, vendors will often put mileage
stipulations or conditions on the agreement that must be met. If these conditions are
not met, then additional charges become the responsibility of the buyer at the end of
the lease. A hire purchase contract removes these restrictions, allowing buyers to use
the vehicle as their own until it becomes their own when they make the last payment
on it.
List Disadvantages of Hire Purchase of the
1. Items can be repossessed if payments are not made.
There are several laws in place which prevent vendors from being able to repossess
certain items, even if the buyer falls behind on payments or refuses to make them. In
Washington State, for example, it is not permitted for creditors to move another car
to reach your car if you qualify for repossession. Creditors are not permitted to have a
vehicle towed from your garage. They are even forbidden from repossession if you
resist them taking the vehicle.
2. Monthly payments are often reflective of credit ratings.
To get the best hire purchase arrangement, buyers must have a strong credit profile.
If they do not have a strong profile, vendors may decide not to work with the
business or household attempting to make a purchase. Those with subpar credit
scores will find that if they are approved, the interest rates will be higher than if they
had good credit. Over the lifetime of a hire purchase agreement, a higher interest rate
can result in thousands of extra naira being spent on the item.
3. It forces the transaction to cost more than it would otherwise.
Even with a solid down payment on the transaction, the interest rates on a hire
purchase agreement will cause the final cost of the item to be higher than if it were
purchased outright.

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4. Not paying the required payments reduces a credit score.
A hire purchase agreement is usually reported to the major credit reporting the
vendor, even if it is a B2B transaction. If the buyer fails to make a single payment,
this fact will be reported.
The impact of the missed payment can then affect the buyer’s ability to make another
hire purchase in the future. If a repossession occurs, this issue could stay on the
credit report for the business or individual for up to 7-10 years in some jurisdictions.
For that reason, it is imperative for buyers to be proactive about their hire purchase
agreements if they are unable to make a payment on time.
5. There are fewer discounts usually available.
Compared to a leasing agreement or an outright purchase, there are fewer discounts
usually offered to buyers who pursue a hire purchase agreement? That is because
there are more risks associated with that type of transaction. With a lease, consumers
are paying for the depreciation of the item. With an outright purchase, there is zero
risk to the vendor, allowing for the possibility of more discounts.
The advantages and disadvantages of hire purchase contracts create a win/win for all
parties involved. Buyers get the chance to use, and eventually own, equipment they
might not be able to purchase outright immediately. Vendors benefit by being able to
sell more items while retaining technical ownership over them to reduce their risk.
All elements of a transaction should be closely examined before signing anything to
ensure the best possible results can be achieved.
10.2 Financing a car with personal contract purchase (PCP)
A personal contract purchase (PCP) is the most popular way of financing a car. It’s
often seen as a way of buying a car over three or five years but most people don’t go
on to buy the car. Here’s an overview of PCP, including how it works, what to be
aware of, what to do if you need to end the contract early, and what to do if you’re
having money problems.
What is a personal contract purchase (PCP)?
A personal contract purchase (PCP) is a complicated way to pay for a car. It’s like
long-term rental, allowing you to use the car until the contract ends. At the end of the
contract, you can:
 Return the car.
 Pay the resale value and keep it.
 Use the resale value towards buying a new car.
 Here’s what you need to know about how a PCP works:

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 The agreement lasts three to five years.
 You will need to pass a credit check.
 You have to pay a deposit upfront.
 The total amount you will pay over the entire length of the contract is often
higher than Personal Contract Hire.
 You won’t own the vehicle at the end of the agreement. You can buy it by
paying a final payment or ‘balloon payment’, which is normally a few
thousand pounds.
 You can also end the deal without buying the car outright.
 There are strict terms in the agreement, like limits to the miles you can do.
 You’ll often need to stay with the same dealer to be able to use any remaining
equity in your car as a deposit for a new car through PCP.
How does a personal contract purchase (PCP) work?
Here’s what will happen when you finance a car through a PCP:
1. First you’ll need to pass a credit check.
Your ability to make the monthly repayment will not be checked though.
This means before you sign up for a PCP deal, it’s important to make sure you’ve
worked out that you can afford to meet all payments over the whole term of the
contract. Are there future costs that might affect your ability to keep up repayments
in 4 years’ time? Use our Budget Planner to help.
2. Then you’ll need to pay a deposit, usually 10% of the value of the vehicle.
3. You’ll then be able to use the car, but remember you don’t own it yet. You’ll also
need to make your payments for the duration of the contract.
Make sure you stay within your mileage restriction. There will be charges if you go
over your limit. Be extra careful not to damage it too as you may be charged at the
end of the contract. If you think you may go over the allowed mileage it may be worth
considering getting a deal with more mileage.
Top tip
If you’ve taken out a PCP plan and intend to buy the car at the end of it, start saving
up the balloon payment now.
People save money faster if they have a definite savings target, so find out how to set
a savings goal.
4. When the contract is up, you’ll need to decide if you want to keep the car, return it,
or use its value to act as a deposit on a new PCP.

24
If you want to keep the car, you’ll need to make a final payment, often called a
balloon payment. This is based on what the dealer thinks the car is worth now - its
Guaranteed Future Value (GVF). This can range from a few hundred to a few
thousand pounds, but will be much more than the normal monthly payments. If you
haven’t got this money saved, you may have to take out another loan to pay it off.
5. If you’re not going to keep the car, you can hand it back without any further
payments.
6. Alternatively, you can use the car’s value after paying off the GVF as a deposit on a
new PCP.
You may need to stick with the same dealer if you want to do this.
Important points to be aware of when getting a personal contract purchase (PCP)
Because PCPs are complex and often poorly explained when you’re buying cars, there
are some things you need to know that might not be clear:
Always check your contract and the terms and conditions. There’ll be fees you’ll need
to be aware of, and you’ll need to know what happens if you need to change the
agreement later
Almost one in five people who take out a PCP deal say they can’t afford the final
payment, and then feel they have to get a new PCP deal so they’ve not wasted the
investment made into the first car. Be careful and check how big your balloon
payment would be. Source opens in new window.
Check how much you’re paying back, both monthly and in total – often you’ll pay
more with a PCP than with other types of car finance.
Check how far your agreed mileage is, and what the fees are for exceeding it.
Excessive wear and tear and damage, such as scratches, can mean you’ll receive
additional charges. Ask for written examples on how they judge what counts as
excessive wear and tear and damage.
To end the deal early or cancel it, you must have paid half the value of the vehicle.
If you haven’t, you’ll need to pay the difference before you can get out of the contract.
The car will need to be in good condition too, or you might be charged for repair
costs.

25
Buying a car through hire purchase
Car hire purchase (HP) is a car finance plan. After paying a relatively low deposit,
you hire your car with the option to buy it by the end of the contract. Here are the
facts you need to decide whether a hire purchase agreement could be the right car-
buying option for you.
10.3 What is hire purchase?
Hire purchase is a way to finance buying a new or used car. You (usually) pay a
deposit and pay off the value of the car in monthly instalments, with the loan secured
against the car.
This means you don’t own the vehicle until the last payment is made
How hire purchase works
 In most situations, you first need to put down a deposit on the car you want to
buy. This is usually 10% or more of the vehicle’s value.
 The rest of the value of the car will then be paid off in instalments over a
period of 12 to 60 months (one to five years).
 Hire purchase is arranged by the car dealer or owner, but brokers also offer
this service. The rates are often very competitive for new cars, but less so for
used cars. For second hand cars the annual percentage rate can vary from 4% -
8%. The lower the number the better. The rate could be higher for example
because you don’t have a good credit score.
 The loan is secured against the car, which is why you can’t own it until you’ve
made your last payment, including paying the Option to Purchase fee.
 Make sure you understand the terms and conditions of the hire purchase
before signing the contract. For example, once all repayments have been made
you pay a final fee, known as the ‘Option to Purchase’, once you’ve paid this
you’ll own the car.
Pros of hire purchase
 Flexible repayment terms (from one to five years) to help fit in with your
monthly budget – but the longer the term the more you’ll pay in interest.
 Relatively low deposit required (normally 10% of the car’s price).
 Fixed interest rates so you know exactly what you’re paying every month for
the length of the term.
 Once you’ve paid half the cost of the car, you might be able to return it and not
have to make any more payments – find out more about cutting car finance
costs.

26
 If you’re credit score is not that high it may be easier to get a hire purchase
than an unsecured loan, as the car is used as collateral for the loan.
 It does not usually come with milage restrictions.
 You don’t need to find a large sum to purchase the car like with PCP.
Cons of hire purchase
 You don’t own the car until you’ve made your final payment, which means if
you get into financial difficulties the finance company could take it away.
 You can’t sell or modify the car over the contract term without getting
permission first.
 Monthly payments are usually higher than for PCP and leasing deals.
 Your deposit and term length will affect your monthly payments. Your
monthly payments are likely to be higher the smaller the deposit is and the
shorter the term of the loan.
 Until you’ve paid a third of the total amount payable the lender can repossess
the car without a court order.
 It can be an expensive route if you only want a short-term agreement.
Hire purchase and conditional sale
Conditional sale is similar to hire purchase but you’ll own the car at the end of a
conditional sale agreement. There is no ‘Option to Purchase’ fee payable, like there is
with a hire purchase, so you’ll automatically become the vehicle owner once you’ve
made all your repayments to your lender.
The agreement usually includes the condition that the goods don’t belong to you until
you’ve paid the final instalment and the lender may be able to take back the car if you
fall behind with payments.
10.4 DAILY RETURN
Daily return is the process of putting the car/taxi in care of a qualified driver who
make delivery to the owner after close of daily business.
Advantages of daily return
 The car belongs to the owner
 The interest generated is higher due to longer year of usage of the car.
Disadvantages of daily return .
 Miss management of cars by the driver
 Drivers having non sense of belonging
 Daily break down of car
 High risk of theft
 Inconsistent of the daily return

27
EXPECTED REVENUE FOR DAILY RETURN
LOCATION REVENUE
/TRIP/TAXI
Revenue for
3 Taxi/Day
REVENUE FOR
365
Lagos Airport Cost Per
Move =
N8, 000 N24,000 N8,760,000
Abuja Airport Cost Per
Move =
N8, 000 N24,000 N8,760,000
ABUJA
/LAGOS/ENUGU
N35, 000 N105,000 N38,325,000
Tricycle N280 N6720 N2,452,800
N58,297,800
EXPECTED REVENUE FOR HIRE PURCHASE
LOCATION COST PRICE INTEREST HIRE PURCHASE
PRICE for one
year
WEEKLY
INSTALLMENT
3 SIENNA ₦9,000,000 ₦9,000,000 ₦18,000,000 ₦353,000.00K
3 TOYOTA
COROLLA
₦9,187,500 ₦9,187,500 ₦18,375,000 ₦353,365.39K
4 KEKE NAPEEP ₦2,720,000 ₦2,720,000 ₦5,440,000 ₦104,615.39K
Legal Consultation
Fee
₦50,000 - - -
Documentation ₦300,000
Insurance coverage
for 5 years
₦112,500
TOTAL ₦21,350,000 ₦20,907,500 ₦41,815,000 ₦810,980.59k

28
PROFIT ANALYSIS
Fig 9. Profit analysis Base on Daily return.
YEARS 1 2 3 4 5
INCOME ₦58,297,800 ₦58,297,800 ₦58,297,800 ₦58,297,800 ₦58,297,800
EXP ₦37,827,500 ₦16,477,500 ₦16,477,500 ₦16,477,500 ₦16,477,500
Interest ₦20,470,300 ₦41,820,300 ₦39,776,300 ₦39,776,300 ₦39,776,300
Unexpected Loss
5%
₦2,812,690 ₦2,812,690 ₦2,812,690 ₦2,812,690 ₦2,812,690
Depreciation
value 15%
N/A ₦8,438,070 ₦8,438,070 ₦8,438,070 ₦8,438,070
Profit/Year ₦17,657,610 ₦30,569,540 ₦30,569,540 ₦30,569,540 ₦30,569,540
Fig 10. Profit analysis Base on Instalments.
YEARS 1
INCOME ₦41,815,000
EXP ₦21,350,000
Expected Profit ₦20,465,000
Unexpected Loss 5% ₦2,812,690
Profit/Year ₦17,652,310
11. RECOMMENDATION
From the analysis above it is obverted that for an investor to generate his/her capital
and profit in a road transportation business it is advised he/she choose the hire
/Condition purchase method due to less risk involve.
Though the interest for daily return is high, likewise the risk is outrageous.
From research, it is observed that giving taxi and cars to people for daily delivery
does not give them sense of belonging on this note them miss-use the car and gives
series of excuses for not making return per day which make daily return on reliable.
However, the interest on the hire/condition purchase is lower that the daily return,
but is better because it safe one the stress of running capital. The running capital will
be bear by the buyer. The most advantage that hire purchase has was that if the buyer
failed to remit twice within the speculated period, the investor or car owner has the
legal right to withdraw the car back and give it to another client.
12.CONCLUSION
Passenger transport service business in Nigeria is a very big and competitive one. It
is easy to make quick profits and it is also easy to pack-up. The guiding principle is to
adopt the best and most dynamic approach to administration especially in the area of
scarce resource or limiting factor management.

29
It is always to follow the legal due process for hire/conditional purchase, and the
clients involve has to provide two guarantors who has the financial assets to cover the
loss of estimated price for the hire purchase as stated in the legal document.

A FEASIBILITY STUDY BUSINESS PLAN ON ROAD TRANSPORTATION BUSINESS IN NIGERIA DEVELOPED BY BRITECH PLUS ENTERPRISES

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A FEASIBILITY STUDY BUSINESS PLAN ON ROAD TRANSPORTATION BUSINESS IN NIGERIA DEVELOPED BY BRITECH PLUS ENTERPRISES