[Jaguar]

8000/6700 is a balance arrived after assuming that the average running would be 150 Kms per day. But in a real world scenario, this would be much higher. In a city like bangalore where the airport is 30 Km outside the city, even if the car does 3 airport runs a day and return as well, it will easily cross 200 Km, even 250 Km per day. Do the math again and the new balance could be some 8000/12-15000.
Thinking logically, none of the taxi services would exist unless they make a profit of around 20k per month. The business is not viable with a lesser profit.

IMO what your father is being offered is too less an amount and not worth the risk. Only go ahead if you get some 15k per month. Even then, consult a good lawyer on the potential risks involved in case of accidents and the like.

[alpha1]

Don't pull the trigger, my opinion is to sit with this gentleman, and work out the math alongside.

You will come to know how much he is earning on your money, and how much you stand to lose. And what if you were doing this business on your own - what problems you would face (local police, agents, mafia etc).

[neoonwheels]

Yeh, I guess starting you own business would be better than giving your car on rent. Apart from what you guys said, here are more perks for him:

1. 8K as expenditure so that makes it 96K per year, he can deduct it from his income and can save on tax (He said he is in 30% slab as of now)
2. He wanted to get 2L loan (He has 2L cash) which he will not. So 9% interest saved for this 2L
3. 2L that he has now, can be put into FD (Least risky) and can earn 7-8% interest.

I guess we are better off this thing. Unless he offers us minimum 12K, its not good enough for us to jump into this.

[TaureanBull]

Interesting thread. All of us have seen these ads in newspaper. I know the fate of one, that too the most prominent one. Metro Cruise ltd. It was in newspaper that they fleeced some 4K people. Now in custody. They will get out soon we all know.

Anyways, I assume that the person can be trusted as he is a friend of your dad. IMO lets leave what he earns initially and be concerned of what you are earning. He has to profit from this because he is managing the operation of car and arranging things like-servicing, maintenance, hiring driver etc. Even if your car does not run in a month he has to pay you 8k. So this is his risk part. But again he can get out of contract with one month notice.

You have to look at a 5yr time frame. Ok lets see your money in PF after 5years.

4L after 5years @8% : 5,87,731/-

The car after 5 years will fetch you :

5x12x8000 = Rs 4,80,000 + Car (estimated value 50-75K)

Lets say max 5.5L you earn.

Minus you costs.

Permit : 10,000/-
Insurance : 35,000/- (Average 7k per year, may be more)
Tyre costs : 12,000x5 = 60,000/-

Ok, roughly, 1L (1.05L to be precise)

You have as asset of 4.5L or a net profit of Rs 50K.

Man, you are at loss by almost 1.25L and I have not talked about the headache of permits, insurance and risk.

PS : If I have gone wrong do let me know.

[neoonwheels]

You are right TaureanBull. I guess to make it profitable for me, I should get minimum 12K per month. In last 2 years, the MF has doubled my dad's money. So even if in risk, MF returns at least 15-20% over a horizon of 3-4 years. This business is profitable only when you are doing it on your own.

[aargee]

@Neon - When you do it on your own, you'll know the if lady luck smiles at you or at someone else. Not to discourage you, but when you start things first, as first level entrepreneur, you've to start with everything, I mean, meeting clients to office boy work; kills your weekends; you wish there were 25 hours & 8 days a week & what not? Be prepared for it too

[Joy]

Originally Posted by aargee

@Neon - When you do it on your own, you'll know the if lady luck smiles at you or at someone else. Not to discourage you, but when you start things first, as first level entrepreneur, you've to start with everything, I mean, meeting clients to office boy work; kills your weekends; you wish there were 25 hours & 8 days a week & what not? Be prepared for it too

Exactly. Plus, it is very difficult to convince a new client these days (unless you don't have any connection in that organisation) to give you their business unless you are ready to offer any better rates cuts (that also substantial) and offer them a longer credit period. In both the cases, you are the one who is suffering. A few of my friends are into car rental business and in my opinion, it would be much better to give your car to some corporate client like bank, IoC, etc. They will give around 8-10K +/- 1-2k plus petrol/diesel as consumed (just quote 2-3 kms less than average mileage per km) plus small maintenances, etc.

Please don't mind, being a first level entrepreneur I am facing all these things (though I am not into car rental but situation is same).

So, think hard and then decide. Please take your sweet time. But once you get past these few hurdles, you will be flying. Good Luck.

[ak916]

Hi Neon,

Most forumites have given an opinion and I agree with them. My suggestion is to NEVER RISK YOUR CAPITAL IN ANOTHER PERSON'S HAND, REGARDLESS OF WHETHER YOU KNOW HIM SINCE 30 YEARS OR 1 YEAR!

I am not going to say "nowadays you cant trust anyone". That's not the point.

Let us understand that people make bad business decisions all the time. Top banks have disappeared over the last 2 years, investment brokerage firms with 100+ years of heritage have sunk without a trace. All it teaches you is that, taking bad decisions is not limited to rookies.

Let us consider 3 scenarios in your case

1) The business goes bad.. you end up with a loss of upto 4L and strained relations with a man you knew well for 20 years. Even if he is not absconding, this will leave a lot of emotional scars for you and your father. I am assuming that 4 Lacs is not money you would spend over a weekend, for instance, shopping impulsively for that big LCD tv. If thats the case, then the emotional trauma wont be a lot.

2) Then think about what you want to get from this? If your aim was to be a businessman, then you aren't one in this case. You can at best call yourself an investor

3) If your aim is to make money and you dont care of involving with the daily activities of a business, the amount you are investing v/s the returns you are getting is about 2% a month minus recurring expenses, bringing that to a net profit of about 1% profit a month, and this is if everything goes to plan. again, not worth it as explained by other forumites.

I personally would invest this in a business that I believe in, where I take all the risks myself, get good advice from internet, people, do research etc. And then if it still fails and I lose all the capital, I can atleast look back and say.. "well, atleast I tried and I now know what not to do". Now thats a 4lac rupee worth of education I wont forget in my life! This I can live with. You have to decide for yourself, if you can live with it or not.

BTW, I had a business of my own and I did reasonably well at what I did.

Sorry if I went OT

[neoonwheels]

Guys,

Spoke to the family friend. Asked him if he can give us 12-13K a month so that we can take the risk. He said its too much for him. So as of now the chapter is closed. Putting dad's money into MF, FD, Stocks and Gold as of now.

May be in future, I can thoroughly research this field and can enter taking risk on my money. Dad was surprised and influenced by his friend's success story over last couple of years. As he is a true businessman, he did not lose an opportunity to try his luck on my dad's money