There is no disputing that taxi cabs in NY are big business. Those who drive make their living on tips provided by their customers, those who operate fleets make their money on the fares, but those in the know make their money on the medallions. Taxi cab medallions are aluminum plates that grant rights for those who want to operate a yellow cab. In NY that can mean millions in revenue. However, the millions are never spent on the medallions, until now.
In October two corporate medallions sold for $1M a piece. This is the highest a medallion has ever sold for. This was due to decades of growth for the medallions. The two were sold by an individual who purchased them in the 1980’s for $80,000 apiece. When he visited Nat Goldbetter, a taxi financing specialist, an offer of $975,000 a piece was made. However, the owner wanted more.
Mr. Goldbetter knew he could find a willing buyer since many medallion owners are reluctant to sell. Taxi medallions are on the rise and many who own these small metallic plates are holding tight. Now that the largest sale has occurred, they may be holding on even tighter.
Nobody expected taxi medallions to reach the heights they have reached today. In the beginning these plates were purchased for $10 in 1937. After WWII the demand for taxis dropped and many drivers returned their medallions to avoid the annual renewal fee. With the new demand for medallions, the value has skyrocketed.
In NY there are currently 13,237 medallions in the city. When new ones are issued they are sold at auction. The scarcity is the reason for the high values as the medallion pool rarely grows. This means, depending on the type of medallion, an owner can name his price and in most cases, get it.
Large fleets control hundreds of medallions, usually owned by the driver or the fleet. Corporate medallions, the ones sold; do not require the owner to drive the cabs. This makes the driver responsible for leasing the medallion from the owner. This is big business as it produces revenue from fares, the drivers lease payments, and the advertising on the cabs. With corporate medallions rarely sold, the price of $1M was easy to get financing for because of the guarantee for return.
Mr. Goldbetter, the man responsible for closing the deal, was also the man responsible for the first $100,000 medallion sale back in 1985. So it is only fitting he makes taxi history again with yet another record breaking sale.
It is hard to speculate what the medallions will do now that the $1M mark has been reached. Some investors believe value will continue to increase as the need for corporate medallions rises, yet others believe it is an indication that the taxi cab medallion bubble has burst and prices will decrease. The sale may spark an interest in other corporate medallion sales that will flood the market with available medallions, in turn decreasing the value.
Marcie McDonald is an insurance consultant who writes for cheapestcarinsurance.org.uk. She recommends checking here for a car insurance comparison; the site also gives you cheap taxi insurance quotes.