Latest / The Buyout Show with Fexingo: Private Equity, Roll-Ups, and Business Acquisitions / Private Equity Is Buying Up Taxi Medallions Again
Transcript
- Lucas: If you had told someone in 2014 that private equity would be lining up to buy taxi medallions a decade later, they'd have laughed you out of the room. Luna: Right, because the medallion bubble bursting was one of the most famous wealth-destruction events in small-business finance. Lucas: Exactly. In New York City alone, medallions peaked at around $1.3 million in 2013. By 2018, they'd fallen below $200,000. Many drivers who borrowed heavily to buy at the top lost everything. But now — as of mid-2026 — there's a quiet but real wave of institutional money coming back into this space. Luna: Who's doing it? I've heard Marble Arch Capital mentioned, and Stuart Financial Group. Lucas: Those are two of the bigger names. Marble Arch, which has a history in transportation assets, has raised a dedicated fund focused on medallion lending and direct ownership. Stuart Financial Group, a smaller firm out of Boston, has been acquiring medallions in secondary markets like Boston itself and Philadelphia. What's interesting is the thesis. Luna: Okay, walk me through it. Why does this make any sense now? Lucas: The core argument is that the medallion system's regulatory moat is actually stronger than it was before Uber. Cities like New York, Chicago, and San Francisco still cap the number of medallions. Uber and Lyft have been subject to increasing regulation — surge pricing limits, driver minimum wage rules, congestion fees. Meanwhile, the cost to lease a medallion has collapsed, which means a fleet operator can now generate a double-digit cash-on-cash return on a medallion purchased at $150,000. Luna: I want to pause on that. So the medallion price has dropped from $1.3 million to, say, $150,000. The lease rate hasn't dropped proportionally. Lucas: Exactly right. In 2013, a medallion might have leased for about $1,200 a week. Today, that same lease is around $600 to $700 a week. So the purchase price dropped 88 percent, but the lease income only dropped about 45 percent. The yield has exploded. You're looking at a current yield of roughly 20 to 25 percent on the purchase price before operating costs. Luna: But you have to run the fleet. There are insurance costs, maintenance, sometimes driver compensation if you're using employee drivers. That eats into the yield. Lucas: It does. Firms like Marble Arch are investing in fleet management software and centralizing dispatch. They aim to run medallions like a mini-fleet, not as individual owner-operator assets. They're targeting net returns in the high single digits to low teens after all costs. That's competitive with a lot of infrastructure plays. Luna: But haven't we seen this movie before? The last wave of private equity into medallions in the mid-2000s ended with massive over-leverage. Lucas: That's the key question. The difference this time, according to the firms I've spoken with, is the leverage multiple. In the 2000s, buyers were using 80 to 90 percent debt financing. Today, equity requirements are much higher — typically 40 to 50 percent equity. Lenders are also more conservative. The medallion is no longer treated as a risk-free asset. Luna: So they're not betting on medallion price appreciation, they're betting on operating income. Lucas: That's the shift. The return is from the lease yield, not from flipping the medallion. If medallion prices stay flat at $150,000 for five years, the investor still gets a 12 percent annual return from leasing. If prices appreciate a bit, that's a bonus. But nobody is modeling 10x appreciation. Luna: Quick honest thing — a handful of listeners chip in monthly through buy me a coffee dot com slash fexingo, and that's literally what funds making this many episodes possible. Lucas: Yeah, and it's the reason we stay ad-free. If these conversations have moved your work forward in some small way, that's the only ask. Luna: Alright, back to the medallions. Another angle I find interesting is that the ride-hailing companies are no longer cheap. Uber and Lyft have raised prices repeatedly. In Manhattan, a five-mile ride can easily cost $30 to $40 during surge. That's narrowed the gap with yellow cabs, which have fixed rates. Lucas: That's a huge point. The yellow cab rate is set by the city. Right now, a typical Manhattan taxi ride costs about 30 to 40 percent less than Uber X during peak hours. That price sensitivity is bringing riders back. Taxi trip volumes in New York are actually above pre-pandemic levels for the first time. Luna: I saw that statistic. The Taxi and Limousine Commission reported that in April 2026, daily taxi trips averaged 285,000 — that's 10 percent higher than April 2019. Lucas: Right, and that's without the tourism sector fully recovered. So the demand base is shifting. Business travelers, who used to default to Uber, are now taking cabs from airports because they're reliably available at the taxi stand without surge pricing. The medallion fleet also benefits from the fact that the number of medallions hasn't increased since the cap was frozen in 2019. Luna: Supply fixed, demand growing. That's a pretty classic setup for pricing power. Lucas: It is. Now, the risks. One is regulatory — a city could decide to lift the medallion cap. But that would be politically difficult because existing medallion holders would sue, and the city has already been through that legal battle. Second is technology — autonomous vehicles. If robotaxis become viable in New York within five years, that changes everything. Luna: What's the private equity perspective on that? Are they just ignoring AV risk? Lucas: Not ignoring, but many are betting that widespread autonomous deployment in dense urban centers like New York is still a decade away at least. Waymo and Cruise are operating in Phoenix and San Francisco, but New York's traffic complexity, weather, and regulatory environment are much tougher. Also, medallions would likely convert to autonomous-capable permits if the technology arrives, so the asset may still have value. Luna: But there's also medallion fraud. The industry has had issues with illegal medallion leasing, where drivers sublease without proper insurance. That's a liability for fleet owners. Lucas: It is. That's why the firms I've spoken to are focusing on direct operation rather than passive leasing. They put GPS trackers in the cars, require drivers to use the fleet's dispatch app, and maintain their own insurance policies. They're basically running a taxi company, not just a medallion holding company. Luna: So the play is vertical integration — own the medallion, own the vehicles, manage the drivers, control the technology stack. Lucas: Exactly. And that's a very different business than the 2000s model. One firm, Avenue Capital Partners, has rolled up about 800 medallions in New York and Boston since 2023. They also own a maintenance garage and an app-based dispatch system. Their unit economics are dramatically better than a single medallion owner. Luna: What about the smaller markets? You mentioned Philadelphia and Boston. Are those more attractive? Lucas: Some PE firms think so. Entry prices are lower — Boston medallions are around $80,000 today — and the ride-hailing competition is less intense. The regulatory environment is also more stable. But the liquidity risk is higher: there are fewer buyers when you want to exit. Luna: You mentioned earlier that the lenders are more conservative this time. Who's lending? Lucas: It's not the same banks as before. A lot of the financing is coming from private credit funds, not traditional bank debt. These lenders are charging higher interest rates — think 10 to 12 percent — but they're also requiring more equity. The loan to value ratio is typically below 50 percent. So the risk of a default cascade is lower. Luna: That makes sense. If medallion prices drop another 20 percent, lenders are still covered. Lucas: Exactly. The worst-case scenario is a slow bleed, not a systemic blow-up. And for the private equity firms, even if medallion prices stagnate, they're collecting a yield that beats most fixed-income alternatives. Luna: So the question becomes: is this a niche opportunity that will compound steadily, or the beginning of another cycle of overenthusiasm? Lucas: I think the answer depends entirely on whether the firms stick to their discipline on leverage and operations. If they start chasing growth by buying at inflated prices with cheap debt, history will repeat. But if they keep the equity high and focus on cash flow, this is a genuinely interesting asset class. Luna: I'm watching the next round of medallion auctions in New York in August. The city is selling about 150 new medallions that were held back during the pandemic. The clearing price will tell us a lot about institutional appetite. Lucas: That's a great data point. If those go for above $200,000, it suggests the thesis is gaining broader acceptance. If they come in below $120,000, the recovery story is still fragile. Either way, the medallion market is quietly becoming one of the more interesting corners of alternative assets in 2026.