A the New Market near the bus station, one can easily hire at reasonable price a horse cart for the trip to the Malecon or to the Viejo Mercado. The vendors of these carts vary widely in both cart and care of the horse, so consider carefully which cart you choose. The driver will take you to El Malecon and wait while you walk it, then pick you up at the other end for the ride back to the bus station. In our case, we paid our driver and jumped off at the Viejo Mercado. Then we decided later to not fuss with taxi or horse cart, so we simply walked back to the bus station carrying our bags of souvenirs.
It is easy to get from Granada to Masaya by bus. You can take any bus to Managua, they all stop in Masaya. The chicken bus (old American school buses, usually yellow which are very common in this part of the world) leaves from the bus station near the market, just around the corner from Palí supermarket. It makes several stops before leaving the town, also very close to Calle El Almendro where I was staying, which was very convenient for me.
Buses run frequently, from 5am to 6pm. They leave when they are full but usually you don't need to wait long. The journey takes a little more than 30 minutes and it was 10 cordobas (December 2010). The bus will drop you off in the massive bus lot behind the huge Mercado Municipal (Mercado Nuevo), a typical local market where you can get everything from live chickens to vegetables, toiletries, clothes and a wide selection of lower-quality handicrafts. The famous Mercado de Artesanías (Mercado Viejo) is a short walk from here.
I visited the Masaya Vulcan on a tour from Granada, but another day I took the bus to visit the town. Buses to Masaya from Granada leaves a few block from where I stayed and only a block from the market. There are frequent buses and I didn’t have to wait long until the bus departed. The bus was one of those repainted old American school buses, so common in Central America. The ride took 30 - 40 minutes and it was 9 cordobas (July 2009).
In Granada the buses stops at a big open space next to Mercado Municipal, about one kilometre east of the centre. I came back here to take the bus back to Granada and had to ask around for the right bus. There were a few with the sign Granada, but only one leaving soon. On that bus there was a TV, the first and only TV I saw on one of these buses.
About every 15 minutes a bus from Granada leaves for Masaya. The ride takes from 40 mins to 1 hour. Get there early or you'll have to stand like I did on my way back to Managua. On a bumpy road with lots of stops it isn't easy. The bus station, if you can call that a parking lot with lots of trash everywhere, is one block south from the market on the right side. If you don't find it the locals are happy to show you the right direction. From Masaya bus station, which after rain, was muddy and not tempting at all, there are frequent buses back to Granada and to the capital Managua. Please note that there are no buses after 6.00 pm.