Vehicles: Health>Wealth>Social life

 

  1. There are two types of vehicles for tax purposes: passenger vehicles and motor vehicles. CRA’s definition is sensitively dependent on the vehicle use in your business.
  2. Motor vehicles are used 90%+ to transport goods, equipment or passengers to earn income. Motor vehicles can be a qualifying SUV, van or truck (dependent on your business). It is typically more economical to purchase motor vehicles since they are not subject to any purchase or lease ceilings.  If you buy it,  then the payments are irrelevant to the tax write-off. The write off stems from CRA’s prescribed depreciation rate of 30% of the COST. This way you save the most in the early years of ownership and less and less as its worth less and less for tax purposes. The smartest thing for you to do is to FINANCE the purchase at a low rate, so that you don’t miss out on the opportunity cost of forking over a chunk all at once. All financing rates are much lower than ROI on CIBC’s balanced index fund
  3. Passenger vehicles are any SUVs, van or trucks that are used less than 90% to transports goods, equipment or passengers to earn income.  Passenger vehicles include ALL coupes, sedans, station wagons, crossover SUVS, sports cars even if they are used 100%  to transport goods, equipment or passengers to earn income.  There is a purchase ceiling of $30,000 on passenger vehicles.  It is typically more economical to purchase any passenger vehicles that cost less than $30,000. The more a passenger vehicle is over $30,000, the more you save by leasing, since the lease ceiling is $800/month +GST. Given that leasing has higher % and cash purchases have better discounts, probably $40k is a more practical cut off.  If you buy a $40k vehicle only $30K can be claimed and depreciated by the business.  If its over $40k then you may be better off leasing.  The lease reduces your taxes by each lease payment. Ideally you should structure it so that you pay $800 per month + GST until your residual is under the $30K ceiling and 100% claimable.
  4. As with all dilemma’s make your decision with this descending list of priorities and you can not go wrong: Health>Wealth>Social life.  New carbon levy introduced effective January 1, 2017, will apply to fuel but not to consumer electricity. Fuel cost is the single-highest operating expense a vehicle incurs. Keep in mind the auto industry as we know it is destined to collapse since shared (Uber), self driving ELECTRIC VEHICLES have 10x utilization with only a fraction of the cost on individually owned cars.  In the meantime, aim to get the best deal buying a used vehicle: 3-5 years old with 80,000-112,000 km (based on Net Present Value calculations accounting for safety ratings, ongoing costs (fuel, maintenance, insurance), depreciation, resale. 
  5.  If you are doing it right, the real cost of driving should be the time wasted in the vehicle.
  6. Design your life for efficiency and spend less time commuting, and free more energy for focused work.
  7. Get rid of any non-corporate vehicle payments, and avoid buying vehicles with debt unless the cost of financing is less than the opportunity cost of your money in your business .  
  8. After heart disease and cancer you are most likely to die in a road accident! White vehicles are statistically the least involved in accidents. Silver and other light colors are next safest to white, while the darker the color the higher it is statistically involved in accidents. Black is statistically the most involved in accidents.
  9. Buckle your kids into the middle seat NOT behind another passenger if possible. If that isn’t possible buckle your child behind the lightest passenger. The number of children killed by a breaking seat back this is more than the number of people killed by Takata airbags! Good options: Steel cargo barrier. Mercedes has had no issues with seat back failure.  http://www.autonews.com/article/20160304/OEM/160309910/audi-loses-$124-million-texas-verdict-over-seatbackfailure


Spend your precious time optimizing the number of years you can live without earned income since there is no guarantee in any business, and even less in careers and even less in jobs.  This is largely dependent on your personal spending requirements.  You should save enough each year that you don’t have to work 1 year in the future.

If you require $40,000 each year to take care of your personal spending requirements (not including equity payments to your house), you need to earn at least $80,000 after-tax save to save at least $40,000 each year.  Prioritize earning more money to support your standard of living, but you must at least save at least 1 year’s living requirements each year.  In this example, wasting an extra $40K on a car is equivalent of wasting 1 full year of your life. 

Arguably the money you may have lost on the cars so far will save you more money than was lost if the negative energy generated by admitting to be wrong and owning up to it should is used as motivation to commit to be more antifragile

Efficient use of time and money involves strategic planning by scheduling every minute of every day, and by injecting small amounts of stress in your life – while avoiding long-term stress (large depreciating assets and ongoing costs RELATIVE TO YOUR INCOME) that consume life and distract from its main focus.



Vehicle Safety

Why are the Euro NCAP results for rear passengers so important?  The latest variation of the Lexus RX received (at the time of this blog posting):

  1. Top Safety Pick + from the IIHS  (Sounded great, BUT…)
  2. WEAK protection for the rear passenger from the Euro NCAP
  3. marginal protection for the driver’s leg from the Euro NCAP
  4. a relatively unimpressive 77% protection for a 36 month old child in a forward facing car seat from the Euro NCAP
  5. AND it received a reduced safety score from the NHTSA (bottom 67%)
  • In the chart listed below, the 2nd and 3rd column are the Head Injury Criterion (HIC) measures which indicate likelihood of head injury arising from an impact for the rear passenger and driver respectively.  Its in descending order of combined HIC scores (safer to less safer vehicles in red). This chart is samples only a small number of vehicles you can look up the HIC scores for the vehicle you like on the IIHS and the NCAP websites.
Lowest from 2nd row 1st row 1st row HIC 1st row HIC Total side roof Lowest Death Head
NCAP HIC SIDE HIC SIDE Overlap Front Mod Front HIC cm NHTSA rate light
Audi Q7 1 Adequate 54 65 225 174 518 27.5 5.00 N/A N/A P
VW Atlas 1 Adequate 57 63 516 243 879 32.0 5.29 4 N/A
Audi Q7 old 1 Adequate 59 105 293 253 710 16.5 4.72 N/A 0
Honda CRV 1 Adequate 61 201 302 225 789 18.0 5.33 5 22
Honda Van 18 1 Adequate 78 125 158 176 537 21.5 5.52 5 8 M
Volvo XC90 1 Adequate 82 233 37 174 526 26.0 5.18 5 N/A
Kia Sorento 1 Adequate 85 210 98 193 586 16.0 4.7 5 N/A
Mazda CX9 GT 1 Adequate 98 143 158 111 510 22.0 5.15 N/A 11 A
Honda Van 17 1 Adequate 99 159 130 131 519 18.5 5.87 5 8 N/A
Benz ML 1 Adequate 104 64 182 233 583 19.0 6.68 5 0
Benz GLE 1 Adequate 104 64 182 233 583 19.0 6.68 5 0
Audi Allroad 1 Adequate 114 234 89 164 601 13.0 4.60 5 15 M
Honda Pilot 1 Adequate 122 147 243 145 657 17.5 5.22 4 17
Acura MDX 1 Adequate 138 180 171 121 610 16.5 5.87 5 N/A
Volvo XC60 1 Adequate 158 85 91 188 522 22.0 5.23 5 10
VW Touareg 1 Adequate 161 40 293 293 787 23.0 4.72 5 9
Tesla S 1 Adequate 212 192 526 323 1253 20.5 4.33 5 N/A
Subaru Outback 1 Adequate 215 112 120 117 564 22.0 5.36 5 12
Audi Q5 1 Adequate 239 184 110 159 692 22.5 5.16 4 7
Benz GLK 2 Marginal 111 73 205 208 597 24.0 6.41 5 7
Lexus RX 3 Weak 87 69 156 221 533 24.0 5.13 4 N/A
Ford Edge 4 Poor 68 89 78 189 424 20.0 5.11 5 26
Thresholds 150 200 240 210 776.67 20.0 4.75 5
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