Most Canadians use their vehicle to get to work in the morning, go shopping, and occasionally travel short distances. Limiting and organizing the use of your car is an excellent way to save on gas and maximize its lifespan. Nonetheless, the reality for Canadians who need to use their vehicle for work is much different. Why and how choose a vehicle for work purposes? What factors should go into your decision? Find the answers to your questions as you read on.
1. Using your personal car for work: The legal differences
Have you just accepted a new job that requires the use of a car? The simplest option available is to use your own vehicle for work purposes. How does using a vehicle for work purposes differ from using it for personal needs? Your decision changes many things, both from a legal and financial standpoint.
• If you are self-employed
, it’s easy. You can simply deduct the portion of the costs associated with your car from your business taxes. Gas, maintenance, replacement of parts, insurance premiums, and even annual depreciation, can be counted as work-related expenses and capital cost allowances! You are eligible to receive 15% of the purchase cost and 30% of the remaining balance in each of the subsequent years.1
However, this deduction is limited to vehicles that retail for $30,000 or less.
• It’s much more complicated to use your personal vehicle for work if you are a salaried worker
. In that case, you are entitled to a tax-free allowance based on your mileage. Your employer must, however, have in its possession a T2200 form, certifying that you need to use your vehicle as part of your job.1
You are also entitled to some deductions for self-employed workers, depending on your circumstances.
2. Buying and registering a vehicle for work purposes
Are you starting a business and want to buy a company car? First you should know that a vehicle for work purposes is not subject to the same rules as a personal vehicle.
• Legally, a commercial vehicle can only be purchased by businesses registered in Quebec’s enterprise register.2
The vehicle will be registered with the letter F, which identifies it as a commercial vehicle. It must weigh 3,000 kg or less. If not, it needs to be registered as a tool vehicle (power shovels, graders, etc.).
• If the company legally owns the vehicle, it must also assume the risks, even if the vehicle is operated by an employee. Businesses must legally be covered by liability insurance for at least $50,000.2 There are some special automobile insurance policies for commercial vehicles
that facilitate unrestricted use of a vehicle for work purposes. Several insurers also offer discounts to their clients who have more than one policy. So don’t hesitate to explore this option if you qualify.
• Buying a commercial vehicle gives a company more flexibility in managing the vehicle. Any qualified professional can take the car to visit clients or pick up merchandise. Nevertheless, there are strict rules to follow. Employees operating company vehicles are eligible to receive taxable benefits3 based on the associated expenses. They must keep a diligent log in order to have a record of their expenses.
3. Scenario 1: Mobile worker
“Vehicle for work purposes” is a broad term. It can refer to a bus or to a car used by an accountant to visit clients. Here’s a scenario to help you understand the differences:
Sarah is a sales rep for a pharmaceutical company. She has to go to several clinics and hospitals every week to meet with health professionals. Her company does not provide a car, but has the famous T2200 form proving that she needs a car to carry out her job. Sarah travels approximately 120,000 km yearly over a large area of Quebec. Which car should she choose?
Sarah’s situation is unique, because she needs a very reliable car. The pharmaceutical sales business is highly competitive and she cannot afford to spend a lot of time getting it fixed. According to a study by the magazine Protégez-Vous
, two brands stand out in terms of reliability past 300,000 km: Honda and Toyota.4
A number of models available from these companies are quite affordable. Sarah considers the Toyota Prius, a hybrid that is a bit more expensive to buy but that will cost her less after she takes advantage of the many incentives
. Besides, she will save on gas.
4. Scenario 2: Building contractor
Jean-Yves is a building contractor and his situation is completely different. He goes to the same location every day, but needs his vehicle on an ongoing basis for a variety of related tasks: carrying various tools and materials, pulling heavy objects, driving on occasionally bumpy ground, and going to the hardware store, when needed. Jean-Yves works in the summer when the temperature goes up to 40 degrees and in the winter when it dips to 40 below. He needs a vehicle that will start and run in extreme conditions.
Jean-Yves has to have a robust and reliable vehicle with a powerful engine. A truck is considered a work tool by building contractors, just like a hammer or saw. The Ford F-150 is very popular among building contractors because of its extreme durability. This is the only model (outside of Honda and Toyota) that got passing marks in the Protégez-Vous
reliability study mentioned earlier.4
It also ranked second out of the trucks rated by the online Car Guide,5
standing out particularly for its reliability. Its only competitor in terms of reliability is the Toyota Tundra, although the Tundra is somewhat more expensive and less energy efficient.
To find a suitable vehicle for work purposes, first you have to determine your short- and long-term needs. Now you know what is involved in such a purchase as well as the benefits you can enjoy!
2 FR : https://saaq.gouv.qc.ca/immatriculation/immatriculer-vehicule/vehicule-commercial-ou-usage-special/vehicule-commercial/