New owner operator

I'm somewath confused. When you prorate it's not for just on Province. It's at least two. I think what you're saying is that you went to Saskatchewan and bought a full plate. If you did, they would have charged you Sales tax on the depreciated value of the truck to a maximum of 50% of the original value. What would you say the value of your truck (and trailer) if it's yours is/are worth?

 

I would never pay anyone to do my pro rating. Just follow the instructions in the guise and do it yourself. s for your National Safety Code Certificate (Authority). Just drop by a Weigh scale or go online and fill out the Form and get it done. It's very easy to do.

 

Look, if you really want up be an O/O and you see this as a way in, and if there's really no other way for you, then maybe.
Here are my questions, if it was me:
1) $5,000 truck rent?
Does that include full maintenance?
Is this a winch truck or something very specialized or is it just a tractor with maybe a blower? Seems pricy.

2) 35% fee? That seems high unless the trailers they provide are specialized like B train Pneumatics or something. Or if the work is so specialized that only few companies can even take it on due to regulations or shear volume.

3) you mentioned a $400 accounting fee. What is that? Anybody who charges you a fee for anything after their percentage is IMO screwing with you. If you're running your own authority you will invoice them, are they then going to charge you $400 to pay you?

4) if you want to haul crude, can't you just buy an older $30,000 truck and work your way up?

I'm sure there are more...

 

I think that you are going about this right, by estamating high where you can, the rough rule should be (based on your share of the revenue) 30% for truck costs, 30% for your pocket and 30% for the rest. The truck rental may sound high, but if the maintainance ie oil, grease, brakes, tires etc (based on good operating practices) are taken care of then it is not that high. do they provide you with a replacement truck it this one needs warranty work? if $2000 a month is going to break the deal , then the margins a too thin. IMO An older truck only work out if you can pay for it and have a cash cushion for repairs as well as a place and the skills to take care of the small things that come up on a hi mile truck. You paper work for NSC needs to be done either way, and should be done even if you didn't need to to keep track of how your business is going. unless you are going to hand an accountant a shoe box full of papers you are better to do the basic accounting work with a program that you can use to E file your GST & year end, if your company (INC) needs to pay tax in alberta you need to involve an accountant, if you have a zero corporate income you can do it and the federal your self. your own insurance and plates shouldn't be any more than they would be if you leased on, sometimes cheaper. Keep asking until you are sure.

 

OK. I thought the $400 was coming off your statement, not as an expense afterwards. As an estimate its a little high, just saying.

Renting is OK. No long term commitment and the opportunity to generate higher revenue than just wages it good. Full maintenance is good.

As for the $30k truck. Yes it could need $30k in repairs in its first year but consider that a $150k new truck depreciates 15% in its first year and 30% every year thereafter until it bottoms out at $10-20k depending on brand. And you pay 8% interest in the remaining balance. Do the math on that and $30 in repairs starts to look reasonable. Plus, new trucks are more expensive to operate than 10 y.o. trucks. A 2001 with a C15 or a late 90's series 60 would be worth putting money into.

 

The one thing I do like about running older trucks is if the work dries up or I can't work for whatever reason (sick or injury) I am not scrambling to make a truck payment.

 

CRA says you can depreciate new equipment a maximum of 20% the first year and 40% every year thereafter. Most guys max this out and depreciate their equipment faster than it actually does and faster than they are paying down the principal.

You can only write off the interest, the principal is actually income but is offset by depreciation. Most people use blended payments, (equal dollar amount for the entire term) and don't see that at the beginning of the loan, there is way more interest than principal in the payment.

So for the first two years they are paying less principal than the depreciation they are taking. This makes their tax bill look artificially smaller. The third year it's about even and the fourth year they get a whopping tax bill. Then they trade it in and start the cycle all over again, swearing they'll never keep a truck that long again. LOL.

You can write off any legitimate business expense on anything, new or old. Sometimes with an old truck and a big expense, CRA will make you write it off over a couple of years because it is seen to increase the value of the truck.

I like the "Canada Small Buisness Improvement Loan". You can get it through your local bank and it's a "demand loan". This means that the principal amount is equal every month and interest is calculated on the remaining balance. So as long as you make the minimum required payment you're good. If you want to make bigger payments at the beginning, you can. I financed my current truck over 7 years and paid it off over 5 years. I paid $2000 in principal at the start and $800 at the end and made some lump sum payments along the way. I even skipped a few along the way when I had health issues and it was no problem because I was ahead of schedule. I like that flexibility. But you need two years of tax returns to qualify.