"Passive mode is only active while you are on foot (Although you can still get ran over by other players, on the plus side, you can still run them over also) . While inside a vehicle, you are able to shoot and get shot at and in the process, get killed. Your vehicle is not immune to Passive Mode. It costs $100 to activate Passive Mode. It is activated through the interaction menu."
http://gta.wikia.com/Passive_Mode
Well that is dumb. You can be shot in a car and killed but not shot while on foot. Yet you can be run over but not shot on foot. That makes no sense.
I only kill when I get killed or see someone tailing me.