U.S. deals still a waiting game

Mark Richardson

After publishing last weekend's story about buying cars in the U.S., we received a dozen or so letters from readers telling us that we were obviously in league with the auto manufacturers and/or dealers.

We get such accusatory letters just about every week, whatever we publish, but in this case the letter writers scolded journalist John LeBlanc and myself for making the process of buying a car in the United States sound harder than it really is.

We were discouraging the public from crossing the border for bargains by mentioning the pitfalls of cross-border shopping when we should have been leaning on the manufacturers or dealers to drop their Canadian prices on par with U.S. prices, we were told.

The fact is, we don't need to lean on anyone. Manufacturers and dealers are thick-skinned, but the real way to make change is to hit them on the bottom line – and that's what's happening now. Potential customers are waiting for prices to drop before committing to buying a new vehicle, and the figures will soon show it.

"People are coming in and saying, `Have you dropped the prices yet?'" one Chrysler dealer told me. "When we tell them that we haven't, they say, `Okay, we'll come back next week.'"

August was a record month for auto sales, before the loonie hit the magic parity with the greenback. September figures were to come out just after this column was written and were expected to slip though not too dramatically. October sales are expected to be a disastrous plummet.

However, Canadian manufacturers will never drop their MSRP prices in a meaningful way. To do so would ransack the value of vehicles coming off their leases with guaranteed residual prices not much more than adjusted new prices. And most important, if and when the loonie's value slips against the greenback, it will not be easy to bump Canadian prices back up to current levels.

They can, however, adjust prices by offering no end of rebates, financing incentives, easy payments and cash-back offers against the MSRPs that will bring the final price more in line with American stickers.

This has already begun. Chrysler offered massive incentives this week, reacting to the empty showrooms, albeit at a cost to its own workforce. BMW and Mercedes are offering rebates, Audi is stepping up the standard items available, and Toyota has been rumoured for a week now to be about to do something significant with its price structure. Everyone else will soon follow.

The ads in today's section will tell more of the story, but I don't get to see the ads before publication, so they're as much news to me as you.

The beauty of this is that incentive plans are completely flexible. They change from week to week to reflect market conditions and can be adjusted up or down to keep pace with competition.

The other advantage is that there is still a penalty for those who want to buy a new car in the States because financing plans there are not valid for Canadians, not to mention the additional paperwork that, frankly, many buyers are hesitant to undertake.

As many as four out of five Canadian auto buyers prefer to finance their vehicles, and they're the people who will take advantage of the various incentive plans.

Right now, manufacturers are using a stick and carrot approach: many will not allow their U.S. franchises to sell to Canadians, while they 're trying to sweeten the pot for deals available up here without selling the farm.

This week, I called up some U.S. dealerships to find out who could still sell me a car. The situation is changing almost daily, so I suggest you make your own calls.

However, a salesperson at a Ford dealership in Niagara Falls told me that he hasn't closed many sales to Canadians. Of every three serious buyers who enter his store, he said, he'll close the deal to one of them. But among Canadians, he'll only close the deal to one in 10.

"I can't finance you!" he said. Those prospective buyers go away, crunch the numbers and find the savings just aren't always that great on affordable cars.

There are plenty of websites out there that offer advice, including carburner.com and redflagdeals.com as well as our story from last year that's just as relevant today as ever, and available to read at wheels.ca.

Mark Richardson is the editor of Wheels. mrichardson@thestar.ca

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