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Canadians shopping for cars in U.S. – again
The loonie’s recent surge toward parity with the U.S. dollar is once again revealing the difference in new-car prices between the two nations, and Canadians are once again asking why this gap exists.
“We are looking at the new 2011 Kia Sorento. The high-end model is $10,000 cheaper in the States for a truck made in North America,” reader Allie Arksey laments.
“There are some (Canadian) incentives here and there. Whoop-de-do.”
So Canadians continue to import vehicles from the U.S., recognizing that there are big savings on vehicles selling for more than $30,000. But doing so on an individual basis can involve a lot of hassle, not to mention that many U.S. dealers aren’t allowed to sell to Canadians. So shoppers are turning to enterprising agents and brokers to do their bidding.
Meanwhile, most manufacturers insist they are working to keep Canadian prices competitive, including offering price cuts and special financing offers (see accompanying article). They’ve had some experience at this. Many were taken off-guard when the dollars hit parity earlier this decade, but they’re better prepared this time.
So how did we get to this point?
Two-and-a-half years ago, the dollar reached parity for the first time since 1976, unleashing a cross-border frenzy, with retailers of everything from books to watercraft getting an earful for their apparent profit-taking.
Car companies were public enemy No. 1. Anyone with an Internet connection could see the glaring disparity between U.S. and Canadian manufacturers’ suggested retail prices (MSRPs). What’s worse, the automakers initially appeared indifferent.
Now that the dollar has returned to parity — and may stick around a while — what are the car companies doing differently?
Gary Moriarty, deputy registrar at the Registrar of Imported Vehicles, or RIV (riv.ca), the agency that oversees the importation of vehicles originally manufactured for distribution in the U.S., suggests things have changed somewhat.
“There isn’t the same level of media attention today as there was, and overall economic conditions are poorer today,” he says. “Some MSRP prices have been adjusted.”
If you’re shopping for a basic economy model, he’s correct.
A glance at the three top-selling cars in Canada reveals an almost synchronous alignment of base prices: the Honda Civic is $335 more in Canada (at $15,990), the Toyota Corolla is just $10 more (at $15,460), while the Mazda3 is $50 less in Canada (at $15,995).
But the price gap widens as you move up the product line: the base price of the Honda Accord is $3,735 more in Canada, while a mid-size Mazda6 is almost $4,000 more.
There are differences in equipment levels (Mazda fits aluminum wheels on the base 6; Americans get plastic wheel covers), but in most cases not enough to justify the thousands of extra dollars Canadians fork out.
Canadians pay an average $5,000 more per vehicle than they ought to, says Robert Lamb, a retired Nortel employee who has become a thorn in the side of auto manufacturers with his CarsWithoutBorders.com website. He maintains that we’re being “gouged” to the tune of $7 billion annually.
“It’s the equivalent of a 1.5 per cent increase in the GST,” he claims.
Lamb accepts that basic models are priced similarly now, but suggests that it’s just a public relations decoy.
“I think the car manufacturers know that the public is really aware of the differences and they are making a stand to be close to the price on entry-level models just to give everyone the impression that we have a level playing field.”
Lamb is not one to stay silent on the issue or sheepishly swallow the company line.
As one of 1,400 Canadians who had their new American-sourced vehicles detained at the border in the fall of 2007 due to a dispute over car immobilizer standards, Lamb garnered national media attention when he brought the transport minister to task over the questionable safety regulation.
Bombarded with bad press and emails from angry consumers, Transport Canada reversed itself on the immobilizer issue and declared U.S.-spec immobilizers legal in Canada.
“The government changed the law and changed it in record time: 15 days,” Lamb recalls.
The following June, Transport Canada announced changes to its outmoded 8 km/h-impact standard for bumpers, aligning them with American and European specifications.
Moriarty says harmonization has muted some of the manufacturers’ protestations regarding cross-border shopping.
“There’s been a lot of harmonization of automobile safety standards between the two markets — with more to come — which has mitigated the automakers’ arguments to a degree.”
Still, Canadians who buy and import American-spec automobiles continue to be given a hard time — not by the government, but by the very manufacturers to whom they give their hard-earned cash.
“What have the automakers learned? Some toughening up of warranty eligibility and non-tariff impediments like super-expensive equipment inspections by Canadian dealers,” says George Iny, president of the Automobile Protection Association. He recounts two recent horror stories.
• To bring a U.S.-spec BMW into compliance, a dealer charged more than $2,500 for a recall letter (a condition of entry) and a simple modification to the body computer to activate the mandatory daytime running lights.
• A Toyota Tacoma truck was part of the U.S. recall for a possible sticking throttle. The APA located a Canadian dealer who would perform the recall work, but was unable to get Toyota U.S.A. to delete the vehicle from the outstanding recalls list, which meant the owner could not register the vehicle in Ontario.
Moriarty says the RIV website advises shoppers to contact Toyota before buying to see if a vehicle is affected by a recall or, if they have already imported a vehicle, to call Toyota and “register” the vehicle “so that when a remedy is at hand it can be expedited.”
Despite the hiccups, Canadians are continuing to import vehicles from the U.S., as tracking by the RIV shows.
After a “slow” year during the depths of last year’s recession when only 124,000 U.S.-market vehicles were imported into Canada, the first three months of 2010 suggest it will be a good year volume-wise — although likely not as high as the record 240,000 imported in 2008.
“We are told that carmakers are monitoring the market and will react with incentives as required,” says Iny. “These may not be price reductions, but could be subsidized financing rates, like zero per cent, not available on a U.S. import.”
Indeed, car shoppers heading for the U.S. know they must pay cash for their purchase; as Canadian citizens they are ineligible for finance or lease deals. As well, models not manufactured in North America (such as the Mazda3) are subject to a 6.1 per cent trade tariff collected at the border, and that makes the American car even more expensive to import than it already is.
Canada’s auto manufacturers and importers are keen to point out other drawbacks.
“Vehicles imported from the U.S.A. into Canada retain less value, so any savings realized at the purchase will be reflected in a proportional loss when it comes to resale,” warns Ted Lalka, vice-president of product planning and marketing at Subaru Canada.
Chrysler spokesperson Mary Gauthier warns of the importation fees collected by RIV, the cost of possible modifications (not many due to harmonization), and the fact that consumers likely can’t trade in their old vehicle in the U.S., thus losing the benefit of a sales-tax reduction on the new vehicle by having a trade-in.
Manufacturers suggest it’s misleading to simply compare MSRPs on corresponding American and Canadian websites.
“Instead, total transaction price should be calculated, including applicable incentives, to determine the true cost. The MSRP for a new Dodge Grand Caravan is $27,445, but with the current incentive offers, consumers can purchase an extremely well-equipped 2010 Dodge Grand Caravan with the Canadian Value Package for $19,999,” Gauthier writes in an email.
A quick Internet check shows that Buffalo residents can get just a $1,500 cash credit from a comparably equipped Grand Caravan SE at their local dealer, which lists at $22,495 with destination charges included. The Canadian van is cheaper.
Most automakers claim they do not pay attention to U.S. automobile prices, but rather to their segment competitors here at home.
“Jaguar and Land Rover, like other companies, price to the Canadian market, not to the U.S. market. Pricing takes into account volumes, marketing strategy, incentives, financing, distribution costs, local regulations and, most particularly, competition,” writes Barbara Barrett, communications manager, Jaguar Land Rover Canada.
Yet Porsche and Volvo are already advertising currency-based rebates (the loonie has also appreciated against the euro) that can see a cash savings to Canadians of between $4,000 and $10,500 — although their U.S. models still remain less expensive.
Subaru acknowledges the elephant in the room.
“Over the last few years Subaru Canada has repositioned the pricing of our vehicles to be more competitive in the Canadian market and better aligned with the United States,” writes Lalka. “While there is still a gap, Canadian models are often equipped with more standard features designed to meet the demands of our diverse climate, such as heated mirrors and heated seats.”
Lamb takes it all with a grain of rock salt.
“You have to be really careful — and informed. They make it very difficult to compare apples to apples,” he says of the manufacturers.
“Nobody sells for the MSRP in the States, either,” he notes.
Lamb says for all the obstacles some automakers and dealers have imposed on consumers — such as charging customers outrageous sums to activate the daytime running lamps — shoppers have struck back with tricks of their own.
“Canadians who have a condo down south, or who have American friends or relatives who can buy for them, are purchasing American vehicles. In Montana, Canadians can register a company for $10, then go out and buy a car.”
And increasingly, Canadians are turning to brokers. In fact, Moriarty points out, 60 per cent of the vehicles flowing northward are represented by dealers and brokers, rather than individuals acting on their own behalf.
While many U.S. dealers are forbidden to sell to Canadians, they’ve found creative ways to make the transactions happen anyway.
“Car dealers use middlemen to get around the restrictions imposed by their corporate head offices,” says Moriarty.
“You’ll do better and have less hassles if the U.S. dealer delivers it to Customs and does the paperwork for you,” Iny adds. “Alternatively, a specialist Canadian retailer sourcing in the U.S. will be better placed than a consumer to make a good deal.”
“Don’t close the sale until you have the recall letter in your hands,” advises Lamb, who says some U.S. dealers will gather the necessary documentation if it results in a sale, in what has been a miserable year for dealers south of the border.
Ultimately, Lamb wonders why car companies have become meddlesome and obstructionist when it comes to Canadians choosing where they buy their vehicles. Their products get sold in the end, and if they’re trying to protect the dealers, well, the dealers themselves are skirting the rules.
“There are dealers in Cornwall and Ottawa that are buying trailerloads of new vehicles from U.S. dealers and selling them here,” claims Lamb.
As for prices, he rejects the oft-repeated defence that it costs more to do business in Canada.
“It’s not about being one-tenth the market. It’s an integrated, free-trade market that Canadians were forced to accept. Vehicle prices should be the same.”
• What are manufacturers doing to keep Canadian prices competitive? Read about price cuts and special financing offers here.
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