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High octane dollar not shifting auto sales

Canadians not going to U.S. for deals as carmakers address price gaps with incentives.

Published April 19, 2011
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<p>The surging dollar is giving Canadian shoppers more buying power, but it isn’t driving them to the U.S. for better auto deals.</p>

<p>Transport Canada statistics reveal that in the first quarter, sales of vehicle imports from the U.S. fell almost 10 per cent to 33,017 from the same three months in 2010 despite the dollar reaching parity with the American greenback and continuing an upward trend.</p>

<p>The decline is also in sharp contrast to 2007 and 2008, when Canadians imported record numbers of autos as the value of the dollar hovered around and above the U.S. currency for several months.</p>

<p>Vehicle imports from the U.S., which also include motorcycles and snowmobiles, plunged in 2009 but increased again last year when the Canadian dollar began showing more strength after tumbling in value during the recession.</p>

<p>Industry officials attribute the current decline to a number of factors, including a spike in used-car stickers in the U.S. and a move by some automakers here to wipe out significant discrepancies in auto prices between the countries for major volume models. One automaker called it addressing the “optical price delta.”</p>

<p>Rick Izzo, vice-president and general manager at Superior Auto Sales in Hamburg, near Buffalo, N.Y., said there is a small “uptick” in business for late model luxury cars from Canadians this year because they are more expensive so the gap is naturally wider between Canada and the U.S. </p>

<p>“With cars over $50,000, there is a noticeable difference; between $25,000 and $50,000, not so much; and under $25,000, it doesn’t make much sense to buy here,” he said in an interview. “Several manufacturers in Canada have adjusted their selling prices and rebates by taking into account the strong Canadian dollar so they can counter U.S. imports.</p>

<p>“Just because the (Canadian) dollar is strong doesn’t mean the market is there for an increase in (import) sales.”</p>

<p>He added prices for late model and used vehicles in the U.S. have also increased anywhere from five to 20 per cent this year because of a lack of supply. Motorists have been keeping their cars longer during a slow recovery from the recession, he said.</p>

<p>Izzo, whose firm also operates Fournier Auto Leasing in Vaughan, said Canadians shopping for mid-level autos find they don’t see much savings after paying duties on U.S. vehicles made abroad and other possible costs to meet federal safety standards here. Those expenses range from Canadian sales taxes, the cost of meeting federal safety standards and a letter indicating the vehicle is free of recalls.</p>

<p>Although Canadians can buy late model and older vehicles in the U.S., many automakers have clauses in franchise agreements that prohibit American dealers from selling new autos to Canadians.</p>

<p>Some automakers here, such as Mercedes-Benz and BMW, also charge fees to honour warranties on vehicles from the U.S. Others, including Honda, Chrysler and Nissan, don’t honour warranties from U.S. vehicles in Canada.</p>

<p>Tony LaRocca, communications director at General Motors of Canada, said different manufacturers’ suggested retail prices (MSRPs) in the two countries don’t always give consumers an accurate comparison to actual costs.</p>

<p>“People often compare prices in Canada and the U.S. by looking at MSRP, but that often doesn’t capture the entire picture and factors such as content and incentives,” LaRocca noted. “And when consumers take it down to the actual monthly payment level, they will find there are less differences than they might have thought.”</p>

<p>For example, he said the retail price for the Chevrolet Cruze compact is lower in Canada than in the U.S. because the company wants to be sure it is competitive in that large segment where rivals have a strong presence here.</p>

<p>Other automakers say price differences of several thousand dollars on what appear to be the same models are sometimes like comparing apples and oranges.</p>

<p>The MSRP on a Mercedes-Benz C300 4Matic sedan is $44,900 here, which is about $7,500 more than a similar model in the U.S. But the U.S. model’s price doesn’t include power folding or auto dimming mirrors, special headlamps, heated front seats, split rear seats, rain-sensing wipers and corrosion protection.</p>

<p>Joanne Caza, a spokeswoman for Mercedes-Benz Canada, added in a statement that when an “optical price delta” remains between a Canadian and U.S. model, the company will address it with special offers and incentive programs so consumers here receive the same value as American customers.</p>

<p>At Toyota Canada, spokeswoman Sandy DiFelice said vehicle pricing between the two countries is complex. Different regulatory structures and option packages unique to the Canadian market can affect overall prices, she said.</p>

<p>“The differences are based on consumer desire, the competitive landscape and the ability to meet unique climate and regulatory conditions,” she added.</p>

<p>While overall auto import sales are down, some industry players say they have noticed Canadian dealers capitalizing on bargains for high-end and mid-level autos in the U.S. for eventual sale here.</p>

<p>“It seems to be going up,” said Viraf Baliwalla, president of Automall Network, a large vehicle broker in Toronto.</p>

<p>Baliwalla said he has noticed big price gaps on high-end cars but also on some mid-level models. </p>

<p>There are also some big bargains, according to one retired executive who paid about $68,000, including taxes, for a 2008 Porsche Carrera and saved $17,000 at a Buffalo luxury dealership.</p>

<p>“With that kind of difference, you would be crazy to buy a similar vehicle up here,” said the executive who requested anonymity. “They (the dealer) did all the paperwork and it was really easy and fast going across the border.” </p>

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