It's been a long time since Canadians harbored thoughts of crossing the border to buy a new car. Since the beginning of the year, the “loonie” is up more then 10 percent against the dollar. Now that the Canadian dollar is nearly equal in value with the American greenback (for the first time in 30 years), our neighbors to the north are doing some major cross-border shopping. The Chronicle Herald (of Halifax, Nova Scotia) reports that more than 64K American vehicles have found their way north so far this year; that's up 26 percent over year ago. One Toronto resident hankering after a new Mercedes S63 AMG found one selling for C$171K in Canada. When he threatened to cross into the U.S. and buy the car for US$127K, the price suddenly dropped to C$149.5K. Canadian car dealers claim sales are down by 25 percent across the board; they're “begging carmakers to cut their list prices.” NAFTA that.
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Dear Canada,
We have cheaper cars, you have cheaper prescription drugs. All we need to do is set up a system wherein we can trade. We can get older Americans to buy the cars here, drive them to Canada, then trade them for your old cars filled with prescription drugs. It’s so simple, only intrusive government border security could make it not work. Still, it’s worth a shot.
Love,
America
I guess that the corporations are finding that NAFTA can cut both ways, eh?
It’s time for the Canadian car importers and manufacturers to actually bring prices in line, or else the bleeding will continue.
It’s really unfair to Canadians and to Canadian dealers, as you can see, to have this situation.
I suspect that prices will have to drop in Canada, and if prices drop there drop say 15%, then prices in the US may have to go up 1.5% to make up for it. (Considering the population difference).
In fact, despite all the yowling and gnashing of teeth I can surely hear from making such a statement, the US dollar is what is dropping like a stone (in value) rather than the other currencies in the world actually appreciating in value at this time.
Part of it is our own economic incompetence (as in, leaving the gold standard – but other nations have all done that too), and also our extreme debt load (not good), lack of savings (in fact for the first time since the depression our savings rate is -1% which is to say we are spending more than we are making, as a people). How long do you suppose THAT can continue?
Fourteen percent sales tax! Holy schneike! I’d deal with customs to get out of that, that’s for sure.
It’s not just cars, either. Stuff like books are pre-printed with the ‘canadian’ and ‘us’ values on them, which are in line with what the dollar used to be worth. It’s only a matter of time before either US prices go up, or Canadian prices go down.
Without knowing the specifics, I’d bet that Quebec’s legislators are good enough at absorbing money that they made a 14% “use tax” on cars that you import from elsewhere.
Here’s how it works.
Cars assemblend in North America cross the border for free as long as they meet or can be easily modified to meet Canadian standards (daytime running lights, LATCH system etc).
Cars built outside of NA are subject to a 6.2% duty and must also meet the standards.
There is a list of admissible vehicles and a description of t he process here http://www.riv.ca/english/html/how_to_import.html
Vehicles crossing the border must be accompanied by a certicficate of origin and must have had all recalls addressed.
There are several dealers near border crossings who actively target Canadian customers and facilitate the process.
Some of the best examples of price gaps are sound with Subaru who is planning to lower prices on 08 M vehicles and specialized cars such as the Corvette (68,000CDN MSRP). A Canadian customer could buy a Corvette in the US, drive it for 3 years then sell it used for more than he/she paid for it.
Silly?.. Yes.
There are companies that specialize in importing vehicles..there’s even a “directory” at http://www.naata.org/directory/directory.html
Warranties are not honored by all manufacturers which is a whole other story. BMW yes, Chrsyler no etc..
I’m not sure where the claim that sales are down is coming from as 2007 has been projected at the best year in histroy for new car sales (1.8 million -source Desrosiers).
It is my understanding that you do have to pay CDN tax on the vehicle when you import it but am unsure about how the provincial taxes are applied as they are set by each provine.
“As an added bonus, car shoppers from Quebec can avoid their 14 percent sales tax if they buy a new car in New Hampshire, which has no sales tax at all. NAFTA that.”
I don’t understand this . . . maybe I’m confused . . . don’t they have to declare it and pay VAT on it when registering the car?
If I buy a car in VA as a NY resident, I can’t register the car in VA so I wind up registering in NY and paying NY sales tax. Wouldn’t Canadians pay VAT when registering back in their home state?
“As an added bonus, car shoppers from Quebec can avoid their 14 percent sales tax if they buy a new car in New Hampshire, which has no sales tax at all. NAFTA that.”
Unless the VAT regime is radically different in Quebec (which may very well be), you still have to pay VAT on your US car.
About the guy with the S63, I’m suprised he managed to get the dealership to budge, because I would have laughed and told him to go ahead and do it. He’ll be barrels of fun once Mercedes Benz Canada tells him to bring it to my dealership for “safety modifications to comply with Canadian standards” on his dime. Even though it may theoretically be possible, I’ve never heard of ANYONE successfully importing a Benz under 15 years old. I know of a few people who ended up selling their cars back to the US at the border because they didn’t do their homework.
A Canadian customer could buy a Corvette in the US, drive it for 3 years then sell it used for more than he/she paid for it.
This is just reaching the popular press now, but be rest assured, Canadian piston heads have been well aware of this for years. Local Canadian market vehicles WILL fetch a premium (or rather, US vehicles generally trade at a discount). Buyers of six figure cars are generally quite aware of what going prices are, If you ran a US car up here today, I wouldn’t expect to sell it for more than a thousand or two above the US price (for your trouble). I know that’s all I would pay, I have legs and a passport too.
Actually, I think the article is exaggerating the price difference a little. It only really applies to high end cars, especially Vettes and Vipers and such that are exempt from the 6.5% duty that Euro cars face. For your bog standard Corollas and Cobalts, you’re still better off buying in Canada.
Back in 2002 the opposite problem existed on lower end cars.
U.S. shoppers were heading to Canada to buy vehicles at the lower prices instituted for the Canadian domestic (read – poorer and more heavily taxed) market.
U.S. dealers would buy Canadian vehicles, import them & sell them with an after market warranty at prices that U.S. home market vehicles couldn’t touch.
Old blog post of mine on this, from 2002.
The following was removed from the text above as misleading (as pointed out here, Canadians still have to pay the VAT on US car purchases at home):
As an added bonus, car shoppers from Quebec can avoid their 14 percent sales tax if they buy a new car in New Hampshire, which has no sales tax at all.
RF
I’ve read recently that 3 out of every 4 new Porsches registered in Canada are US-market cars. Looking at the prices, it’s no surprise why.
My own personal experience: I’m finalizing a deal this week to buy an ’04 330i from a dealer in New York and will then import it to Canada. My total cost (including all fees and taxes) will be right around $32K ($Can). To buy the same car from a Canadian dealer would cost me closer to $40K ($Can, including taxes).
The funny thing is passenger cars and light-duty trucks assembled in Canada (Ontario exclusively) have MSRPs that presume a foreign exchange rate of between USD@CAD1.10 to USD@CAD1.40. Toyota/Lexus and Honda/Acura are closer to USD@CAD1.10; with Chrysler being closer to USD@CAD1.40.
While the forex rate is around USD@CAD1.05 right now, some of the politicians are complaining that prices in Canada are inflated. These clowns were nowhere to be heard from when at USD@CAD1.30 or more Canadians were paying less than Americans for goods imported from the US.
My Father purchased a Lexus LX 470 a bit ago. He priced then in Ontario, then priced them in the U.S.. He figured he would save $20k Canadian by buying in the U.S.A.., and that included the duty etc. The warranty is apparently North America, not just Canada or U.S.. He went into the dealer in Toronto, told them how much it would cost to bring one up from Stateside, they tried to call his bluff by saying “go ahead”, he walked out of the dealership. 15 minutes down the road, he gets a call on his Cell that they would drop the price by $18k because he was a repeat customer.
To clarify its not VAT but GST(Goods and Service Tax) its 6% and payable to the Federal Gov’t. If you are importing a car the GST is paid at the border to Canada Revenue as the vehicle enters Canada, if the car as an A/C the 100 a/c tax is also payable at the border. To register the car the respective provincial sales tax is paid at the license office when the car is plated.
Customers moving to Canada with an M-B the majority of vehicles can be converted, its usually the rear bumper that does not meet the Canadian specs that incurs the biggest expense.
When converting Canadian to US most Canadian banks charge an additional 2 to 3% above the exchange rate depending on the amount.
There are many businesses playing the arbitrage game between Canadian and US prices on specific usually high end vehicles.
Cretinx
As a former Canadian now living in the US,I can assure you that you are absolutely correct. When importing a car, unless it is Antique ( over 25 years old) you have to pay the GST (VAT as it has been called) and when you go to register it the PST or Provincial Sales Tax is collected. The only savings is on the price you pay and the taxes you would have paid on the difference.
An MSRP check on a Cobalt revealed a differnce of $230.00 US. However, a Corvette is $20,000 cheaper in the US. Add $2500 in taxes and the savings is significant. So do your homework before you buy.
Can you also not claim the US tax back if you are a Canadian resident?
Actually, I think the article is exaggerating the price difference a little. It only really applies to high end cars, especially Vettes and Vipers and such that are exempt from the 6.5% duty that Euro cars face. For your bog standard Corollas and Cobalts, you’re still better off buying in Canada.
A few cars off the top of my head..US MSRP adjusted to CAD..not luxury in any way:
Subaru WRX Sti 2007 $35,630.84 vs CAD $48,995 (= 6.2%)
Legacy 2.5 GT Limited 30,099.26 CAD vs 2.5GT Sedan $40,295
Acura TL 35,871.03 CAD vs $44,275.00
I take your point about buyers being savvy about where a vehicle is from on the used market but wouldn’t most non-enthusiasts respond to a dealer’s advertised price? Looking on the trader site the price difference for imported cars from the US are still pretty high compared to what they can be had for in the US.
GST is payable on all vehicles coming into Canada irrelevant of the age, you pay GST on a 50 year old car coming into Canada.
The only problem with buying a US-market car is that you’re stuck squinting at the itty-bitty KPH numerals on the inner ring of the speedo for the rest of your life.
A few cars off the top of my head..US MSRP adjusted to CAD..not luxury in any way:
Subaru WRX Sti 2007 $35,630.84 vs CAD $48,995 (= 6.2%)
Legacy 2.5 GT Limited 30,099.26 CAD vs 2.5GT Sedan $40,295
Acura TL 35,871.03 CAD vs $44,275.00
I would say both the Subies are fairly high end cars, and Subarus are also disproportionatly popular due to the fact that the Legacy is made in the US, and both Subaru corporate and US Subaru dealers are unusually open to cross border trade, as previously mentioned. Also, the various Subaru trim levels are not directly comaprable. The Canadian STi, off the top of my head, comes standard with heated mirrors while the US spec one does not.
The Acura, with the 1.05 exchange rate and the 6.2% import duty, is already coming in at C$40k, add on provincial sales tax (6% or 7%) various misc. expenses in sourcing one, and add on the fact that Honda Canada will not honor the warranty, it becomes a less appetizing option.
I take your point about buyers being savvy about where a vehicle is from on the used market but wouldn’t most non-enthusiasts respond to a dealer’s advertised price? Looking on the trader site the price difference for imported cars from the US are still pretty high compared to what they can be had for in the US.
Again, you would be dealing with high-end cars here. I suppose you might be able to find such a non-enthusiast to unload your imported M5 or Z06 on, and pocket the difference, but I personally wouldn’t count on it. It might make more sense for a used dealer to import nearly-new units in bulk. I understand this accounts for most of the 61k imports.
Sorry, I didn’t realize you had already done the currency conversion. That makes my case a bit weaker, but I think we’re not far off anyway. In general my point would be the further up the ladder you go, the bigger the price difference.
@omnivore – it depends on what you buy, some cars allow you to toggle the speedometer between metric and imperial (that’s just about the only entertaining thing about the current Malibu, watching that needle swing back and forth).
You can also buy speedometer conversion kits or speedometer labels to overlay on US IPs.
Despite all this talk of arbitrage, a base 2007 Honda Civic retailing for $16k and change is priced about where it should be vis-a-vis an inflation adjusted $13,000 Civic of 1996 (I should know; I bought both generations).
You can try it yourself here: http://www.bankofcanada.ca/en/rates/inflation_calc.html
Of course, the new one also comes standard with a CD player, aux input, more than one airbag and a whole plethora of other bits that the 1996 models didn’t offer at any price.
I was shopping for a VW GTI earlier in the year.
Even with all the taxes and fees, buying it in NY would have saved about CAD 3,000 over buying it in Ontario—well worth the longer drive and the cross-border hassle.
When I first called the dealers in Buffalo, the first told me that he couldn’t sell to me, but the second said that they sell to Canadians fairly frequently. All good.
When I called VWOA to confirm that the warranty would be honoured in Canada, they were pretty coy about it, but eventually conceded that the warranty would be valid. They wouldn’t, however, put it in writing! Nonetheless, the local dealer told me that as long as the odometer was within the limit, they’d weren’t fussed as to where it’d been bought, so that was also all good.
Anyhow, I put off a new car for a few months. When I called back to the Buffalo dealer he told me that word had come from VWOA that selling to Canadians was now verboten—too many Canucks were crossing the border and the Canadian dealers were upset.
Anyhow, I bought a used A3 instead and haven’t looked back since!