CTV reports that a class action lawsuit suit filed in Ontario Superior Court claims carmakers and dealers conspired to violate “competition and consumer protection laws.” Lawyer Henry Juroviesky claims US car dealers suppressed cross-border shopping by limiting supply, inflating prices and voiding warranties. In the past, dealers “used the large gap between the Canadian dollar and U.S. greenback to justify the higher prices in Canada,” says Juroviesky. "Now that the dollar is at parity they can't use that cloud… to mask what they're doing.” Meanwhile, a recent study says the problem is going away. "In all of our 'popular' segments… the price gap between Canada and the U.S. narrowed in 2007," says Dennis DesRosiers, President of DesRosiers Automotive Consultants Inc. of Richmond Hill, Ontario.
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funny how noone complained when our dollar was around 60 cents a few years ago and Americans were buying thousands of cars in Canada…
The complaint is against Canadian subsidiaries of manufacturer that they are charging too much for vehicles to the Canadian market. At the same time raising barriers and hurdles to make it “challenging” for Canadians to buy vehicles in the US.
This is an article from the Globe and Mail which shows the level of consumer discontent towards this situation. Review the comments.
http://www.reportonbusiness.ca/servlet/story/RTGAM.20070926.wcarsuit0926/CommentStory/robNews/home
I’m a Canadian who recently bought a US vehicle (for my wife – a 2005 Mini Cooper S) because of the pricing differences, and while I agree with part of the lawsuit, I’m not sure I can accept the “inflated prices” argument. Shouldn’t a business be able to sell a product for whatever price they’ve determined the market will accept? The warranty issue is a bit more interesting, but there are many non-automotive products that are also only warrantied for their country of origin, so I’m not sure how this will hold up. That being said, I might not have purchased a Mini if the warranty wasn’t honoured/honored in Canada (BMW products lose their “free” maintenance when crossing the border, but the regular warranty remains in effect).
I did find it interesting that I was charged $500 for a recall clearance letter (required for importation to Canada on used vehicles) from BMW; I could certainly get one for free from any US BMW dealer, however BMW has instructed RIV (the company that handles Canadian registration of imported vehicles) not to accept US recall clearance letters. Oddly enough, BMW Canada cannot produce a recall clearance letter, they must request a fax/email from their US counterpart – which they stamp with a Canadian BMW/Mini logo. From reading a few forums, I’ve learned (but not confirmed) that Mercedes and Porsche are also charging for this documentation – to the tune of several thousand dollars. I suspect this angle might be interesting to include in the lawsuit – the paperwork is freely available to Canadian consumers, and I’m not sure that there is a valid argument to have it sourced from a Canadian dealer. With most other brands, this documentation is free – ie, had I imported a Lexus (for example), there would be no charge for the recall clearance letter – just a few minutes on the phone, and the cost of fax paper!
BTW, Dennis DesRosier has been blasted on a few forums as a stool pigeon for the automotive industry here in Canada – in a recent news article he claimed the average difference in pricing was ~$200. Most people heading to the US to buy vehicles seem to claim at least 10x that amount. My personal savings was in the neighbourhood of $5k-$7k (tough to say with used vehicles), while several people I met while filling the paperwork at the border where saving substantially more – ie, $18k on a Subaru Outback, and $40k (!!!) on a Porsche (didn’t catch the model – 911 convertible of some sort presumably).
In response to the rising dollar (and perhaps the threat of the lawsuit), Porsche, BMW & Mercedes have announced that they will be lowering their prices for 2008 models. Porsche has announced a 10% cut (which means they are still 20%-30% more expensive in Canada), and they other two haven’t stated a price yet.
On the other side of the argument, it’s probably also worthwhile considering leasing residuals. If the manufacturers all dropped their prices to their US equivalents, a consumer with a 4 year lease coming up this year (who leased when CAD$ was ~65-75% of USD) could potentially have a buy out that is the same as the price of a new model!
Interesting stuff!
This very topic here is what drives me up the wall. I get all wound up when I see the difference in prices between Canada and the US. Subaru is one of the absolute worst, which really bothers me because that is what I want! Also, I was looking at a Nissan Rogue as a new alternative to a subie but found that the base Rogue costs ~$19K US and starts at ~$25K CAD. The destination fee is also one of the most bogus charges you can pay. You can buy a Civic in Newmarket (built there) and the destination fee is $1500!! The same fee in New York is ~$600. Just bend right over, and no, you’re not going to get a reach-around.
Once you start looking at Porsche or BMW “M” the prices go nuts. Try $25 grand over for a M3. Oh, and don’t forget the 14% tax on top of that.
Glenn, here’s and interesting update:
http://www.reportonbusiness.com:80/servlet/story/RTGAM.20070926.wcarsuit0926/BNStory/robNews/home
Looks like AGR already linked to the comments section of the above.
“Emro :
September 27th, 2007 at 9:23 am
funny how noone complained when our dollar was around 60 cents a few years ago and Americans were buying thousands of cars in Canada… ”
Didn’t read the CTV article that was attached to this news item, did you?
Here’s a quote from it:
“U.S. lawsuits
Meanwhile, class-action suits in the U.S. — launched in 2003 against automakers and dealer organizations — are currently being heard in a court in Maine.
The lawsuits — which came at a time when the Canadian dollar was valued in the 65-cent US range — were launched after Americans crossing the border to buy cars were denied warranty coverage.
The lawsuits argue that the failure to honour warranties denied Americans the benefits of lower prices.”
This lawsuit has brought in the open Canadian consumer discontent towards the pricing of vehicles in Canada.
The Globe and Mail has been proactive in keeping this issue in the forefront, and this lawsuit has further empowered consumers.
In Canada there is a subsidiary of a manufacturer that owns all the dealerships in the 3 major Canadian cities. The manufacturer makes money twice on the vehicles it sells in these markets. This manufacturer makes it very challenging to import vehicles from the US.
Up until the Canadian dollar was at 80 to 85 cents US, it would seem that most Canadians tacitly accepted the higher prices. As the Canadian dollar rose beyond 90 cents US the price discrepencies became increasingly glaring.
Johnny Canada: Glenn, here’s and interesting update:
“Consumer groups welcome car price lawsuit”
Thanks for the interesting link. :-)
And thanks go to AGR for the link to the comments following the above article.
Sounds like it’ll be awhile before these issues get sorted out.
I’m sure TTAC will try to follow this story as it unfolds over time.
glenn, the lawsuit brings to the forefront the level of discontent among consumers. Its convenient and self serving for Canadian subsidiaries to say that their vehicles are priced as per the competition.
The Canadian consumers is saying, if that is the case, then I will buy your product in the US, and don’t make it so difficult for me to do that.
The actual lawsuit will take ages before its heard, but consumers are expressing their opinions, which sends an immediate clear message to manufacturers.
“ireallylovemangoes: Didn’t read the CTV article that was attached to this news item, did you?”
I did, i guess i should have been clearer in my post… I meant no Canadians were complaining :)
AGR: The actual lawsuit will take ages before its heard, but consumers are expressing their opinions, which sends an immediate clear message to manufacturers.
Understood about how long that’ll be in the courts.
The comments of Canadian consumers are interesting.
Perhaps someone will post a comment (at the ReportonBusiness site) with a link to this news item here at TTAC. :-)
This story is a good illustration of just how fast-moving today’s (economic) world is, I feel.
Forget about exchange rates, what about NAFTA ? Goods and services are traded openly across our borders, warrantees intact.
Why doesn’t this apply to automobiles ? What legal right does BMW have to void a warrantee ? None.
Gentlemen, start your lawyers.
From Brendon:
BTW, Dennis DesRosier has been blasted on a few forums as a stool pigeon for the automotive industry here in Canada – in a recent news article he claimed the average difference in pricing was ~$200. Most people heading to the US to buy vehicles seem to claim at least 10x that amount. My personal savings was in the neighbourhood of $5k-$7k
The dirty little detail in the “Economics” racket is the concept of adjusting for equipment discrepancies over time, or between countries.
One of the standard defenses from the auto manufacurers on differences in pricing is that we in Canada get ‘higher content’ vehicles… Presumably, when adjusting for this equipment difference, the ‘average’ price difference seems lower.
The same shell game occurs with the Federal Govenment’s Consumer Price Index, which is a measure of inflation. Economists constantly adjust (i.e. under-report) car price increases by comparing the level of equipment of a current car to a mythical car in the base year (i.e. 1992). For instance, the average 1992 model year car in Canada did not have air bags, while a 2007 model year does. An ‘estimate’ for what portion of the vehicle price is caused by the inclusion of air bags is made and taken out of the price of the current car…
There are lies, damn lies, and economic models ;)
I hope the automakers screw Canadians out of every penny. Sorry, I’m just bitter that when I was paying for college in the US I had to deal with an exchange rate that increased my tuition by about 50%, and now that I have decided to stay in the US and make US dollars (but most of my outstanding loans are still in Canadian dollars), the exchange rate is screwing me once again
The real crime is the price of car insurance in Ontario, it’s literally 3-4 times as much in Toronto than it is in Boston where I’m currently residing
I would hope all Canadians go south for cars, and let all their dealers go bust. Their dealers are even worse than ours.
Doing business in Canada is plain dangerous to the soul. It’s no wonder they are socialist, I would be also if I only knew that business environment.
What I don’t understand is whether its the chicken or the egg. It’s risk aversion that I think makes them like this. It’s really weird because otherwise they are some of the nicest people on earth. Seriously.
Cry me a river, topdog. You made your choices so suck it up.
We don’t need a lawsuit to settle this. What we Canadians need to do is stop buying the f*cking cars at these prices. Face it, the manufacturers are raping us because they are still selling cars. They aren’t lying when they are saying they are charging what the market will bear, because we’re still buying cars. If we stop buying new cars in great enough numbers the manufacturers will drop prices accordingly.
Landcrusher:Having a social net does not make us socialists.Now if Mrs Clinton becomes president and itroduces social programs,will America turn into a socialist country?I doubt it,but if it did it would be the will of the American people,and it most certainly wouldn’t be my place as a Canadian to pass judgement.
mikey, the retail car business in Canada is conducted with a different mentality than the same business in the US. I think Landcrusher was referring to that difference when he expressed his opinion.
If Landcrusher is referring to social safety nets, the US is headed in the same direction as Canada.
Mikey: If Mrs. Clinton gets elected, do you think your plant will have an opening for another manufacturing engineer?
Sure ryan theres always openings.Be warned we have a crappy weather and obscene taxes[social programs don’t come cheap]
I’ve explored the posibilitys of living in the US south for 5 or 6 months of the year I’m not permitted to work there, no green card = no work Aparently the US has enough old retired autoworkers.Oh well did,t want to retire anyway TTAC tells me the company gonna die so Ryan rethink your plans
You know what else sucks? On top of that inflated price we pay for cars in Canada, we are required to then spend another 14% in sales taxes (in Ontario 7% PST and federal 6%) instead of a nice 7-8% sales tax in the U.S.
Pay thousands more for the car, then double the tax.
dean:
The irony is that even though I’ve been screwed twice by the exchange rate, living in the US has allowed me to buy and insure a 2006 Corvette as a 23 year old male, something that I never would have been able to do if I were in Canada where the car would cost 25% more and insurance would be about 300% more. As somebody who would be likely to spend 90% of my disposable income on a car anyway, it’s a fair trade off to me
In Ontario its 8% PST not 7.
It gets interesting with hi line vehicles that have to pay the “Green Levy” which is federal, and Ontario Gas Guzzler.
It goes: price of vehicle+Green Levy+Gas Guzzler=Total+6%GST+8%PST=price taxes in.
Gas at $1.00 per litre = $4.00 per gallon.
mikey:
Just as well. I prefer to be hot than cold anyway. Here, in SE Missouri, we get all of it. 0 degrees (F) in the winter, 110+ in the summer, 90% humidity, near torrential rains in the spring, and a beautiful fall. We actually have a saying..”Don’t like the weather? Wait 10 minutes.”
I would love to work for in the automotive field, but I’ll have to move pretty far to do it. I worked with PLCs, robots, lasers, etc. at old internship (I’m a young buck – 24 y/o), which was a blast. Where can you find more of that stuff than in the automotive field of manufacturing?
“dean” had it right.
The only reason that dealers can charge more for cars in Canada is that there are enough suckers walking through the door with pen in hand willing to sign up for any 0% or 2.9% BS that the manufacturers can dream up. There are many here who are “car poor” …..people who have that hulking Silverado in the driveway purchased at 1.9% over 5 or 6 years with 2 grand down….and $700/mo. to cover vehicle and insurance……oh…forgot about the $100 fill-up once or twice a week.
If there are enough people here that are willing to squander a mortgage payment on a depreciating asset then the dealers will continue to have their way.
I have owned a couple of new vehicles and will never buy new again….its only new until you cross the curb at the dealers lot then you are out 10 grand in depreciation and taxes.
I buy 2 yr old vehicles @ 55% of new and sleep better at night.
But…..somebody has to buy new and if you’re that person don’t get gouged by a Canadian dealer now that our $ are at par. Try buying a current year demo from an American dealer. You can pay your kids college tuition for a year or two on what you will save.
I think its time to get some commonly used terms properly defined, in this forum.
I don’t know what this exact law suit alleges, or if someone in the media simply used the
term Dealer, when it should have been Auto Manufacturer.
Its not the Mercedes Benz Dealer in Bellingham or Seattle that does not want to sell a new
car to me. Its the policy of Mercedes Benz in Germany that dictates to Mercedes Benz US who their Dealers can
sell cars to. The Dealer in the US cannot sell a Car to me because I’m not an American Resident.
The Dealer can lose his or her license should they sell cars from that Manufacturer or face a huge fine.
A friend of mine a retired Import Dealer her in Canada was fined $100,000.00 by Toyota for selling Cars to US customers several years ago.
Furthermore it should be remembered that Canada represents
only about 2 percent of the worldwide car sales market. the US market represents
about 20 percent. Hence these multinational Manufacturers have a lot of clout.
They don’t care if they have to pull the plug on a Canadian or US Dealership.
The following is a quote from a former Toyota employee, at another forum:
There are different levels of management here. Take the Toyota example, with three levels of management in the equation: Toyota Japan, Toyota USA and Toyota Canada. Japan has the world-wide balance sheet, so every sale makes an impact on the total bottom line for them. They don’t care where the sales come from, and will direct the cars to wherever they believe they will be sold. Both USA and Canada operate as their own business units. They have their own targets and report financially to Toyota Japan as separate units. They each want to show as much profitability as they possibly can to the parent.
Toyota Japan sets vehicle allocation world-wide. They decide to send 100 units to the US and 10 units to Canada. But the US dealers then sends 10 of their hundred units to Canada because the exchange rate today makes it more profitable for the individual dealer. Those 10 sales appear this year in Toyota USA’s balance sheet, but Toyota Japan sees where the cars went, and next year they send the US 90 units and Canada 20 units. This puts the sales into Canada’s balance sheet for each subsequent year unless Japan decides to change the allocations. The big loser is USA, who lost 10 vehicles in the allocation. So making a quick buck on fluctuating currency exchanges can cost in the long run. If the Canadian dollar dropped to .75 US next year, Toyota Canada will still have the extra allocation of vehicles and will still be able to generate profit on them. Toyota USA has nothing and their profit drops.
The bottom line; large multinational companies decide how you and me the average consumer are going to spend our after tax
dollars. After all they paid for that clout through their lobbying efforts and campaign contributions to those people running for public
office, naturally those also happen to be the same people we think we elect.