Are Canadians paying too much for their cars?
Last year the US dollar lost considerable value in relationship to the world’s currencies. When the Canadian dollar hit parity and indeed rose above the US dollar, it became strikingly apparent that cars were still considerably cheaper south of the border. It became an embarrassment for the car manufacturers and some announced reduced “Canadian” pricing. Like the innocent soul that I am, I went back to sleep assuming that the problem was solved.
Wrong! A little research on the websites of various automakers shows a different story.
Honda sells vehicles that range from 7% to 48% more expensive in Canada. Lower end cars show less difference. For example, the Fit is close, coming in at 7% higher in Canada. The Civic hybrid is 17% higher ($22,600 vs. $26,350). The S2000 sportscar is 48% higher, about $16,000 more expensive here. The Toyota Prius is 24% cheaper in the US ($22,220 vs. $27,600). And I could go on and on but you see the tendency.
GM and Ford seem to have closed the price differential by marking down the differences with discounts. GM has a “pricing allowance” of $16,000 on the Cadillac Escalade. Ford uses the terms – “family pricing and delivery allowance”. It looks like they don’t actually want to lower the higher price on a permanent basis.
What I find incredible is that cars can be sold cheaper in Alaska than in New Brunswick. The Mazda 6 sport sedan is 25% ($5,400) more expensive in Canada. In fact the destination charge is only $700 versus over $1200 for Canadian locations. Are we overcharged by auto manufacturers?
Some of the reasons tossed around for the difference are a bit strange. Are Canadian interest rates really lower? Do we get more incentive deals than the US? Could we really negotiate a better deal because there is more profit than south of the border? Do cars sold in Canada have different warranty coverage and different features? One thing is certainly true. Exchange rates vary from week to week.
We spend roughly $53 billion on new vehicles each year and if we’re paying roughly 15% too much, it’s costing us $8 billion extra each year. Wouldn’t this be a fair job for the federal government to investigate and act? Obviously, we have to consider the exchange rate and other valid costs that could be proven by the manufacturers.
What has been Ottawa’s response so far? Mr Flaherty suggests that we shop around. Well it’s presently quite difficult to import a car from the US, thanks to our government bureaucracy. Real “free trade” in cars would allow Canadians to buy a car in the US and bring it into Canada paying only the sales tax. Anything more is a trade barrier that ensures higher prices in Canada. When enough cars come across the border, the prices at Canadian dealers will migrate towards the same level as in the US.
During research, I came across a recent article in MACLEANS magazine by Colin Campbell that indicated the same tendency is showing up in all consumer goods, not just cars. A couple of interesting quotes “The reality is that what you can buy in the States for a dollar costs $1.35 up here. That’s the reality they should be facing, not this other smoke and mirrors.”
From Professor Avi Goldfarb quoted in the article “It’s not so much that the Canadian consumer is willing to pay higher prices. It’s much more that the Canadian consumer doesn’t have a choice,” he says.
Canadians don’t make higher salaries than in the US yet we pay more for everything we buy. The answers being given to us are inadequate and unacceptable. We are paying probably hundreds of billions of dollars in excess of fair prices.
It’s time we ask Stephen Harper what he plans to do about this gouging machine supported by his government. And the next time you go to Chapters to buy a book, bring along some American money. If there is a US price listed, you might get a bargain.
here’s a website I ran across after writing this article. it’s great for those who want to take real action and save money by importing a car from the US. http://www.carswithoutborders.com/