Car makers put brakes on pricing parity

Dealers slash stickers but costs still
20-30% higher than US

By Anwar Ali

It's been a few months since the loonie took its wild flight to US dollar parity but it is still hovering at that mark. While Canadians may feel entitled to cash in on the strength of their currency, price adjustments here have been decidedly underwhelming.

The auto industry, in particular, has been slow to give the Canuck buck its due. And when Canadians started pouring across the border in search of cheap wheels, car manufacturers responded aggressively. They instructed stateside dealers to turn away bargain-hungry Canadians and threatened not to honour warrantees on cars purchased in the US. (We told one Canadian doctor's story of being blocked from buying a Toyota Tacoma in the US in our November issue.)

After the holidays, some of them finally started reducing their prices. Toyota Canada proudly displays its "lower price philosophy" on its website and in newspaper ads across the country. They say they've reduced the Manufacturer's Suggested Retail Price (MSRP) on all 2008 models. Not to be outdone, General Motors advertises Canadian price cuts of up to $14,000. Volkswagen lowered some of its prices too.

Car prices haven't been this cheap since 1991. The average car priced dropped one per cent in 2007 to $25,304 and costs the average family buying an average-priced car 18.9 weeks of salary, according to new Statistics Canada data. But when you start comparing apples to apples, you figure out pretty fast that prices here are still a far cry from what our American cousins are paying. (See the chart for price comparisons on a selection of models.)

"BETTER EQUIPPED"
Some car makers insist the Canadian and US situations are apples and oranges. Mercedes Benz, for one, doesn't bother much with price reductions. The German automaker claims any straight MSRP comparison is "inaccurate at best." They say it's partly because Canadian models are "better equipped" than their US counterparts, especially with standard features specific to colder climate.

To keep Canadian buyers happy Mercedes Benz offers incentives like "highly flexible financing" at "attractive market prices." But mostly they use fear, dissuading Canadians from going south by emphasizing, for instance, potential costs associated with meeting Canadian regulatory requirements and a 6.1% import levy that applies to all vehicles made outside of North America.

IMPORT PROS & CONS
Mercedes may have a point. First of all, not all vehicles bought in the US can be driven in Canada. Transport Canada provides a list of vehicles that are admissible. Since that list is based on information voluntarily provided by manufacturers, there's no guarantee that the vehicle you buy can be modified to meet Canadian standards even if it appears on the list. The onus is on you to find out from the manufacturer.

You have 45 days from the time you cross the border to complete a federal inspection. The Registrar of Imported Vehicles has contracts with 470 Canadian Tires across the country to do this testing on its behalf. But even if the modifications are possible, they could cost you a lot of dough.

CarCostCanada.com points out that you cannot finance or lease a car in the US. Arrang�ing financing at regular bank interest rates might not save you money in the end. On top of that, you'll need to double check that your warranty will be honoured in Canada. Any saving you reap could be quickly wiped out with one trip to the mechanic.

CALL IN THE BROKER
If all this sounds like a logistical nightmare amplified by overlooked costs, there's still another way to import from the US, and save money. They're called brokers and, contrary to popular belief, they haven't all been shut down by the automakers.

One, called BuyUSAcars.ca, does the work for you and gets you past the dealers who are obligated not to sell to you. BuyUSACars has a US-based corporation that buys vehicles and exports them to Canadian buyers.

The company will ensure your vehicle can be imported, advise you of the modifications you'll need to make, negotiate a price on your behalf and help you to transfer the title to your name (you still need to verify the warranty).

The fee they charge is between $2,000 to $3,000. If the price differential of the car you want to buy is more than that — and it usually is — this could be a worthwhile alternative to doing it yourself. Unless, perhaps you buy a car that chugs gas and you get slapped with the $4,000 Canadian Vehicle Efficiency Incentive Excise Tax.