Canadian car buyers blocked from cheaper U.S. prices

Canadians planning a trip south of the border next week to take advantage of Black Friday deals may run into roadblocks if a car is on their shopping list. A CBC Marketplace investigation reveals automakers are preventing Canadians from taking advantage of cheaper car prices south of the border.

Marketplace found price differences of thousands of dollars in the manufacturers suggested retail price (MSRP) for the same model car on different sides of the border, but many U.S. dealers refuse to sell a new vehicle to Canadian customers.

In some cases, cars manufactured in Canada were more expensive to buy at Canadian dealerships than in the U.S.

Vancouver resident Caitlin Mayne, comparing prices for a new Volkswagen Beetle, found that the cars MSRP was about $3,000 less in the U.S., only an hours drive from her home. Thats a lot of money, she told Marketplace co-host Erica Johnson.

In one case Marketplace found a Dodge Grand Caravan listed at an MSRP that was approximately $7,000 cheaper in the U.S. than on Canadian lots.

Steve Rogers, who runs a business that buys cars in the U.S. for Canadian consumers, says that the price difference can run even higher. Last year Rogers bought his wife a new car, taking advantage of lower American prices.

The car was $60,000 in Canada and I paid $40,000 in the U.S., Rogers said. You know, I have a hard time with the fact that Im paying more as a Canadian just because of where I live.

The full Marketplace investigation, Price Wars, airs tonight at 8pm (8:30pm NT) on CBC Television.

Undercover investigation

To see what Canadian consumers face, Marketplace staff spoke with salespeople at more than 30 car franchises in Bellingham, Wash., and Buffalo, N.Y., both close to the Canadian border.

In many cases, they were told that the dealers were not permitted to sell new vehicles to Canadians. Many dealerships refused or discouraged a sale when they realized the potential buyer was Canadian.

Some dealers provided incorrect information when pressed for a reason, saying that the law only permits them to sell cars to U.S. citizen or residents. For whatever international tariff laws or transaction law, one dealer explained, U.S. citizens can only buy in the U.S. and Canadian citizens only in Canada.

There is no law that prohibits Canadians from buying cars in the U.S., although the transactions are subject to the same taxes as vehicles bought in Canada.

According to Chief Tom Schreiber at U.S. Customs and Border Protection, "you do not have to be a U.S. resident or have a U.S. address if you are a Canadian citizen and you wish to purchase a car in the United States and export it to Canada."

In some cases, dealers said that vehicles purchased in the U.S. and brought across the border would not be protected by warranty.

Rogers says that in his experience bringing cars across the border, this has not been the case. Some manufacturers do not honour the warranty in Canada, but very few.

Some U.S. dealers warned not to sell to Canadians

Some U.S. dealers told Marketplace staff that company policy prevented them from selling new cars to Canadian customers. A memo obtained from one car manufacturer explained this policy to dealers, stating:

It has come to our attention that a growing number of dealers are conducting an increasing amount of sales outside of the United States. Although your dealer agreement does not expressly prohibit such activity any vehicle sales made by U.S. dealers outside of the continental U.S. are discouraged.

It continues: Vehicle sales made by U.S. dealers to individuals or organizations residing outside of the continental United States will no longer be eligible for any incentive payment/programs such as vehicle incentives, ascent program payouts, quarterly/monthly dealer sales volume bonuses, Chairmans Roundtable awards, etc.

Automakers denied that their policies penalized Canadians or prevented them from buying cars in the U.S., telling Marketplace that such policies protect sales territories and help dealers build a network of local clientele.

There is nothing to prevent Canadians driving to the U.S. to buy a car, one automaker wrote in an e-mail. A large part of any dealers operations is in service and so it is always better for a dealer to sell locally and retain that service business.

Some dealers were more accommodating to Canadian consumers, though this varied by location. Ford, Kia and Nissan all agreed to sell new cars to Canadian customers, though the Kia and Nissan dealerships said they could not guarantee their warranty would be valid in Canada. And in all cases, the vehicles have to be paid up for upfront, as financing isn't available.

Price difference 'really galling for Canadians'

George Iny, the director of the Canada-based Automobile Protection Association, a consumer advocacy group, says the difference in cost is unfair to Canadians.

I know thats really galling for Canadians, Iny says. You might be punished if you brought in a new vehicle from the U.S. depending on the brand youre buying.

The manufacturers want to protect the price in the higher-price market as much as they can, Iny adds. Our sense is that its a strong-arm tactic and its an indirect way to restrict the trade of vehicles.

Iny says its up to the government to step in to protect consumers.

Its absolutely designed to restrain the trade of vehicles between the borders - and that, thats an element of equity, he says. The carmaker benefits greatly from free trade in cars and car parts, and the customer should at least be entitled to that benefit as well.

If we are going for free trade for the carmakers, then it should to some degree be free - equally free - for the consumer, he adds.

While cheaper car prices in the U.S. keep him in business, Rogers says that the difference still surprises him.

I could never find the reality, the rule where they come up with pricing them differently, he says. Its strictly just a fictitious line that prevents us from driving across. Why is there this huge discrepancy in cost?