RSS

Which automobile manufacturers are taking you for a ride?

18 Apr

Now that the Canadian dollar is hovering around par with the US greenback again, we will likely be hearing plenty of complaints about the fact that things still cost more here in Canada than they do in the US, even though our dollar is worth the same or even more.

It seems to me that nothing illustrates that complaint better than comparing the cost of  the same automobile on both sides of the border. Canadian consumers have been suffering for a number of years from new car prices that seem to ignore the comparative value of our dollar. As a result, used car dealerships and individual consumers have been importing vehicles from the US in record numbers over the past few years as the Canadian dollar has continued to strengthen.

Not every vehicle offered in Canada can be purchased significantly cheaper in the US, but there are enough examples out there to see why the imports continue to grow. The standard excuse the manufacturers use for these discrepancies is that the vehicles are not similarly equipped so it is not a fair comparison. Another thing they correctly point out is that Canada imposes a 6.1% duty on vehicles manufactured outside North America – I don’t believe the US has a similar duty at this time.

Finally, the manufacturers point out that the Canadian government has different safety requirements and taxes that they must align with which increases the costs. I can think of two examples of this off the top of my head. The first is the fact that the Canadian government charges a $100 air-conditioning tax. Since this is a small number, it is always charged separately, and would be charged on any personal vehicle imports from the US, the AC tax is easy to ignore. The other thing that comes to mind for me is the Canadian requirement for daytime running lights. Again, this is a fairly insignificant item and I think we call all agree that combining all the little differences the Canadian government requires does not add up to thousands of dollars in extra MSRP.

The automotive manufacturers would have us believe that Canadian vehicles are fairly priced and any differences can be explained away by the comments noted above. I’ll use a few examples in this post to test that theory. I will try to make sure I am comparing apples to apples as the packages in the US can vary widely from the Canadian spec vehicle. I will include any cash incentives that are being offered which decrease the purchase price, but interest rate only incentives will be ignored.

I thought I would look at 6 passenger (or higher) vehicles, two each from US, Japanese, and German manufacturers. Usually the top of the line model is the easiest to compare because there are fewer options, regardless of which side of the border you are on, so I will focus my efforts there. Let’s see if any of the automobile manufacturers are taking you for a ride…

2010 Ford Flex Limited AWD

Manufactured: Oakville, Ontario

US Cost (USD):

$39,470 (MSRP)

$775 (Destination and handling)

$40,245 (Total MSRP)

-$2,500 (Cash Back – New England Ford Dealers)

$37,745 (MSRP After Incentives)

Canadian Cost (CAD) (Update May 11, 2010):

$43,199 (MSRP)

$1,400 (Freight and PDI)

$44,599 (Total MSRP)

$5,000 (Delivery Allowance)

$1,000 (Custom Cash)

$38,599 (MSRP After Incentives)

Additional cost to Canadians: $854 $6,854 (with Canadian dollar at par). That is a 2.3% 18.2% premium over the comparable US model.

Comment: It is difficult to determine if there is a difference in the features offered on these two models but I think the Canadian model may be slightly more feature-rich (Sync system included). At any rate, the difference in price doesn’t seem to be much to be concerned about. The Ford Flex Limited AWD seems to be fairly priced in Canada after the hefty rebates currently being offered. Ford of Canada must have read my original article and decided that they shouldn’t be the only one treating Canadian consumers fairly. They have since dropped the $6,000 rebate offered on the Flex Limited AWD and as a result are no longer offering a good value to Canadians on this vehicle. I don’t think the Sync system included on the Canadian model is worth almost 7 grand. How about you?

2010 GMC Acadia SLT1 AWD

Manufactured: Delta Township, Michigan

US Cost (USD):

$40,860 (MSRP)

$775 (Delivery and handling)

$40,860 (Total MSRP)

-$2,000 (Cash Back)

$38,860 (MSRP After Incentives)

Canadian Cost (CAD):

$49,185 (MSRP)

$1,350 (Freight and PDI)

$50,535 (Total MSRP)

Additional cost to Canadians: $11,675 (with Canadian dollar at par). That is a 30.0% premium over the comparable US model.

Comment: I can not see any difference in the standard configuration of this vehicle between the US and Canada. There is no Canadian import duty on this vehicle because it is manufactured in North America. I don’t understand how GM Canada can justify the price differential for the GMC Acadia SLT1 AWD.

2010 Honda Odyssey Touring

Manufactured: Lincoln, Alabama

US Cost (USD):

$40,755 (MSRP)

$710 (Destination and handling)

$41,465 (Total MSRP)

Canadian Cost (CAD):

$49,690 (MSRP)

$1,590 (Freight and PDI)

$51,280 (Total MSRP)

Additional cost to Canadians: $9,815 (with Canadian dollar at par). That is a 23.7% premium over the comparable US model.

Comment: I can not see any difference in the standard configuration of this vehicle between the US and Canada. There is no Canadian import duty on this vehicle because it is manufactured in North America. I don’t understand how Honda Canada can justify the price differential for the Odyssey Touring.

2010 Mercedes-Benz R350

Manufactured: Tuscaloosa, Alabama and Mexico City, Mexico

US Cost (USD):

$49,300 (Base MSRP)

$790 (PARKTRONIC)

$670 (7-Passenger Seating)

$220 (Heated Leather Multi-Function Steering Wheel)

$740 (Heated Front Seats)

$875 (Transportation Charge)

$52,595 (Total MSRP including options to match Canadian spec vehicle)

Canadian Cost (CAD):

$54,700 (MSRP)

$1,995 (Freight and PDI. It is interesting to note that this fee is not shown on the MB Canada website.)

$56,995(Total MSRP)

Additional cost to Canadians: $4,100 (with Canadian dollar at par). That is a 7.8% premium over the comparable US model.

Comment: There is no Canadian import duty on this vehicle because it is manufactured in North America. I have done my best to configure a US model to make this comparison. It is possible I have missed something, but I don’t think I missed $4,100 worth of US model options. I don’t understand the discrepancy in the Canadian model pricing, but I think a premium of anything less than 10% is not enough to get too upset about.

2011 Toyota Sienna Limited

Manufactured: Princeton, Indiana

US Cost (USD):

$38,500 (MSRP)

$4,416 (Limited Premium Package)

$800 (Delivery, processing and handling fee)

$43,716 (Total MSRP including options to match Canadian spec vehicle)

Canadian Cost (CAD):

$49,100 (MSRP)

$1,440 (Destination and handling)

$50,540 (Total MSRP)

I can not see any difference in the standard configuration of this vehicle between the US and Canada. There is no Canadian import duty on this vehicle because it is manufactured in North America. I don’t understand how Toyota Canada can justify the price differential for the Sienna Limited.

Additional cost to Canadians: $6,824 (with Canadian dollar at par). That is a 15.6% premium over the comparable US model.

2010 Volkswagen Routan SEL Premium / Execline

Manufactured: Windsor, Ontario

US Cost (USD):

$42,500 (MSRP)

$800 (Destination charge)

$43,300 (Total MSRP)

Canadian Cost (CAD):

$50,575 (MSRP)

$1,580 (Freight and PDI)

$52,155 (Total MSRP)

Additional cost to Canadians: $8,855 (with Canadian dollar at par). That is a 20.5% premium over the comparable US model.

Comments: Neither VW USA or VW Canada indicated any cash back offers on the Routan on their websites, but they were both offering 0% financing for 60 months. I can not see any difference in the standard configuration of this vehicle between the US and Canada. There is no Canadian import duty on this vehicle because it is manufactured in North America. I don’t understand how VW Canada can justify the price differential for the Routan Execline.

Conclusion

These examples illustrate that Canadians are paying more, sometimes significantly more, for the same vehicle than people in the US. For the models I looked at here, only was close to the same price, and it was still almost 8% more here in Canada. The worst offender was GMC with the Acadia SLT1 AWD clocking in at a full 30% premium over the similarly equipped US model.

The other troubling trend is that the freight charges in Canada were almost always double (or more) than those in the US – even if the vehicle was manufactured in Canada.

There is still a problem folks. It’s not our imagination.

You may be saying to yourself, “I don’t like it, but what can I do about it?”. I have a few ideas on that:

  1. If you are thinking about a new vehicle, run a similar analysis on the models you are considering. If you are trying to decide between two similar vehicles, choose the one that you feel is more fairly priced compared to its US equivalent.
  2. Investigate the details around importing a US model yourself or having a broker/dealer do it for you. It’s not that difficult, but there are some things you need to know and watch out for. I intend to post some information on this subject in the not too distant future.
  3. Buy a used car. I find that although some models are completely out of whack on a new car basis, things seems to even out between the US and Canada in the used market over time – the older the vehicle the lower the premium. In general, those overpriced models tend to depreciate faster here than they do in the US. That said, there are still some pretty smoking deals to be had in the “slightly used” market in the US.

I hope you found this post enlightening. If you find any problems with my math or my assumptions, please forward them on using the comments feature. If you have any more examples of crazy out-of-whack prices or models that seem fairly priced, feel free to share those as well.

Advertisements
 
2 Comments

Posted by on April 18, 2010 in Automotive

 

Tags: , , ,

2 responses to “Which automobile manufacturers are taking you for a ride?

  1. James C

    December 15, 2010 at 8:49 PM

    Hi,

    I stumbled across your website while researching cell/smart phones and looking for reviews. I found what I wanted and have been enjoying your other commentaries about consumer related concerns.

    Regarding this cost comparison you’ve made of specific new vehicles, I think it’s a good analysis. The results are not too, too surprising and seem to generally validate my own impressions about how Canadians tend to be gouged by major corporations for the goods & services we buy. Quite disgusting really.

    But to play the devil’s advocate here in the interest of good critical analysis (which you obviously value) … there is one factor you seem to have ignored: comparative labour costs. This is not a stab at unionization or union wages since I’m actually a supporter of collective bargaining in general. And I really have no idea personally whether Canadian automotive sector labour costs are higher or lower (or the same) as American auto sector labour costs. That said, it does seem reasonable to assume that the labour input for manufacturing automobiles in a unionized environment must amount to a significant portion of overall production costs. I haven’t researched this question myself so I have no idea – but it would be interesting to know how labour costs across the border are similar or different and to what extent they do or don’t help explain the priced differentials you identified.

    Thanks for the time you put into your articles – very informative and helpful!

     
  2. Value Canuck

    December 16, 2010 at 10:19 AM

    James. Thanks for your comment.

    I think that in this instance labour costs are not the issue. For the most part vehicles sold in North America are manufactured in one place for the entire North American (and often World) market. With very few exceptions (Acura CSX?), they don’t manufacture vehicles in Canada only for the Canadian market.

    The examples that get my goat the most are vehicles that are manufactured in Canada, but sell for a lower price in the US, with a LOWER freight charge, than what we pay in Canada. How can they be cheaper to ship from Windsor, ON to Florida or California than they are to ship from Windsor, ON to a dealer in Windsor, ON? The answer is, they aren’t. So why do we pay more in freight for those vehicles?

    The broader question is, if a vehicle is manufactured anywere in North America (no import duties to worry about under NAFTA), while the Canadian Dollar is at par, why do Canadian’s have to pay more?

    The only answer I can come up with to both questions is that the auto manufacturers feel that they can gouge Canadians and get away with it. History seems to indicate they are correct, but I hope to see that change. Time will tell.

     

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

 
%d bloggers like this: