Canadian Loonie reaches parity with U.S. dollar, so why are Canadian cars more expensive?
Due to the dollar's dip, one American greenback is worth the equivalent Canadian Loonie. At least, it's worth the same at the exchange window. However, it is not worth anywhere near the same amount at Canadian car dealerships, and at least one Canadian wants to know why.
Even though the two currencies are at parity, the difference in the prices of various cars ranges from $7,000 to $10,000. An Audi A4 Quattro with the turbo 2.0-liter is $32,000 in the US, but it'll set you back more than $40,000 in Canada. A $25,095 Taurus here will run you $33,399 in Canada. The discrepancy when it comes to Volvo is highest, with a 38-percent markup that equates to an $11,000 premium if you buy in Canada.
With those kinds of numbers, it's no surprise that Canadians are going south of the border to find a set of wheels. The blogger, Clever Shark, has written to automakers to find out why the land of the maple leaf has to pay so much, but he's not holding his breath for answers.
[Source: Clever Shark, photo by KAREN BLEIER/AFP/Getty]
Reader Comments (Page 1 of 5)
fuknut 2:12PM (9/23/2007)
uhhhh...lived there! Socialism. Tax is 15% in most provinces. U think companies want to give up their profit premiums. They'll ask the govt to subsidize before they'll reduce prices. Got out of there a few years ago when the wife decided social medicine had ruined her health. She is dying of heart failure at 38. Great system all-round
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Snowdog 2:40PM (9/23/2007)
Ummm. Idiot much.
I live there. Currency fluctuations are not immediately compensated for. The price of cars has nothing to do with universal health coverage.
You can't blame the health system for giving you heart disease.
Hooper 4:13PM (9/23/2007)
Re: Taxes
Clever Shark writes, "[Y]ou do have to pay tax on the car plus some import fees, but if you’re buying an upscale vehicle you could potentially save many thousand dollars by shopping south of the border." So the higher VAT/sales tax/whatever in Canada doesn't account for all of the entire difference.
Barney 4:43PM (9/23/2007)
You'll have to do better then 15% socialism. We pay provincal & federal taxs and you do pay state and federal taxs. These taxs are above the gouging.
Craig 6:22PM (9/23/2007)
I'd be willing to bet that the prices differences are due to:
- Different import duty amounts - As an example, the AUS $ is really strong against the rest of the world at present but because we have about 62.5% worth of duties and taxes as soon as a car comes into the country, our car prices are still high. Plus if the price goes over $57K, a luxury car tax is imposed.
- Cost of Canadianising the car, speedo and running lights...
- And finally, the car makers only review their pricing against the exhange rates at most once per year. This is done to protect from falling values and to profit for increasing values. And from when the cars are purchased from the manufacturers to when they are sold off the lot can be as much as 3 months, the exchange rate is very volatile and can change a lot in 3 months.
psarhjinian 8:33PM (9/23/2007)
First off, Canada's health care isn't the best (that award goes to Europe) but it is better than the US (which actually ranks below many _second world_ nations in healths services, yet spends more than _Sweden_ per capita). Sure, the rich get care first, but the poor either get seen and go bankrupt, or die.
Thanks, if it's all the same to you, I'll take the Canadian system.
Second: this is gouging on the part of the manufacturers. The problem they face in lowering, though, is that they'd see a consumer revolt amongst those who bought the year or two prior. What should have happened is that manufacturers ought not to have raised MSRP as high (they did, under guise of currency fluctuations, but they got greedy) and eaten it. But this is the era of 30-day profit cycles, so we can't sit and wait for the market to change.
They could have used PDI to offset this, but Canadian PDI fees are already stupidly high--even for cars like the Corolla and RX, which are friggin' built here.
Hooper 9:26PM (9/23/2007)
Whoops, I stand corrected. I thought Canada had something like the VAT in European countries that's included in the selling prices of goods sold there, but Toledo Guy and Judy Zik point out in their comments below that that is not the case in Canada.
teknokracy 10:21PM (9/23/2007)
Did you actually live in Canada? As someone who actually does, I know for a fact that the MSRP BEFORE taxes is less in the USA. Take for example a new GTI, base model. About $22,000 in the US. $30,000 in Canada. After taxes, even more expensive.
Really, all it comes down to is the fact that Canada is a DIFFERENT COUNTRY than the USA, just like cars are a different price in Germany as they are in the USA. Guess what? The average price of a car like an M5 is cheaper in the US than it is in Germany - the country where it was bred and built. Why? Because the US market is so large, the auto makers can afford to sell at a lower price to move more units. In Canada, they have to spend money on a different ad campaign, different marketing, offices, distribution, etc etc... so the price is inherently higher. There's your explanation!
J. Crew 1:08AM (9/24/2007)
Your name says it all...
Socialism? We may be a bit more than the USA, but try and explain to me how that is a bad thing. Your government is not looking out for your best interest and the result is your dollar has fallen as much as it has in a very short period of time. The currency value of the USD is dropping because the world markets have been losing confidence in your country and its sliding economy. This is also why the price of gold has been climbing along with the rise in the strength of the Euro. The record debt levels your government is creating based on a war that should not have been along with allowing the outsourcing of your manufacturing base to the Chinese for pure profit are eating away at your ability to ever pay back the debt you are adding to every day. This has made the elite very rich while cutting out the middle income earners who actually buy and spend more than the rich as a whole. Throw in the tax cuts for the rich, the only people who are making money and can afford to and should be paying more taxes are the ones getting the breaks. I guess the theory is as it always has been, the rich get richer and rest get... Hey, I am all for making a good living and a profit, but too much greed is a bad thing. Can a government or country actually go bankrupt? I guess we will find out in the next year or so.
As for sales taxes in Canada:
Alberta 6%
British Columbia 13%
Saskatchewan 11%
Manitoba 13%
Ontario 14%
Quebec 13.95%
PEI 16.6%
Clearly you have no idea what you are talking about in regards to our tax system. The manufacturers to not benefit from high taxes, the government does. We buy smaller cars on average, or maybe less options on more expensive cars as the tax eats away at our buying power. Less taxes would mean more options and the manufacturers would love that as would any consumer. I am sure they will have to adjust their numbers when pricing out the 2008 models, but I would no expect and drastic movement as our economy has been great and our retail auto sales have been on a tear this year.
I am sorry to hear about your wife though. Our health care system is not the best, but everyone is covered. Unfortunately everyone has a different situation to deal with on a regional basis with average wait times, as well as the types of specialized facilities in each area. The only way to get moved up a list is having a more serious case than the others. Everyone pays and everyone is treated... eventually.
Adam 2:17PM (9/23/2007)
Just a note to the poster; the Canadian dollar has made significant ground against the Euro and the Sterling too, so it's really not just the US dollar tanking that is contributing to the parity.
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Snowdog 2:47PM (9/23/2007)
It should be obvious that good are not going to be repriced monthly to take into account currency fluctuations.
Those with short memories may have forgotten that at certain low currency points, cars were actually cheaper in Canada, and Americans regularly crossed the border to by them in Canada.
Instead of whining. Buy your cars across the border as actions will count much more than words in balancing this out in the long run. But no matter what you won't see a change in MSRP on a current model.
When the new models appear in 2008 there will probably adjustments downward in CDN MSRP and upward adjustments in USA MSRP.
This is the reality of currency differences.
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Barney 4:45PM (9/23/2007)
Good pints Snowdog. A cup of coffee goes unchanged.
FrankTheCrank 2:48PM (9/23/2007)
Because the dollar has tanked...we're going to be in Iraq for a long long time.
Iraq is going to make Vietnam look like a weekend trip.
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PiCASSO 3:00PM (9/23/2007)
USD to Canadian:
April 9, 2007 = 1.1522
Sept 21, 2007 = 1.0008
Change of 13% from April
British Pound to Canadian:
April 17, 2007 = 2.26549
Sept 21, 2007 = 2.02241
Change of 11% from April
Euro to Canadian
April 10, 2007 = 1.54232
Sept 21, 2007 = 1.40873
Change of 9% from April
All figures from http://www.x-rates.com
So over 5-months, you have a 9 to 13% increase of value of the Canadian dollar against the USD, GBP, and Euro. Yet here in Canada, the prices of vehicles are tremendously more expensive than in USA. It will take a about a year before these prices are adjusted to anywhere close to the US market.
Unfortunately, any Canadian shopping for a vehicle that's not assembled in USA, Mexico, or Canada, will have to pay 8% (I think it's that amount) DUTY on the vehicle (on top of the provincial and federal taxes). Therefore, buying a 3-year old Volvo from USA (with Duty) will end-up being closer to the retail price in Canada.
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epp_b 3:32PM (9/23/2007)
Why do they rip us off on cars? Because they can. It's that simple.
- A Canadian
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Barney 6:59PM (9/23/2007)
That is the most precise answer. Simple and true.
Rodstar 1:34PM (9/24/2007)
epp b...
He's right on the money. It's about what the Canadian market is willing to absorb. If Canadian's are willing to pay a certain price, even if it's inlfated then the manufactures will continue to do so.
Kintu 3:34PM (9/23/2007)
The price discrepancy between cars in the US and Cnada has always been more than could be accounted for the value of the currencies. I remember that when the second generation Acura TL came out, it cost practically the same in the US and in Canada, around 35K, so it was considered a bargain in Canada, since the US dollar was much stronger.
Paradoxically, the CA dollar kept climbing up, but the third generation TL was 10K more expensive North of the border.
And now that the Canadian dollar has been edging the US dollar for more than a year, there are still some mind boggling differences in price. Here are a few examples of pre-tax MSRPs:
Infiniti:
G sedan $31 450 US 39 900 $ Ca
G coupe $34 250 US 47 350 $ CA (13 100$ difference!)
M 35 $41 450 US 56 400$ CA (14 950$ diff.)
Lexus:
LS 460 $61 500 US 86 500$ CA (25 000$ diff. !!)
GS 350 $44 150 US 59 759$ CA (15 609$ diif.)
IS 350 $35 905 US 47 900$ CA (12 005$ diff.)
BMW:
750i $75 800 US 108 500$ CA (32 700$ diff.!!!!)
528i $44 300 US 59 900$ CA (15 600$ diif.)
335i $38 900 US 49 900$ CA (11 000$ diff.)
Mercedes:
S 600 (in Canada there's no S550, it's an S550 4-matic only)
$144 975 US 183 000$ CA (38 025$ diff.!!)
E 350 $51 675 US 74 500$ CA (4-matic only) (22 875$ diff)
C-Class $31 975 US 41 000$ CA (9 025$ diff.)
ML 350 $44 425 US 59 900$ CA (15 475$ diff)
And that's not only the case for imports:
Cadillac:
CTS $32 900 US 38 900$ CA (6000$ diff)
Escalade $55 640 US 76 490$ (20 850$ diff.)
Lincoln
MKX $34 120 US 42 399$ CA (8 279$ diff)
Navigator 4x4 $50 655 US 76 299$ CA (25 644$ diff!)
And the list goes on and on...
Basically, the more premium a car gets, the more the markup in the canadian market. If you factor in the fact that Canadians have a lower average income and more income tax than their US counterparts, Canadian have to accept a lower standard of living than their south-of-the-border neighbours.
I really do hope that Manufacturers do wake up or that consumers will go buy their cars in the US to entice some sort of change.
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psarhjinian 8:41PM (9/23/2007)
I think the MKX is actually made in Canada, which makes is kind of sad...
Jeff Crew 3:58PM (9/23/2007)
As stated above, maunfacturers are not going to adjust their pricing mid year. We are having a fantastic year for new car sales because our economy is very strong in most parts of the country. It would be smart for consumers to snap up a car from the USA, but the only downside is that many manufacturers will not honor the warranty once it is imported back into Canada. Having said that, if you live in a border community, it is not that big of a deal to cross into the USA for warranty work if needed. You can drop the car off and go shopping for the day as it is not just the price of cars that is out of line. I suspect many Canadians will be going on vacations and spending lots of money in the next little while if the currency holds at or near the dollar.
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