Automakers to face $2B class-action for Canadian price discrepancies
A few days ago we posted on the price discrepancy between identical vehicles sold in the U.S. and Canada. The discrepancy was always there, but became apparent when the value of the Canadian Loonie reached parity with the U.S. dollar recently. It was then that consumers couldn't ignore the fact that they were paying more for vehicles than their U.S. neighbors, up to 38% in some cases.
The Toronto-based class-action lawsuit firm Juroviesky and Ricci is taking up the case and expected to file a $2 billion class-action suit on behalf of four Canadians who feel that they paid more for their cars than they would have in the U.S. The class-action suit is open to any Canadian consumer who bought a new vehicle between August, 2005 and August, 2007 when the Canadian dollar was rapidly appreciating, but the prices of Canadian cars weren't adjusting.
Thanks for the tip, SS3!
[Source: Canada.com, photo by KAREN BLEIER/AFP/Getty]
The fact that cars cost more in Canada is hardly new information, and many Canadians simply cross the border and buy their new cars in the U.S. The class-action lawsuit, however, also charges that automakers conspired to inhibit this practice by making consumers sign "no-export clauses" preventing them from returning to Canada with their cars, as well as refusing to perform warranty work on cars purchased in the United States. Even dealers have gotten caught up in the mix, with U.S. dealerships allegedly being penalized for selling cars that were later exported and Canadian dealers threatened with termination if they didn't comply with these practices.
The lawsuit also names the Canadian Automobile Dealers Association and the National Automobile Dealers Association in the U.S as defendants. Cases like this have been brought up before apparently, but have been long, drawn out affairs with little ultimate effect on the issue at hand. With the Loonie and US dollar at hovering around parity, however, the discrepancies are now shockingly apparent.
Reader Comments (Page 4 of 4)
tekdemon 5:56PM (9/26/2007)
This makes no sense though...they don't seriously expect auto manufacturers to all just drop their MSRPs by 33% in Canada just because the USD went down, did they?
By that logic if any country anywhere has a better price on a car we should start suing?! That makes no sense at all. If USD goes down, so does the manufacturer's US-based costs. And more importantly, manufacturers can't hike the US price up 50% and still sell the same car in the USA, whereas the price is basically just staying constant in Canada.
If you think about it in CAD, the manufacturers are making less money in the USA, but that doesn't meant that they shouldn't make money elsewhere so they don't just suddenly lose 1/3rd of their profits.
There's no proof of collusion at all, any car company is probably still free to crazy drop their prices, but it makes very little sense for any of them to do so, especially when not even all the cars are assembled in the USA anyway (i.e. while CAD has reached parity with USD, a european made car sold in Canada has absolutely nothing to do with what the CAD:USD exchange happens to be).
If they feel like it's a lousy deal, don't buy the car, and go buy some other car that's a better value. There's no reason why an American made vehicle should suddenly drop in price just because the USD sank. Jeez. Plus, as this is all dynamic, those US dollars they make will most likely still be stored as US dollars, so if it reappreciates all those past earnings become a lot more meaningful (i.e. if the USD becomes worth a lot more than CAD again in a few months).
Of course, I've already wasted far too much thought time on what is essentially a joke of a lawsuit.
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mike 5:54PM (9/26/2007)
Buying a car in the States isn't that simple. The biggest problem that people will encounter is that they have to buy the car outright. They can't lease it. Most banks won't lend you the full amount for a 50K plus car.
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Zerk 6:02PM (9/26/2007)
For a hell of a long time cars were less expensive in Canada. So it raises the question of why it is so damn unfair now when in the past it was perfectly fine for Americans to have to go thru the import hassle of buying a car in Canada to get the lower Canadian price?
Wahhhh.....Waaaaaaahhhh.....waaaaaaahhh....snifffle...poor Canadians!
At least you don't share a border with Mexico. Be thankful.
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Hooper 8:41PM (9/26/2007)
I'm sure Canadians feel the same way about the U.S. as many of us in the U.S. feel about Mexico.
alex 6:16PM (9/26/2007)
This is ridiculous. To Canadians, cars don't cost any more than they did 4 years ago. It's just that the way the currencies have changed value, the car companies now have a higher profit margin. why must they be forced to share more of that margin with the Canadian public? If a company improves its cost structure and it yields a larger margin, should they also be forced to lower prices?
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tankd0g 10:35AM (9/28/2007)
Canadians were getting ripped off 4 years ago too. Sorry but if we have to live with this stupid NAFTA bull**** then it has to work both ways. If a manufacturer is going to jack up the price in Canada AND restrict Canadians from buying in the US, then no more using cheaper Canadian manufacturing to make those cars in the first place I say.
Bubba 6:32PM (9/26/2007)
The issue, in my opinion, is not that Canadian auto prices have not dropped alongside the relative worth of the greenback. That's all to do with foreign exchange, and can't be blamed on automakers.
I have a real issue, however, with the fact that automakers have taken steps to penalize Canadians who attempt to purchase a car in the US. Not honoring warranty, threatening US dealer franchises and withholding recall clearances are just a few examples. I think the relative "fairness" of these tactics is a perfectly valid topic for debate in a court.
I welcome the profile this brings to the situation....
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Zerk 7:00PM (9/26/2007)
Which automakers?
SPG 7:05PM (9/26/2007)
Not only are cars more to purchase new here but cars hold onto their value much more.
2000 Alero in Canada is usually 7 to 9 grand.
In the USA it can go for as low as $3,500.
It's a huge hassle to buy in the USA and bring a car over.
Belive me, I considered it.
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tankd0g 10:31AM (9/29/2007)
They aren't depreciating any less in Canada, they just started at a higher price.
SPG 4:34PM (9/29/2007)
I have taken that into consideration.
When you look at the resale for vehicles in general the depreciation is greater in the USA to Canada.
Convert to market price, currency rates, average resale.
captain underpants and the bringdown gang 7:18PM (9/26/2007)
Things always cost more in canada than they do in US near as I can tell the reason why they do that is because the sheer volume of cars that are sold in US is much higher.
Additionally they can get away with it.
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Zerk 9:16PM (9/26/2007)
hey captain diapers, do you fail to realize that cars in Canada have been less expensive than in the US for the majority of the past 10 years. Things always cost more in Canada....hmmmm.....nope.
Jonathan 10:33PM (9/26/2007)
The point is less about whether or not a car costs more or less in the United States, or Canada based on currency valuation. The USD has lost ground against most of the major currencies, Japanese Yen, Euro, British Pound. As a Canadian I shouldn't be questioning why we pay more for a car, note that if one does the math Europeans pay more for the same cars than we do, it is why auto makers have not increased prices in the United States. As US currency has hit rock bottom, cars not only cost less in the United States, the Big Three pretty much give them away while complaining about lagging sales, and overhead costs.
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Joe 9:04AM (9/27/2007)
Will these lawyers give back their legal fees when the Canadian dollar drops and the prices are lower in Canada than the US? Or will they just sue south of the border.
I'm all for consumer pressure, but do we really want every price in our society indexed to the greenback? Why not just switch to using it then?
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Quote the Raven 11:23AM (9/27/2007)
Not to be over simplistic, but why does anyone feel the have a "right" to tell a company how much they can charge someone for their product? If they want to charge 700% in Canada what law prohibits this?
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tankd0g 10:37AM (9/28/2007)
In theory the free market would prohibit charging 700%, however cars are not flip-flops at Wal-Mart. For the same reason gasoline is essentially the same inflated price no matter where you buy it, so are cars. If Toyota for example decided to double the price of their cars in Canada AND prevent anyone from buying outside Canada you'd think that Toyota simply would not sell any cars. However, these are cars, necessities in modern life, especially in rural Canada, all the other brands will see this increase and the potential profit and raise theirs to follow suit, it's not a cooincidence that all cars in the same class come in around the same price point regardless of what the cost of manufacturing is. This is why you don't see any manufacturer in Canada undercutting the rest. Left unchecked the price of cars could keep climbing until they find a point where no one is selling a car anymore, then they roll it back $100. This doesn't happen in the USA because there is such a glut of cars available to sale, the 2.8 are practically giving them away, or rather they can't even give them away. Class action lawsuits like this, while seemingly pointless, serve to raise awareness of what is going on, and keep the manufacturers somewhat honest. As this gets more press, no one wants to be singled out as the biggest price gouger of the bunch.