'Huge price disparities not just on luxury vehicles', expert advises

Published on Canadian Business Online, Sep 27, 2007

Drive one hour to a border city and save $10,000 - that's a huge incentive for consumers, and it is creating a lot of friction between dealers and their clients. It isn't just luxury vehicles that have a large price disparity. Everyday vehicle prices are almost as high.

Most research looks at advertised Canadian versus US prices. No consideration is given to the final negotiated selling price differences. Here are some actual selling price differences of everyday vehicles:

• 2007 Honda Odyssey is over $11,500 more in Canada than in the US
• 2007 Toyota Camry is over $11,000 more in Canada than in the US
• 2007 Chevrolet Malibu is over $6,000 more in Canada than in the US.

It is no wonder that Automall Network, a professional vehicle buying service, has been receiving a number of Canadian inquiries looking for help with cross-border vehicle shopping.

"Our mission is to help our clients solve their vehicle buying challenges" says Viraf Baliwalla, President of Automall Network, "and $10,000 on the identical vehicle certainly qualifies as a major challenge. We agree that consumers can save a great deal of money buying a US vehicle - if it is done right. Otherwise, there are pitfalls that one will face".

Speaking to the Toronto Area Dealers' Association on this subject, Baliwalla was told that a small percentage of consumers are savvy enough to do this on their own, however most do not have the resources so it is not yet affecting Canadian purchases.

"Expect that to change in the very near future" claims Baliwalla, who predicted the downfall of the used car market when GM, Ford and Chrysler first launched their employee price incentives to consumers two years ago. "We were telling our clients to wait a few months and then buy used" says Baliwalla. Sure enough, there was an inventory glut of used vehicles on the market within 2 months and nobody was buying. Prices of used cars plummeted.

When buying a US vehicle, here are some of the things Canadian buyers must consider:

• Vehicles acquired in the US have to pass a different set of standards than in Canada. Some are not importable. Others have to be "Canadianized" before they can be put on the road. Paperwork must also be done properly before the vehicle gets to the border. Otherwise, you could be the proud Canadian owner of a US vehicle that you can't bring into the country.
• Dealer franchise agreements prohibit dealers from selling new vehicles across borders, so it will be difficult to find a franchised US dealer to buy from.
• Financing and leasing incentives wouldn't apply. Hence, one would have to pay cash, use a line of credit or obtain financing from their bank. Most manufacturers in the US are also offering rebates for cash purchases which further increases the savings.
• A trade-in cannot be used.
• Watch out for flood and accident damaged vehicles. Many states don't have reporting requirements on such vehicles. Many such vehicles have found their way back into the consumer marketplace after being written off by the insurance company.
• Some manufacturers are not honouring the warranties on new vehicles, however this is the least of your worries. Good third party warranties are available that mimic manufacturer warranties at a reasonable price. Automall Network offers their clients a coast to coast warranty that is good in either the US or Canada. The beauty is that the owner doesn't have to even go back to a franchised dealer to get service. They can have repairs done at their favourite local garage.

"When you factor in the savings in the vehicle price, even paying for the additional warranty still makes a lot of sense" says Baliwalla.

One more piece of advice Baliwalla provides is to buy a slightly used vehicle instead of new. Warranty and dealer contract issues are typically on brand new cars. If a vehicle is brought into the country as a used vehicle, say after six months to a year on the road in the US, there won't be the same issues. A further benefit is that someone else has taken the hit for depreciation, thus further lowering the selling price and increasing the savings by several thousand dollars.

"We definitely exist as a consumer advocate and advisor. We believe in supporting the local economy and local dealers in each market. However we serve our clients' needs first" adds Baliwalla.

Automall Network has launched a Fight for Fair Pricing campaign to advocate for price parity. Consumers can sign up at www.AutomallNetwork.com. Once they have collected enough names, their intention is to lobby the auto manufacturers to reduce the differences, thus eliminating the temptation to not shop locally.

Automall Network is a Professional Vehicle Buying Service, providing independent expertise and assistance to the insurance industry and consumer buyers for new and used vehicles. Automall Network services clients in both Canada and the United States.

For more information, contact Viraf Baliwalla at (416) 249-5474 x303, 1 (866) 310-8701 x303 or email to [email protected].