Canadians cross border for cars

The last time the Canadian dollar stood at par with the American dollar, in January, 1976, British Airways and Air France were readying the Concorde's first supersonic commercial flight and Nick Izzo was a peppy 10-year-old with an obsession for toy cars.

Now the Concorde is dead and he's dealing the real thing -- saving many Canadians a lot of money as the loonie claws its way back to its former glory.

Mr. Izzo and his family run Superior Auto Sales Inc., a car dealership near Lake Erie just south of Buffalo. In business for more than 50 years, they specialize in finding new and used cars and trucks located in the United States and delivering them to Canadian customers looking for a better bargain in the United States. And they say orders in the past four months have "gone nuts."

The soaring Canadian dollar spurred a record number of Canadians to buy a new or used car in the United States last year -- 112,826 vehicles in all, according to the North American Automobile Trade Association. It was the first time more than 100,000 vehicles headed north. But interviews with dealers and Internet chat suggest the cross-border buying has picked up even more in the past few weeks as the dollar passes US95? and climbs toward parity.

"It's about time, eh?" said Mr. Izzo, an American who nevertheless harbours an obvious affection for Canada.

"You guys have been behind our dollar for almost as long as I've been alive. We used to love going up there to shop for clothes. It was any excuse to go to Canada. We'd buy all kinds of stuff."

That included cars. When the loonie was tanking against the American currency earlier this decade and before, auto dealers in both countries were buying vehicles in Canada and packing them on trucks going south.

Now the tables are turned. The loonie has found new-found strength on the back of a strong Canadian economy. More Canadian dealers are showing up at auto auctions in northern U.S. states. And more Canadians are realizing they can sometimes save thousands of dollars if they buy a car across the border.

It's all happening because manufacturers' suggested retail prices for vehicles have generally not changed in either country to adjust to this new reality. Based on the exchange rate in the first half of 2006, the sticker price for the average vehicle was $5,842 higher, or 17% more, in Canada than in the United States, according to a study released last year by DesRosiers Automotive Consultants. That difference could be even greater now.

A typical Superior customer in Canada pockets 10% of the vehicle's price by shopping cross-border, the company says. The more the vehicle costs, the more they save.

"The real issue is that the manufacturers are selling cars to the U.S. dealers at a significantly reduced rate than what they're selling to the Canadian dealers," said Richard Ferber, office manager at Superior. "And that's unfair. It's really being done at the expense of the Canadian consumer. And that's really created a market niche for us."

You don't have to look hard to see the impact. On a recent day this past week, Superior's big service bays were full of vehicles, many of them slated for Canadian buyers. A Mercedes 500 SL sat waiting for a safety and emissions tests. A grey 2006 Range Rover Sport was ready to be shipped off to a buyer in Toronto. "He's saving about $4,500 -- for a used car!" exclaimed Richard Izzo, who heads the business with his sons.

Superior sells between 60 and 70 vehicles a month in all, half of them to Canadians now, Mr. Ferber said. Most of those are new, high-end vehicles such as Porsche and Lexus. Typically, buyers will call the company's office with a request. Then Superior will find the vehicle somewhere in the United States and deliver it to the customer in Canada, completing all paperwork and regulatory testing that needs to be done. To make things even less painless for Canadians, they can also change the odometer faceplate so it highlights kilometres bigger than miles.

"A lot of people that come to us, they understand what a Louis Vuitton is. They understand what a Porsche is. And if they can save money on it, they're going to come to the person that can help them save money," said Mary Hulbert, a saleswoman at Superior. "We make it seamless for them."

The Izzos are selling not only to individuals but to Canadian dealers and leasing companies as well. This week alone, Mr. Izzo said he sold a Toyota Highlander hybrid and a Lexus RX350 to a Canadian Toyota retailer. The deal-making is happening behind the back of Toyota Canada, which would normally be the sole source of Toyota vehicles.

Sometimes Mr. Izzo can even get the latest vehicle editions, including the 2008 models now coming out, before Canadian dealers can get them from their manufacturers.

"I offered [one dealer] an '08," Mr. Izzo explained. "He said, 'If I put that '08 on my lot and advertise for it and they're not out here for another three weeks, Toyota will crucify me.' "

The price gap between Canadian and American vehicles, particularly for pricier luxury and sports vehicles, is creating tension between some Canadian dealers and manufacturers, said Bill Watkin, president of the Motor Dealers' Association of Alberta. "They're really frustrated with it," Mr. Watkin said of Canadian retailers. He said some dealers have approached car companies asking them to level the playing field and protect prices to prevent cross-border shopping.

"The U.S. guys are going, 'Hooray for us! Our dealers are making out like bandits,' " Mr. Watkin said. "And the Canadian guys are screaming."

Manufacturers, including General Motors Corp. and others, have sent memos in past months to U.S. dealers operating near the Canadian border, warning them it's against their dealer sales and service agreements to knowingly sell a vehicle for export. Chrysler Canada has warned Canadians that it will not honour warranties for vehicles bought in the United States.

Mr. Ferber and the Izzos call the manufacturers' moves "petty" and say they amount to needless intimidation. "They want to scare the Canadian consumer into paying more for the vehicle that's for sale at the Canadian dealership," Mr. Ferber said. "It's sort of unfortunate."

Chrysler counters that Superior is scaring Canadian buyers into thinking they're overpaying by sticking to their local dealership. "We think it's in the best interest of the consumers to buy a vehicle in the country where they reside," said Stuart Schorr, spokesman for Chrysler Canada.

Mr. Schorr said Chrysler generally finds its transaction prices on both sides of the border to be relatively equal when everything is considered, including incentives and financing. "We don't see a big difference in our pricing and so we haven't seen a big wave of people cross-border shopping."

He's right. The trend may be growing, but it is not yet a mass movement. Statistics show that the number of cars and trucks Canadians bought in the United States represented about 2.9% of the 3.94 million new and used vehicles sold in all of Canada last year.

That may be high enough to hurt luxury car sales in Canada. Subaru fans have been buying high-end Imprezas in greater numbers across the border for months.

Yet even the Izzos acknowledge it's not enough to force GM or Ford to change their pricing.

Analysts say many Canadians are simply not shopping for cars and trucks in the United States because they're petrified of the red tape and think it's too complex. There are also stories of arguments at Canadian dealerships between people who've bought in the United States and retailers because the buyers expect the same service and priority treatment as clients who buy locally.

But several dealers said the headaches have been overstated. Buyers who import a vehicle pay GST and a government registration fee, in addition to an extra duty of 6.1% if the automobile was made outside North America. They also have to get the car inspected to meet emissions and safety standards. Alternatively, brokers like Superior do it all.

"We're not going to sell a million cars in Canada," Richard Izzo said. "But we're going to sell some. We're saving people money. That's the name of the game."

No, the Canadian dollar has gone up.

It’s tied to the American dollar, so the Canadian dollar value moves up and down against foreign currencies, the pound sterling or Euro for example, the same as the American dollar.

It isn’t increasing in value because of lower American dollar figures, it’s increasing because of the strong Canadian economy, especially because of Alberta’s oil.

I have noticed this same thing, and it’s teeing me off - enough that I may look at importing my next car from the US, although the Canadian divisions of these companies throw up every barrier they can to protect their fat profits.

It particularly annoys me to see these huge discpreancies in prices on cars that are largely built in the US. The Candian dollar hasn’t appreciated as much against, say the Yen, as it has the US dollar, so I wouldn’t expect to see prices go down quite as much on those. For example, though, a top of the line V6 Honda Accord goes for about CDN$37,000 (maybe a little less) here, and for about USD$29,000 in the US. The difference in price between a top of the line Pontiac G6 in Canada and the US is even greater.

Now, admittedly, the dollar has gone up, a lot, lately. You can’t expect large and rapid swings in exchange rates to be reflected in prices immediately. However, it should be closer than it is, by now. I wonder if part of the reason is that outfits like Honda Canada don’t want to kill the resale value of their cars in Canada - dropping $5,000 off the price of a new Accord would do something similar to the resale value of those already on the road. There’s also the factor that foreign manufacturers can’t jack up prices in the US as quickly as they’d like to - it would just be too unpalatable for US consumers. When the Canadian dollar was really low, you could buy many cars and motorcycles for less in Canada than in the US.

One more example, that really cheeses me off. A new Kawasaki Concours 1400 goes for over CDN$18,000, and less than USD$13,000. That’s a brand new bike on the market, and it’s made in Japan. I expect that price increases are coming in the US if the FX rate stays like it is, and price decreases in Canada, but we’ll have to wait - good for people in the US, not so good for us. I’ll tell you one thing, we never got anywhere that kind of discount in Canada even when the US dollar was worth $1.50 Canadian.

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