Pitfalls in Shopping for Car Deals in U.S.

(Derrick Penner – CanWest News/Vancouver Sun)

Canadian Gerry Pyke is being stymied in his efforts to engage in a bit of freelance “free trade” by buying a new Toyota Tacoma pickup truck in Washington state and saving himself, in his estimation, about $6,000.

It’s not because there is a ban on purchasing and importing autos from the United States - with the Canadian dollar hitting par with U.S. currency, the number of Canadians car shopping across the border is skyrocketing.

The roadblock is Toyota’s regional distribution agreements, which forbid dealers in one region from selling to customers who are going to register their cars in another dealer’s territory.

That policy doesn’t sit well with Pyke, of Delta, B.C.. He said that Toyota enjoys the benefits of the North American Free Trade Agreement, which allows it to manufacture cars in Canada and the U.S. and ship them across the border in either direction without tariffs, “while not giving us the benefits of an equalizing dollar.”

It may be “unfair,” as Pyke puts it - but it’s not unique to Toyota.

Manufacturers can’t stop Canadians from buying used cars and importing them. But several manufacturers ban dealers from selling to customers who plan on registering their vehicles in Canada, preventing Canadians from taking advantage of lower list prices in the U.S..

Glen Ringdal, CEO of the New Car Dealers Association of B.C., said while cross-border sales may look attractive in price, they aren’t always easy to pursue, and come with their own pitfalls.

For new sales, he said, Canadians who buy in the U.S. often run into problems getting warranties honoured. Also, if they run into difficulties that require going back to the dealer, “they have a long way to go to see him.”

When buyers import cars, he said, they also have to spend money making modifications to ensure they comply with Canadian vehicle safety laws.

Along with Toyota, both GM and Acura refuse to let new cars sold in the U.S. cross the border into Canada. But Canadians should have no problems buying Fords, Subarus or Nissans for import.

At Skagit Subaru in Burlington, Wash., Canadian sales “have been a lot more active recently,” according to Joe Thurmond, the dealership’s sales manager. “We’ve seen a few (Canadians) each week.”

Randy Carlton, sales manager at Lynwood Acura, said he sees a lot of Canadians too, but directs their attention to the used-car side of his lot. Selling new vehicles across the border has always been a violation of his dealership’s sales agreement.

“We didn’t realize it until it was brought to our attention,” Carlton said.

The cross-border market is growing as the value of the Canadian dollar remains high against U.S. dollar. Canadians bought a record 112,826 cars in the U.S. during 2006, according to the North American Automobile Trade Association, and the trend is still on the upswing.

However, brokers in the business of importing vehicles for Canadians report that the manufacturers are getting more strict about clamping down on sales to Canadians.

“It is getting harder for people to buy new (cars to import),” Randal Reid, owner of Kelowna-based PNT Registered Importers Inc. “The manufacturers are stepping up to the program a little more, making sure there’s not a carte blanche influx (of cars into Canada).”

Reid said for Canadians, finding an American dealer can be hit or miss, and depends on whether they find a “friendly dealer.” He added that his company used to work with a friendly Toyota dealer in Montana until a while ago, when Toyota stepped in and stopped the practice.

Toyota U.S.A. spokesman Xavier Dominicis said the border ban has been a long-standing company policy.

“This isn’t a Canada-specific directive,” Dominicis said. “This is the way our distributorships work throughout the world.”

“The purpose... is the efficiency of allocation of product. Each distributorship has its own territory that it services, and you have to maintain the integrity of the territory, or distributorship.”

Toyota Canada spokeswoman Nicole Grant added that on pricing, “in the long run, it’s always our goal to be as competitive as we can in the marketplace.”

She added that often “unseen differences” between components in Canadian and U.S. models will influence some of the difference in price.

GM Canada spokeswoman Patty Faith said GM doesn’t encourage people to buy vehicles in the U.S. and take them north. GM won’t honour a vehicle’s warranty for six months after it crosses the border.

“We price to the Canadian marketplace,” she added.

While GM does monitor the exchange rate, “it’s not something we would look at in determining prices. Exchange rates are volatile. They go up and down on a regular basis. You wouldn’t have seen prices change the other way when the Canadian dollar was low.”

NAATA president Brian Osler said that, generally, manufacturers will tell their dealers in the U.S. not to sell new cars to Canadians.

There is a way for Canadian buyers to get around that rule. Osler said that there are brokers, or independent auto dealers, with operations based in the U.S. that will buy new cars from American dealers. Those cars are registered in the U.S., Osler said, effectively making them used cars that the broker or dealer can pass on to a Canadian buyer.

But Ringdal said many states “don’t have anywhere near the used-vehicle history reporting that we have here,” which can cause buyers difficulties.