Canadians Take Loonie For a Ride

(Allison Lampert — CanWest News/Montreal Gazette)

Some U.S. car dealers roll out welcome mat for bargain-hunting Canucks — some don’t
Brian McBride was looking forward to this Thanksgiving weekend, and he’s not even Canadian.

McBride, whose family owns the Bill McBride car dealership in Plattsburgh, N.Y., about 100 kilometres south of Montreal, was expecting big business over the three-day holiday. There are the Americans, celebrating Columbus Day, and an expected influx of customers from Quebec.

For McBride and other U.S. auto dealers near the northern border, business has been soaring over the last few months, right along with the loonie, which closed Friday at $1.018 US.

In September, when the loonie hit par with the dollar for the first time since 1976, McBride’s sales of new Subarus nearly doubled compared with the same month last year.

Canadians eager to save $10,000 and more on higher-end U.S. cars accounted for a third of those sales.

“The response has been very, very good,” McBride said. “It’s progressively mushrooming.”

The strong loonie is coming at an ideal time for dealers like McBride.

In the U.S., already-weak auto sales are predicted to decline in 2008 to a decade-low level, due to slowing employment growth, the housing market and high energy costs, a report this week by Scotia Bank economist Carlos Gomes said.

But car manufacturers such as General Motors, BMW and Porsche are penalizing U.S. dealers who sell new models to Canadians.

For example, they may refuse to supply dealers with top-of-the-line, high-margin models. In other cases, they may decline to reimburse dealers who incur costs for customer incentives. Other makers, including Honda, won’t honour warranties on U.S. imports.

Even Subaru, which permits these sales, is now making it tougher for Canadians to get their 2008 U.S. car warranties honoured in Canada.

As a result, said McBride, “We’re anticipating future growth, but we don’t expect this to continue forever.”

In 2007, Canadians are expected to import about 150,000 U.S cars, up from 112,800 last year. Scotia Bank’s Gomes estimates 1.65 million vehicles will be purchased this year in Canada, up from 1.61 million in 2006.

Auto manufacturers said cars are priced based on local-market factors, including operating costs, that tend to be higher in Canada. Gomes noted that companies have had trouble adjusting their prices to the value of the loonie, which ascended from 85 cents to the U.S. dollar in March to parity in September.

Still, manufacturers of luxury cars — the market with the most pronounced gap on prices between Canada and the U.S. — are trying to discourage cross-border shopping.

Then there’s the process of importing the car, which obliges the owner to pass through three government bodies: Canada’s Registrar of Imported Vehicles, the U.S. Customs and Border Protection and the Canada Border Services Agency.

New cars don’t have to be registered in the U.S., but they must be brought to an American customs office at least 72 hours before export.

For Ashlee Lynn Wismach, the time invested to import her Audi TT coupe, when she moved from California back to Montreal last year, would make her think twice about buying a car in the U.S. — unless she could get a really good deal. “It’s a headache,” she said.

“That’s why people hire a broker to do it. If it was a matter of saving $500 I wouldn’t do it. If it’s a question of saving, say $5,000, I would do it.”

Indeed, the prospect of saving thousands of dollars on a U.S. car makes the hassles worth it, some Canadians say. In Shelburne, Vt., John DuBruhl said inquiries from Canadians account for about half the calls received at his family’s luxury-auto dealership.

But DuBruhl’s dealership won’t sell new Mercedes, BMW and Porsche cars to Canadians, because of potential repercussions from the manufacturers.

He can sell used cars.

“Please, put it in the headline — we can’t sell to Canadians,” his receptionist tells a reporter.

“They’re killing me with calls.”