Canadian Imports Go Loonie

Samir Syed
by Samir Syed

The Canadian dollar is back. After a thirty-year slump, the “loonie” is now staring eye-to-eye at the American greenback. The strong Canadian economy, the worldwide thirst for oil, and George Bush using The Fed as a money tree have all converged to push the Canadian dollar skyward. The meteoric rise of the dollar has given Canadians incredible arbitrage opportunities with American products; especially cars. The Canadian car industry ain’t pleased– and for good reason.

In 2006, Canadians imported 112k new and used vehicles from their neighbors to the south. That stat represents over 50 percent growth in US imports over the last two years. The crux of the problem: many retail prices in Canada are based on an exchange rate more appropriate for the Clinton era. To wit: Buying a Nissan 350Z Coupé in the United States will cost you $29,000. A similarly optioned car in Canada will cost – wait for this – $51,000.

Now, converting the US price of $29k at a rate of about 1.06 yields $30,740. Throw in $2k for shipping (you can drive it up yourself on a temp plate), $1800 in import duties (which you don’t pay on any vehicle assembled in the NAFTA zone), $5,200 in taxes (assuming Quebec and Ontario’s rates) and you’ve pocketed a cool CA$13k by buying your new Z stateside.

The downside, of course, is that Nissan, like most manufacturers, doesn’t honor warranties in any country other than the country of purchase. One notable exception (of course): Toyota. The Japanese automaker honors warranties all across North America. It’s good for the whole family, too: Lexus, Scion, Toyota and the newest addition, Subaru, are all included. Still, if you’re not expecting 13 grand’s worth of warranty repairs on a reliable car like the 350Z, the deal is hotter than a dancing bobcat with its ass on fire.

The other problem is red tape. In order to get a US-spec vehicle on the road in Canada, it must first be admissible for import. The government has printed a list of such vehicles on http://www.riv.ca. Conspicuous by their inadmissibility are the Pontiac GTO and the Mistubishi Lancer Evolution IX, which have failed Canadian bumper and emissions tests. Export papers need to be filed at U.S. customs, and import papers at Canadian customs, including a manufacturer’s letter stating that no outstanding recalls apply to the vehicle in question.

Once imported, a vehicle has to be converted to display kilometer-based readings, and have daytime running lights installed. Finally, the vehicle must be inspected and (possibly) emissions tested before it can be registered in a province of Canada. Other annoyances may apply. For example, if the vehicle comes from a state with lax tint and modification laws, you might end up needing to make cosmetic adjustments as well.

The fact that new cars start so much lower on the MRSP ladder in the U.S. also has ramifications in the used market. A 2005 Honda Accord EX-L with 14k miles will fetch about US$18k stateside. The same car will cost $23,400 in Canada. Converting 18-grand to Canadian and applying taxes will give us a car that costs $21,050. The best part? Since the Accord is assembled in Ohio, it’s a NAFTA car! On savings of $2,350, the day trip to upstate New York pays for itself. Even greater savings can be had on big-time depreciators like the Cadillac CTS-V or the Porsche 911 Turbo.

I picked the 350Z scenario because it’s a more extreme example of manufacturers being too greedily lethargic to adjust their Canadian pricing. Driving.ca recently quoted an average difference to be about $5,800 across international lines in one of its articles. The difference is still important enough to encourage a steady, increasingly large parade of vehicles across the border.

The government of Canada is hemming and hawing about ways to protect Canadian dealers while in some ways paying lip service to NAFTA. For their part, manufacturers are now threatening U.S. dealers with a loss of franchise if they continue selling to Canadians. Meanwhile, the market is busy reacting predictably. For those too lazy to go through all the hoops, vast arrays of brokers and importers have put out a shingle and are waiting for your business.

Eventually, something will break. Either the manufacturers will adjust Canadian pricing, outright ban the sale of cars in the United States to non-residents or the Canadian government will impose an automotive tariff.

The medium-term outlook for the U.S. dollar is particularly bearish. Therefore, there is no reason to expect an abatement of any kind in Canadian imports. It’s a strange role reversal for many Americans, to think their country has become Canada’s automotive outlet mall. Quite soon, Canadians will be making fun of that “funny, two-tone money,” too.

Samir Syed
Samir Syed

Please visit my homepage for all things me.

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  • AGR AGR on Oct 12, 2007

    The media is siding with the Canadian consumer with their coverage of the price disparity, it would seem that RIV is also siding with the consumer. The "popular opinion" is with the consumer.

  • Gentle Ted Gentle Ted on Oct 12, 2007

    For Canadian if you want help and advice on purchasing a vehicle in the USA, look at this web site Carhelpcanada.com or phone them at 416-651-0555. Someone made a comment on this site about where or who to contact, this organization is a non-profit group and I purchased my last Car from them, Gentle Ted

  • Ajla I've owned one 4.5L (Allante) and one N* (Seville). In Allante tune (200hp/270lb ft) the 4.5L feels decent, but I don't know how it would have held up to the competition. The N* is perfectly lovely until it breaks. GM adding a 5th gear to the 4T80 around 2004 would have been nice though.I'm a little surprised that adding a turbo or supercharger to the 4.5/4.9 wasn't considered when other GM divisions were utilizing forced induction in a largely successful fashion.As I'm sure most of us know, adding DOHC heads to an OHV design is something GM eventually did anyway with the 3.4L and although reasonably powerful it was a bigger maintenance and reliability nightmare even than the eventually N*. I'm also interested if the N* has any development overlap with the Quad4 or if it was totally separate.
  • Bd2 Excellent article as always Corey. Looking forward to this series and your style of verbiage.
  • YellowDuck Really surprised it's only 1/3. Lack of Android Auto would be a dealbreaker for me. At this point I might even say it needs to be wireless. I can't believe any manufacturer would still be trying to sell built in nav as like a $1500 option. Must sell it to people with flip phones.
  • Mike Beranek Great subject for a multi-part piece. There's a lovely DTS for sale near my work... does anyone have a year that the Northstar becomes buyable? I've heard both 2005 and 2007.
  • Parkave231 Looking forward to this deep dive, Corey. My '02 Deville was right on the cusp of when they "fixed" the head bolt issues, but I really don't know if mine was one of the improved ones. Still, it never gave me problems during ownership, aside from the stupid intake plenum duct issue, which was the one time I'll admit I bit off a little more than I could chew.Smooth engine, decent low-end torque for an OHC engine, and whisper quiet. I got great gas mileage out of it too. But how could GM ever screw up head issues on two V8s in a row?
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