Canadian Car Dealers Recalcitrance Revealed
So why would Canadian car brands refuse to lower their prices in the face of a huge wave of bargain-seeking cross-border shoppers, and the pricing policy's stultifying effects on the new car market? Because they can? Yes and no. The Globe and Mail tapped Bank of Nova Scotia economist Carlos Gomes for an explanation, and an explanation they got: auto makers are reluctant to cut MSRPs in Canada because a record 550k vehicles are coming to the end of their leases next year, up from last year's five-year low of 470k units. Cutting prices would reduce the vehicle's residual values leading to huge losses for the dealers and auto financing companies obliged to buy them back from the lessees. Oops. Instead of biting the billion dollar bullet, Canadian car companies have launched a less expensive PR war. The Globe says "several auto makers" sponsored an eight-page (!) advertising supplement. Within this magnum opus (methinks they doth protest too much), execs from Audi Canada, Toyota Canada and Volvo Canada justified their Canadian price premium and explained what they're doing about it. If any of our Canadian readers have a copy of yesterday's Mail, we'd love to read the quotes.
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