As the Canadian dollar has increased relative to its American counterpart, there has been renewed discussion about the cost savings of importing a car from the United States into Canada. All of the examples cited outline the price differential, the exchange rate adjustment, transportation costs, GST, duties (when applicable), and other costs of importing. The bottom line is that even with these additional costs and inconveniences, it still is often cheaper to go ahead with the U.S. import versus buying a new one from a dealer. While this is rarely the case on a less expensive vehicle, it seems to be generally true on many luxury cars as well as more expensive sport utilities, and trucks.
These simple analyses however tend to omit several significant and very real costs. The first one is the dealer incentives that may be available on a car from your Canadian dealer. Don’t forget to include any incentives that may be available. Even if you have the cash, a low finance rate should also be taken into consideration. If a manufacturer is offering a 0% or other low rate option, you could finance the car, and earn interest on the money that you were going to spend on it. Depending on what type of return you could earn, this could easily equate to several thousand dollars.
The second and potentially larger cost that your American bought vehicle will incur is a greater level of depreciation. While it doesn’t necessarily make intuitive sense that a vehicle bought in the U.S. is worth less than one purchased in Canada, it has become a very real realtiy. The bottom line, is that at some point you will want to sell your car or truck. When you do, the U.S. origin will have a significant impact on what your vehicle is worth. For whatever reason, a used vehicle customer has an inherent distrust of a vehicle for sale in Canada that was originally purchased in the United States.
How much does this impact the value? It depends on a lot of things but in my experience, a minimum of 5 – 10% of the original sale price if resold within the first three years. So a vehicle bought in the U.S. for $50,0000 very well may save you $5000 versus buying it in Canada, even when accounting for all of the hard costs of importing. However, the savings can quickly evaporate if you were to look at trading it in or selling it privately within the first 3 years of ownership.
This accelerated depreciation is more than just this dealers anecdotal experience and opinion. It is fully supported by prices paid at auctions all across Canada for U.S. imported vehicles. The bottom line is that a dealer needs to price a used U.S. imported vehicle several thousands of dollars below that of one originally purchased in Canada in order for it to sell.
While it may not seem logical, even a vehicle produced in the same factory, and equipped identically, mysteriously drops thousands of dollars in value as soon as a prospective buyer determines that it originated at a dealership south of the border. This discrimination will tend to decrease over time so by the time your vehicle is 7 – 10 years old, it will be less of an issue but will still be a consideration in the valuation of your vehicle.
As a Honda dealer, I have experienced numerous situations where customers were trying to trade in a vehicle that they had purchased in the U.S., only to find that its resale value was far below what it would have been if they had purchased it in Canada originally. We have all likely heard a story from a friend, a neighbour, or a co-worker how they or someone they know saved thousands by buying a vehicle in the U.S. versus Canada. The larger question is, will they have actually saved any money once they account for the inevitable lower trade value that they will experience when it is time for their next vehicle.
