Ambitious But Rubbish

A little over a month ago I started a little experiment to find out what was happening with Canadian car prices, which remain hugely inflated compared to prices for the same make & model cars in the US. All but one of the cars on the reviewed list were imported from either Europe or Japan, but the one American entry showed a price markup that was comparable to the other cars. After two weeks off in China and one week to recover from a nasty cold I caught there, I am finally writing the follow-up to that story. The car-makers aren’t going to look good.

I’ve put up a page here where I put in the responses that came from the car-makers, with names and contact information removed.

Why wouldn’t they look good? Because I’m not the first to ask them the same question — why do the same cars cost so much more in Canada than in the USA — and they have a stock response to it which they send everyone who asks (if they bother to reply to messages at all), and that response is a pure lie. Yes, a falsehood. And it’s easily verifiable too.

Those companies that did respond — BMW, Audi, Ford and Volvo — all basically have the same story about how the prices are determined by market forces, how they can’t just change the pricing from day to day, how there are differences (however hilariously minor) between the Canadian and US models, etc.

Of course there are some variations in the speech. BMW, for instance, affirms that to lower the price now would lower the value of BMWs that have been sold up until now (evidently German economics teachings tend to confuse “price” and “value”), and rather amusingly goes on to rue the fact that BMW USA can’t charge its customers as much as BMW Canada does (duly noted!). They also pretty much promise NOT to lower prices but instead to “increase the value of [their] vehicles by offering more standard options in [their] models”. Where they’ll find those $15,000 optional extras in the 3-series remains a bit of a mystery. I may snark a lot, but at least BMW is honest.

Volvo, however, just went with a complete lie, and I find that a bit shocking. Did they imagine that I wouldn’t verify the information they gave me? Volvo asserts this:

While companies price their products relative to the market operated in, it's easy
for citizens from both countries to cross the border, shop and bring them home.

While it IS actually fairly simple to import a car from the US into Canada, you need to be able to buy a car for this to work.

And you can’t. The same company that tells us it’s “easy” to just buy a US car and take it home conveniently forgets to tell us that the agreement it signs with its dealerships in the US forbids selling a new car to a Canadian for exportation purposes. Even if the dealer is not involved in the exportation proceedings.

This is not proper to Volvo. The fact is that, as a non-US resident, you’re prevented by dealership contract from purchasing a new Volvo, Audi, BMW, Mercedes or Ford. I’ve confirmed this by asking dealers in border areas. One dealer told me bluntly that he wish he could help me out because the dealership gets 20-30 calls and emails from Canadians daily asking him the same question.

Understandably I’m pretty much universally disappointed by the knowledge I’ve gained here. “Market forces” seems to translate here not into a magical world of the self-correcting market where supply and demand rule, but rather as “because we can force you to pay this by controlling international trade of our vehicles through obligatory exclusionary contracts”. Now, forgive me as I’m not an economist, but that doesn’t sound like “market forces” to me. Not in the slightest. In fact it strikes me that there may be antitrust implications to these Canadian pricing policies, but that’s an area for lawyers to figure out. The lawyers involved in a $2B class-action lawsuit regarding Canadian car pricing discrepancies clearly think that there is. And frankly after having played this little game of “find the red lady” with the car-makers I’m starting to hope that the lawyers are right.

Not all car-makers seem to be as tone-deaf, however. In fact Porsche has already announced that they’re dropping prices by 10% on their 2008 models in response to currency changes. Sounds like great news until you realize that their “Canadian Premium” on 2007 models was well over 30%. They’re doing something, but it seems to amount to little but give lip service to the strength of the CAD$.

So, what’s a Canadian to do? Well, for one thing you *can* buy a used car in the US, even from the “official” dealers. Now, the term “used” can mean a lot of things, but apparently this includes low-usage vehicles like floor demos. My understanding of this is that as long as the title to the car has changed hands once — for whatever reason — that car can then be sold to anybody, and it’s your responsibility to make sure it’s up to Canadian standards before you import it.

Then again it seems to me that the best thing you can do in the face of such blatant price manipulation by the car-makers is to buy a used car locally, or even to seriously ask yourself if you need a car at all. Most Canadians live in cities nowadays, and the city you’re in probably has some sort of a transit system in place. This will save you from being taken advantage of by the car-maker, but will also save you hundreds every month in insurance premiums, registration, gas and parking. Sometimes you need a car, of course, and that’s where car rental agencies come in — by shopping around you’ll often be able to rent a nice-sized car for very cheap (< $30/day).

The point is that there are other options than buying or leasing a car. And when you consider the contempt that car-makers seem to have for the Canadian customer, those clearly seem to be your best options.