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Buying a New Car in the US: What’s in It for Canadians?

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Arif Harji
by Arif Harji on December 13, 2018

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New cars tend to cost about 20 percent more in Canada than in the United States. Therefore many Canadians look south of the border for their next vehicle. 

For instance, General Motors of Canada prices vehicles based on the previous year's supply and demand, not on the exchange rate of the Canadian dollar. For example, a GM Yukon costs $11,000 to $13,000 more in Canada than in the United States, even though it’s the same vehicle. Price differentials vary based on the specific make and model, but overall, cars in Canada cost significantly more than similar vehicles in the United States.

Because the USD/CAD exchange rate fluctuates unpredictably and continuously, the auto industry may find it easier to charge more instead of trying to keep prices comparable. This can result in a significant difference in the bottom-line purchase price. The Canadian market is also smaller than the American market, meaning there is less overall competition for vehicle selection. This is one of the main reasons many Canadians look south of the border, especially for new cars, to get a true bargain.

Everyone loves a bargain. When people set out to buy a new car, they expect the salespeople to knock the price down after negotiation, or offer more perks for the same price. Canadian buyers can keep this in mind when shopping for a new vehicle in the United States. Haggling is normal, and they may be able to get a better deal than they expected by merely asking for it. 

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Fees Canadians Must Consider

To bring a vehicle across the border, a Canadian buyer needs to prove they have the rights to the car. Required documents include the title, registration, and proof of insurance. Drivers also need the necessary permits to show the car is allowed on the road, and the car has to pass the proper inspections. The Canadian Border Services charges a $195 fee plus taxes for any vehicle which is imported. Duty is figured at 6.1 percent of the purchase price. Sales tax has to be paid in the U.S. at the time the car is purchased, and then again at the border. Transport Canada regulations may even require the new owner to make modifications to drive it on Canadian roads. Some provinces may have additional requirements. There may also be a high-emissions excise tax, or shipping costs if the car can't be driven across the border.

The vehicle’s warranty is an important factor to consider. The warranty on a car which has been brought across the border may be difficult to enforce, or it may have to be implemented through the American branch of the company. Some warranties will be void for the first six months or 12,000 km, leaving the owner without vehicle protection for an extensive amount of time. Canadians who consider buying a vehicle in the U.S. should look closely at the warranty before making the purchase. 

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How to Pay for the Car

Exchange rates need to be taken into consideration, and this can help further save costs. After all, the goal of buying a car beyond borders is to save money. Buyers should keep this goal in mind during all aspects of the car-buying process. For instance, traditional banks can charge a 10 percent spread on currency conversion, while foreign exchange brokers charge less than 1 percent. Whether you’re purchasing the car in Canada, or at a dealership in the U.S., you can use foreign exchange services. For example, FX services, such as MTFX, can get the funds to the beneficiary within 24 hours.

Automakers will not be able to lease or finance a vehicle when the buyer is in another country, which also means that the buyer will not be able to take advantage of the specials offered by the manufacturer, some of which are excellent deals. If borrowing the money, the buyer needs to take out a loan or line of credit in Canada. To make international payments, the person buying the car needs to buy the correct currency based on the current foreign exchange rate.

Buyers could save tens of thousands of dollars on the purchase of a new high-end car in the United States. For luxury vehicles such as Mercedes, BMW, Audi, Lexus, and Acura, the savings can be substantial. One customer saved $90,000 on a Lamborghini import. These kinds of savings make buying across the border more than worth it.

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