But George Iny, President of consumer watchdog organization the Automobile Protection Association, says “the industry has been derelict” in trying to equalize vehicle prices between Canada and the United States and is “acting like it’s still pre-1988 (when the two countries signed the first Free Trade Agreement).
“What’s making it worse is that dealer associations are trying to pretend (the price differential) isn’t an issue with customers, which takes pressure off the manufacturers to change the situation.”
There’s strong evidence to suggest that cars in Canada are selling for below sticker prices: Dennis Desrosiers says 2007 is shaping up to be the best year ever for Canadian new-vehicle sales, with projected sales of about 1.8 million new cars and light trucks. The previous record was around 1.7 million.
Iny, however, says a generally robust economy, particularly west of Ontario, is helping new car sales in Canada, and that “we are simply reaping the rewards of good economic controls and practices in past decades.”
He concedes that dropping prices in the middle of a given vehicle’s model run isn’t realistic; he says the price differential was foreseeable months ago. The APA’s position is that when the Canadian approaches parity with the U.S. dollar, manufacturers should react by reducing prices when a model is redesigned.
“The APA promotes buying locally,” he says, but goes on to say that the organization’s main interest is standing up for Canadian consumers – even if that means helping car buyers find reputable dealers who can help them import cars from the United States to save money on the purchase. Iny says the APA’s research shows that the majority of new car buyers would consider importing a car if the potential savings were at least $3,000 or $4,000.
There are signs that some manufacturers are working at equalizing Canadian and U.S. MSRPs.
DaimlerChrysler Canada recently announced prices for its all-new 2008 Dodge Grand Caravan and Chrysler Town & Country, which are significantly lower than those for the 2007 models. Same goes for Subaru, whose redesigned 2008 Impreza and WRX models are anywhere from $100 to $2,500 cheaper than the cars they replace. The new Grand Caravan’s starting MSRP in Canada is a little more than $4,000 higher than the U.S. list price and the base Impreza’s price is $3,700 higher (but the new WRX sedan is still priced more than $8,600 higher here, though that’s better than the $10,500 difference for the outgoing 2007 model).
It’s hard to say if these lower prices are part of a trend that will continue, or simply isolated cases of manufacturers hoping to increase sales in certain market segments: the demand for minivans is waning thanks to the growing popularity of crossovers, and the Impreza and WRX compete against newer, popular models, like the Mini Cooper S, MazdaSpeed3 and the high-performance Mitsubishi Lancer EVO that’s expected to go on sale in Canada for the first in the near future.
But if a strong Canadian dollar means higher MSRPs here, relatively speaking, it could be having a more positive effect on used car prices, according to Desrosiers.
“Five years ago, Canada exported as many as 300,000 used cars every year,” says Desrosiers. “That actually created a shortage and drove used car values up. This year, we expect that we will import around 100,000 used cars, and this glut will force used vehicle prices to go down, on average.”
Peter Woolford of the Retail Council of Canada says that the nature of retail sales means that prices for goods can be slow to change in response to a stronger Canadian dollar. He adds that the price of a product is affected by much more than just the cost of production. He cites Canada’s geography and higher labour costs as a couple of examples for why prices for some products are higher in Canada.
He adds, though, that the automotive sector is unique in the retail marketplace, so vehicle prices are not necessarily affected by the same factors that affect other areas of retail sales.
But BMW’s Dexter reiterates the fact that vehicle prices are market driven: the last thing a manufacturer wants to do is price a car higher than buyers are willing to pay for it.
“The last time this happened, the situation was reversed,” he says. “But car companies didn’t raise prices in Canada to make up for it.”