22
Jul
2014

Are Canada Car Dealers Driven to Success?

Car dealers in The Great White North are facing more and more challenges when it comes to selling new cars to Canadian citizens.

With average new car prices drastically higher in Canada than in the country’s neighbor to south, car dealers are finding it more difficult to make a sale.

With automotive opposition in mind, here are just some of the challenges that Canadian car dealers face when selling new cars in Maple Leaf Country:

Lack of Major Manufacturers

Although Canada does have major manufacturers that make parts for GM, Ford, Toyota, and other brands, the country lacks in major overall automobile manufacturers. This means that locally manufactured vehicles are limited and due to the low availability, they’re also more expensive.

In addition, because a large number of Canadian automobiles are imported from the United States and other foreign countries, they are subject to freight and pre-delivery charges.

These charges vary, but on average cost Canadian car buyers thousands of dollars more per vehicle. This translates to a lack of buying, which means trouble for Canadian dealerships.

Lower U.S. Prices

From fewer charges to lower MSRPs, Canadian car buyers are flocking to the United States when they’re ready to purchase a new car.



Considering affordable prices are just one of the reasons why you buy a car, it’s no surprise that Canadians are visiting their neighbors to the south for lower prices.

How much of a price difference is there between new cars in Canada and the United States for the same make and model?
Well, according to CBC News Ottawa, the price difference is in the thousands.

For example, a 2014 Acura MDX has an MSRP of $52,690 in Canada whereas the MSRP a short drive across the border in the United States is $43,300. This is a major draw for Canadian car buyers and a major drawback for Canadian dealerships.

Tariffs

Canada and the United States have a major trading partnership known as the Automotive Products Trade Agreement.
This, along with the Canada-U.S. Free Trade Agreement creates import and export tariffs that protect Canada’s car industry from being overrun with outside competition.

But, there’s a looming agreement with South Korea that could lift tariffs on foreign car imports from that country, namely the Hyundai brand.

This could mean direct losses for Canadian automobile manufacturers due to a reduction of domestically manufactured vehicles. Although an influx of vehicles seems like a good thing for Canadian dealerships, it means bad news for Canada manufacturers in the long run.

U.S. Recalls vs. Cars in Canada

New cars are recalled all the time for any number of reasons, which further complicates the car buying landscape in Canada. When Canadians buy their automobiles in the United States and a part is recalled, they usually go to local dealerships to have the part replaced.

This means the cost of the recall, including parts and labor, usually falls on the shoulders of the car brand’s Canadian dealership even though the car was bought in the United States.

Although this is only the case with manufacturer recalls and not factory-specific recalls, it still puts a financial strain on Canadian dealerships.

The Canadian car industry isn’t necessarily struggling, but it’s plain to see that dealerships in The Great White North do face industry challenges.

About the Author: Adam Groff is a freelance writer and creator of content. He writes on a variety of topics including budgeting and the environment.

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