The following is a guest post by Sustainable Personal Finance. Living in Canada, SPF is able to provide an interesting perspective on car buying. He and his wife were able to save thousands of dollars by importing a car from the U.S. instead of buying locally. Scroll down for a checklist of all the steps to import a car into Canada.
Why do people import cars to Canada?
Ever wondered why Canadian retailers get so nervous when the “Loonie” gets close to parity with the US green back? Simply put, Canadians seemingly pay 20%-30% more for most consumer goods than do our American cousins. Fair? Hardly. Who can blame a Canadian who wants to save his or her hard earned money? Americans surely avoid buying Canadian when the two dollars have the same currency value. When this occurs Canadian exports to our largest trading partner decrease, various industries (such as the film industry) pull out of movie making and our tourism industry takes a big hit as less Americans spend their hard earned money in a place where it costs more for everything. Gasoline? Way cheaper in the U.S. Want to buy a book in Canada? Check the back of the book and it costs 25% more in Canada. Want a loaf of bread? Expect to pay more in Canada.
While the noted examples are small ticket purchases, buying a new (or used) vehicle is a much bigger deal. When the two dollars are at parity, a car in Canada will cost the consumer 20%-30% more than if the consumer purchases the vehicle in the United States. If a Canadian wants to purchase a car that costs $20,000 in the U.S.A they can expect to pay $24,000-$26,000 in Canada (before tacking on a very high taxation rate that ranges from 8%-15% dependent on the province the car is being imported to).
I will state that this discrepancy is not the Canadian car dealers’ fault. The invoice price and MSRP are dictated to them by the parent manufacturer. There is a double standard as to how these manufacturers treat dealers on each side of the border and it is akin to highway robbery. We recently imported a car from the U.S. and even after a small currency conversion fee and despite the Loonie not being at par at the time, we saved over $9,500 which ended up being 77.4% of the price of the same car sold in Canada.
Importing is not as difficult as it sounds
You may think that duty taxes, hassle at the border or at your local dealership, or warranties being void when you cross the border are a detriment to importing a new vehicle, but they’re really not. The horror stories you hear are usually generated by Canadian dealerships who are desperately seeing an increase of U.S. imports and a decline in their sales.
With some careful research and vehicle selection you too can save thousands upon thousands of dollars. After doing our thorough homework and making an informed decision we were ready to negotiate the purchase of our new 2011 Subaru Outback. Unlike Canadian dealerships, the U.S. dealerships seem to start negotiation at invoice cost, not MSRP! What a pleasant difference. We got our car for $300 under invoice. It took us 1 day (11.5 hours to be precise) to go get our car. We got to customize our new car to precisely how we wanted it instead of having to choose from a very limited selection here in Canada. Our deal was negotiated via email and we paid upon delivery. We felt liked valued clients when dealing with the U.S. dealership. In total, we spent about 45 minutes total dealing with customs after picking up the new car. The dealer in N.Y. State we dealt with even went as far to provide an overhead map of the U.S. Customs area to help expedite the process. The process after getting our new car into Canada was wrapped up within 4 business days.
Importing a car into Canada may seem to be a daunting task but it really isn’t too difficult. Here is the process:
Steps to import a car into Canada
- Make sure the vehicle you are interested in is on the Registrar of Imported Vehicles admissibility list. Some manufacturers do not allow their dealerships to sell new vehicles to Canadians.
- Check to see if the manufacturer honours the warranty for your chosen vehicle once it has crossed the border into Canada. Some manufacturers have the owner pay for warranty expenses out of pocket and then apply for reimbursement.
- Find out if the vehicle you will purchase is subject to the high emissions excise tax. NRCAN is a great place to look this up as these taxes can run $1000-$4000 on inefficient vehicles.
- Check the list of vehicles that have had safety recalls.
- If you are buying used it is worth investigating the vehicle’s history. There are numerous online services that allow you to check the VIN number. The peace of mind is worth $20-30.
- Find out if you will have to pay duty on the car. Cars manufactured in North America are not subject to duty tax but those built outside North America are subject to duty under NAFTA. Duty is often 6.1% of the value of the vehicle. Even with duty, you can often still save thousands of dollars importing. Industry Canada can help you look up the vehicle you are buying.
- Arrange your currency exchange.
- Arrange payment, vehicle pickup or delivery. Delivery or the use of an Importer can make quite a dent in your savings, so carefully evaluate if you want to use these services. Some dealerships accept payment on delivery if you pick the car up in person. It is also wise to request a temporary licence that can be taped to your rear window. Don’t leave without an outstanding recall letter (if the dealership will provide one).
- Fax in a copy of the vehicle title to the U.S. border crossing where you intend to cross. This must be done 72 hours in advance of exporting the car.
- Arrange to get motor vehicle insurance for the car if you intend to drive it back to Canada.
- Plan your trip to the dealership where you intend to buy the car.
- Meet with the dealership. Double check that the VIN on the bill of sale matches the one on the vehicle. There is usually a sticker on the driver side door that has the VIN on it.
- Drive to your desired U.S. border crossing and identify yourself with your passport and licence. The officers will check that the title, VIN and bill of sale. They will then release the title to Canada Customs.
- Drive to Canada Customs and identify yourself with your passport and licence. Inform the officers you are importing your new car and fill out the Vehicle Import Form 1 (It will be provided).
- You will now pay the $195+GST RIV fee, $100 A/C tax (if the car has A/C), duty (if so required) and possibly the aforementioned emissions tax. You also pay the 5% GST (QST in Quebec, GST portion of HST in Ontario and British Columbia). Your rewards credit card should handle these payments as most Canadian Customs offices won’t take cash or cheque payment.
- Customs will release your Form 1. Keep all your paperwork available in case you are pulled over, which is possible if a police officer sees a car with no plates.
- Drive home!
- Within 10 days of submitting your Form 1 Canada Customs will mail you the Form 2 – Federal Inspection.
- You have 45 days from the day you submitted to get any required modifications done to your vehicle (common items include metric speedometer updates/display, daytime running lights, child tether anchorage) and have your vehicle inspected at Canadian Tire.
- At the inspection ensure you have all of the documentation you’ve accumulated. The Forms 1 and 2, letter of recall, title, bill of sale are all required.
- The techs at Canadian Tire will conduct their inspection. This will take 30-60 minutes. The inspection is included in the RIV fee you paid at the border.
- If the vehicle passes inspection, skip ahead to 24.
- If the vehicle does not pass inspection, determine where you want the upgrades done and get the work completed within 45 days.
- Take your paperwork to the provincial licencing office and register your car. You will pay provincial tax at this point.
A number of steps to take, but to save 20-30% on your vehicle purchase, well worth it.
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