Buying a Car from the U.S – The Pros/Cons and Process

My last post on the car research that I’m doing spurred a great deal of interest with some readers requesting more information on purchasing a car across the border.

If you didn’t know already cars in the U.S, for the most part, have a much lower price tag than the exact same vehicle sold in Canada.  Even after the exchange rate difference, the savings can still amount in the thousands of dollars range.  For example, the 2009 Toyota RAV4 (some manufactured in Canada) base 4WD model lists for around $32.2k CAD freight included in Canada.  Just across the border however, the same RAV4 lists for: $28.5k CAD (based on $1.10 exchange).  For the same vehicle, almost a $4,000 difference which only grows larger if the Canadian dollar rises even further and if you account for attractive U.S car incentives.  The RAV4 is actually a tame example as I’ve seen cases where the savings reach in the $10k range.

The benefit of buying a car in the U.S is obvious, big time savings, especially when the loonie is strong.  The savings is basically:

Cost difference (after currency exchange) – customs fees (if applicable) – travel costs – RIV fee – recall letter fee – inspection.

However, there are numerous drawbacks as well.

  • Some manufacturers (like Honda) do not honor their warranty if the vehicle is purchased across the border (link).
  • Vehicles not manufactured in North American get charged a 6.2% duty fee at the border.  VIN numbers starting with a “letter” means that the vehicle is built outside of North America.
  • Foreign exchange fees, and travel fees to get to the vehicle.
  • For those of you who finance your vehicles, you’ll have to arrange financing in Canada before purchasing from the U.S.
  • Only certain vehicles are admissible (list).
  • The paperwork and process required can be a bit tedious.  (Riv, recall letter, MSO/MCO,  travel)

Noting the drawbacks above, if I were to purchase a car in the U.S, it would have to be on the warranty list along with being manufactured in North America to avoid customs.

Here is a (very) brief summary of the process (from RFD):

  1. Pick out the vehicle that you want and make sure that the warranty is honored here in Canada.  To maximize the savings, make sure that it has doesn’t have a “letter” as the first digit of the VIN to avoid the 6.2% customs charge.
  2. Find dealerships close to the border that sell your particular model and make sure that they will sell to Canadians (some will not).
  3. Negotiate your deal, pay deposit via credit card, get info for wire transfer along with the VIN.
  4. Get the dealership to fax the MCO or MSO to US customs 72 hours before crossing the border (returning to Canada).
  5. Obtain a recall letter from the car manufacturer.
  6. Call your insurance company to provide coverage to drive the car back to Canada.  I called Meloche Monnex and they said to me that all I need is the car serial number and I’d be good to go.
  7. Go through the paperwork with U.S Customs, then Canadian customs.  On the Canadian side, you’ll have to pay GST, customs fees (if applicable), air conditioning tax, and RIV fee.
  8. When you get home, fax the paperwork (MCO/MSO, recall letter) to RIV.
  9. Once you receive the go ahead from RIV (form 2), bring the car to get inspected to ensure that it meets Canadian standards.
  10. Register your car provincially.

Note that the above summary is very high level as I skipped many of the intricate details.  Having said that, it seems like a LOT of fuss to go through, but it may be worth it if you live close to the border.

Resources on the detailed process, please visit the sites below:

I would love to hear from people who have already gone through this process.

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FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.
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shah
8 years ago

Hi Guys,
I am looking for Toyota Sienna 2013,
can you suggest a dealer information that can sale car to canadians?

also, whom should i contact in governments if i wants details for car transfer?

thansk

Phil
9 years ago

I have a question if anyone can answer it

Looking to purchase a Infiniti Corporate demo (title is on MSO) and hence does not appeared to be titled as of yet although the dealership says it is a ‘used” vehicle as it has 9500 miles on the clock

Do I need to first register the vehicle in USA to ensure warranty is transferable to Canada, or is there any way around this. Otherwise I end up paying local state taxes only to import to Canada within 24 hours

Infiniti Canada states the vehicle needs to be registed in USA first of all

Rob M
10 years ago

Frugal Trader,

In response to your query from over a year ago (sorry, didn’t come back until just now)…

Yes they dealt with customs, had the recall letters etc (they shipped to Canada on a regular basis), and delivered it right to the location requested (I didn’t want it at my house). To top it off I paid $25 for CDN tire to inspect it on my location (instead of theirs) so I didn’t have to move it around town. They covered the plate for the trip as well.

As for the person that said that CDN Tire has a monopoly on the service, they don’t. In Calgary I know that Stampede Lexus/Toyota also does the inspections, and you can have the “repairs” to enable the daytime running lights done anywhere, you just need to have the inspection done by a RIV certified shop, of which CDN Tire is the most prolific.

Rob

CommonSenseAnUncommonVirtue
10 years ago

Future Money-Bags,

Buying a used vehicle from a reputable US or Provincial dealership and demanding they provide a ‘Car-Fax’ listing the history of the vehicle prevents the majority of these sorts of issues. Any decent salesperson will provide you with the car-fax on the vehicle once price has been agreed upon, often without your requesting it. It costs the dealership next to nothing and is figured into their in-house inspection and turn around costs.

You can also take the vehicle for an independent inspection after signing it out of the dealership for an extended test drive (if your credit is good enough)…any decent mechanic will be able to make an inspection inside of an hour for glaring mechanical issues or body/frame issues. The cost for an hour of shop time is minimal, the potential savings in time and frustration alone…too large to measure.

As for corrosion via salt…many States do not salt their roads…so you can always request that you are shown something that was taken in trade by the dealership, rather than something they purchased from an auction. Still get the car-fax, to make sure the car was not sold to the dealership after the former owner moved in from out of state.

One comment on the thread itself…a truly wise Canadian looking for a used vehicle would be better served in doing a little more research, getting a listing of the same used car auctions that the US dealership personnel frequent and saving that much more money.

You can order car fax’s on vehicles you wish to bid on via your laptop w/ wifi…You’ll have to pay for a shop to inspect the vehicle and fix any minor issues (assuming the vehicle as originally equipped is already up to Canadian smog and road safety standards)…As well as likely having to take it to a detail shop for thorough cleaning/touch up painting…but the savings are still an order of magnitude greater.

As in much of life, the best ‘deals’ and the best ‘luck’ go to the harder and more intelligent worker. The lazy get gouged, regardless of which side of the border they live on.

Future Money-Bags
10 years ago

When looking to buy a 2nd-hand car privately (or from dealer), I stay away from out-of-province or out of country cars. These have hidden problems that were not noticed by inspection and depending which province, could have a lot of rust and water damage.
Sometimes cars have been in floods and driven through salty roads for years, and still do not show any damage, but one day it all comes out and costs you 1000’s.
I just read a post on Squawfox about buying used cars, its a great read and goes to show that anyone can benefit and learn something.

Ms Save Money
11 years ago

Bilbo Bloggins – if that was the case and the person drove the car up for you – just a teaser but are you going to drive the person down afterwards? haha

fifi
11 years ago

Bought a new Nissan Pathfinder in 07, dollar at par at the time. I made sure that it was made in North America first, since I was told that some Nissans are made in the US, others are imported.
Picked it up in Great Falls, MT, live in Calgary. No sales tax in Montana, saving some hassle. After all expenses, and of course negotiating over the phone over a few phone calls, ended up saving $14,000. I did a lot of reasearch myself to make sure I knew what I was getting in to (mostly w/ RIV), but the dealership in Montana was very used to doing these transactions with Canadians, and basically held my hand as I walked through the process, and basically just handed me an envelope to give at the border when I am crossing back.
Find a dealership that has experience with cross-boder sales, and hopefully, like in my experience, they’ll be happy to walk you through it all for the sale.

Jordan
11 years ago

I bought a used Acura MDX from the US and saved at least $6k compared to a used vehicle hear. The the more important savings is our used MDX was was less then 50% the cost of a new model here. So don’t fool or rationalize yourself into buying a new vehicle just because it’s cheaper in the US then here, the used vehicles are cheaper still.

We bought our vehicle on eBay, for this make sure you buy from a seller with good feedback, make sure it’s covered by eBay’s vehicle buyers’ protection warranty. Because of the warranty I think eBay is the only place to buy a used vehicle online.

Our vehicle shipped up from Texas. Make sure you shop around a lot, there are a lot of shipping companies and the prices vary hugely. We paid $800 but got quotes up to $2000 for exactly the same service. Try dealing with an actual shipper, ask that they have their own trucks, otherwise you are most likely dealing with a broker who won’t really be able to guarantee delivery times. Also make sure the shipper has full cargo insurance.

I’d recommend avoiding paying a company to import the vehicle for you, the process isn’t very hard and the company’s charge at least $1k to do it.

Regarding a recall clearance letter Honda/Acura and some other manufacturer’s will also refuse to issue one to a Canadian customer! It is disgusting to me that they are abusing a safety policy just to try maintaining high prices in Canada. So you need the seller to obtain this for you before you get to the border. I also recall seeing an online company that would do this for you for a fee, but can’t recall at the moment.

Also make sure you check with your border crossing ahead of time, because some borders are designated for vehicle imports, and others are not.

Also be aware there is a $1000-$4000 “Gas guzzler tax”, I mean “Green Levy Tax” you have to pay when importing larger vehicles like SUVs that don’t get a minimum MPG.

Like Wealth Manager said you need to get a temporary permit to drive the vehicle in Canada. In BC atleast you can get this ahead of picking up the vehicle with a copy of the vehicle’s title. The quirk is a temporary permit is only allowed to be used for a single trip, so we needed one to drive the vehicle into Canada. Then had to walk to the insurance office again for a 2nd permit a few days later to drive it to Canadian Tire for the inspection.

Another thing to know is not all US vehicles are equipped with day time running lights, so when you get to step 2 of the RIV form where the vehicle is inspected at Canadian Tire they might fail you unless you have them hard wire the lights to stay on. Canadian Tire has a monopoly on this service so they really stick it to you, we got hit with a $300 bill.

Bilbo Bloggins
11 years ago

Is the process simpler if you purchase a car from a private US citizen and the seller is willing to drive the car across the border to you?

RB @ RichBy30RetireBy40
11 years ago

Hey Guys & Frugal Trader, for what it’s worth, I’ve bought 8 cars over the past 10 years online here in the US on Craigslist. All in all, 15 transactions. I wrote about my experience on my blog here. http://www.richby30retireby40.com/2009/07/7-cars-in-10-years.html

Best of luck!

RB

Rich By 30 Retire By 40