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):
- 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.
- Find dealerships close to the border that sell your particular model and make sure that they will sell to Canadians (some will not).
- Negotiate your deal, pay deposit via credit card, get info for wire transfer along with the VIN.
- Get the dealership to fax the MCO or MSO to US customs 72 hours before crossing the border (returning to Canada).
- Obtain a recall letter from the car manufacturer.
- 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.
- 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.
- When you get home, fax the paperwork (MCO/MSO, recall letter) to RIV.
- Once you receive the go ahead from RIV (form 2), bring the car to get inspected to ensure that it meets Canadian standards.
- 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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