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B.C. Car Buyers Most Likely to Shop in U.S.

By Bruce Constantineau, The Vancouver Sun

Province accounts for 27 per cent of U.S. vehicles imported to Canada in first 10 months of year, Scotiabank says...

B.C. car buyers are the most likely in Canada to purchase U.S. cars and bring them back home, according to a Scotiabank report released Monday.

The report said the surging Canadian dollar has pushed U.S. vehicle imports to record levels, with B.C. buyers being the most prone to making cross-border transactions.

B.C. accounted for 27 per cent of all U.S. vehicles imported into Canada during the first 10 months of 2007 -- more than double its 12-per-cent share of all Canadian motor vehicle sales.

Scotiabank auto industry analyst Carlos Gomes said the high percentage of imports into B.C. reflects the large Metro Vancouver population base -- more than 2.5 million people -- and the region's proximity to major U.S. cities, especially Seattle.

He said U.S. prices are often $4,000 to $5,000 less than comparable Canadian vehicles.

"Even if you have to spend some money to upgrade the vehicle to meet Canadian standards, there's still a significant saving," Gomes said.

He said Canadian buyers of U.S. vehicles often have to spend $1,000 to $1,500 to install items like daytime running lights or improved bumpers to match Canadian standards.

The Scotiabank report said Canadians imported a record 137,000 (mostly used) vehicles from the U.S. during the first 10 months of this year -- a 21-per-cent increase over the same period last year.

October imports this year nearly hit the 25,000 mark, 68 per cent higher than September imports and double the level reached in October 2006.

Gomes said the currency exchange rate has clearly fuelled the import buying surge, rather than increases in Canadian prices. He noted new car prices in Canada were flat between 1998 and 2006 and have declined by about five per cent this year, with prices of North American-built light trucks dropping by eight per cent.

"Manufacturers have not adjusted their [suggested retail prices] in Canada but they have enhanced incentives and have been offering better lease and financing deals [so transaction costs have come down]," Gomes said. He said automakers are reluctant to cut their suggested retail prices in Canada because a record 550,000 vehicles are due to come off-lease next year, up from a five-year low of 470,000 units last year.

"If they drop prices, then the residual values of those [off-lease vehicles] will fall as well and they'll have to take losses on vehicles that come back into the market," Gomes said.

He predicts U.S. vehicle imports to Canada will continue to set new records as long as the loonie remains close to the U.S. dollar, something he figures is a "good bet" as the U.S. economy shows signs of weakening.

"That should create a reduced demand for vehicles in the U.S., leading to even lower prices in that marke. That obviously increases the attractiveness of a U.S. vehicle purchase from a Canadian standpoint."

B.C. car dealer representatives would not discuss the growing cross-border car buying trend Monday, noting there's a major class-action lawsuit in Ontario accusing automakers and dealers of conspiring to artificially inflate car prices in Canada.