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Consumers Suspicious of Automobile Pricing

By Greg Keenan, Auto Industry Reporter

Survey respondents believe vehicles are less expensive in the United States, and want the government to act.

Car buyers want the federal government to force auto makers to reduce the prices of their vehicles in Canada to match those in the United States, says a survey of new auto purchasers by consulting firm Maritz Canada Inc.

Almost all buyers - 96 per cent - are aware of the difference in prices between vehicles in the two countries and more than two-thirds point to the vehicle companies as being most responsible for higher prices, said Maritz, which surveyed 1,918 Canadians who bought a new car in the past 12 months. Eight of every 10 people responding want the federal government to act. Many of them blame Ottawa for being at least partly responsible for higher prices in Canada.

"These findings clearly suggest that the automotive industry needs to take action to address these perceptions - whether it is to further reduce prices or to start communicating with consumers to help them understand the underlying reasons for the price gap," Maritz said.

Those surveyed believed a $20,000 car would cost $3,200 less in the United States, a $30,000 car would be $5,180 cheaper and a $40,000 vehicle would cost $7,500 less at a U.S. dealership.

It also showed that as many as half the people who bought cars in the past 12 months would consider buying a vehicle in the United States, while 74 per cent of those planning to buy a vehicle in the next 12 months would consider heading south.

"Over half of the market; we're not talking 5 per cent to 7 per cent here," said Chris Travell, vice-president Maritz's automotive group. "It looks like it's going to continue to be an issue in the short term."

Cross-border car shopping has been a thorny and high-profile issue for auto makers in Canada as the Canadian dollar reached parity with the U.S. currency and then soared to $1.10.

Auto makers at first stood steadfast and insisted that the price gap was not as large as it appeared to be because of different incentives and lease rates and maintained that prices are set for individual national markets.

But as the flood of buyers to the south hit a peak in October and November, auto makers responded first with incentives for cash buyers, then cut prices with rebates, subsidized lease rates and other incentives.

About three-quarters of the buyers who responded to the survey, however, said they don't believe the recent price cuts, reduced lease rates and cash incentives are sufficient to offset the difference in prices between Canadian and U.S. vehicles.

That's despite the blitz of incentive money and advertising dollars that has flowed into the market in recent months as auto makers have tried to keep buyers at home.

"It's an expensive game that everybody's playing right now," Mr. Travell said.

The number of cross-border shoppers hit a record in November at 30,002 - which surpassed the previous record set in October - but the numbers have been rising all year.

As of Nov. 30, more than 166,000 Canadians had purchased cars in the United States, shattering the record of 112,826 set in 2006.