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Should You Buy Your Next Car in Canada?

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I've imported two vehicles from Canada to The US. Here's some things to be aware of.

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Why Buy a Car or Truck in Canada?

Many of the automobiles sold in Canada are exactly the same models that are sold in the US. Whether they're made in Detroit at a Ford factory and shipped north, or made in a Chevy factory in Ontario and shipped south, they're often the equivalent vehicles that American consumers are used to buying. There may be minor differences. such as a speedometer that displays kilometers on the larger, outside part of the dial, instead of the reverse in the US, or they may have extra cold-weather gear (such as an engine block heater) installed.

Bargains Are Usually the Result of Exchange Rate Fluctuations

From time to time US consumers may benefit from extreme swings in what is normally a fairly stable exchange rate between the US and Canadian dollars. There have been times when the loonie (as the Canadian dollar is nicknamed), and the greenback have been "on par" or having no difference in value between them. Times such as these may give our northern neighbors opportunities to find bargains on US made merchandise, yet it can be hard on the wallets of Americans visiting Canada. Every so often it so happens that the Canadian dollar falls to historic lows against the US dollar, providing for bargains of all kinds when Americans shop in the Great White North. In one example of this disparity in currency value, on January 21 of 2002, the Canadian Dollar (CAD) fell to a value of only 61.79 cents to the US dollar

A falling Canadian dollar is generally the main reason that vehicle prices north of the border may be cheaper at times, but not the only factor. A surplus of certain models can occur if more than the market could handle were imported into the country.

My Own Experience in Buying a Vehicle From Canada

In 2019 I purchased a new Ford F-150 truck in the city of Nanaimo, British Columbia. The truck was made in a plant in Kansas City, MO, and was identical to models sold in the US, except for the speedometer, which had kilometers on the outside of the dial. It also featured a trim package called "XTR" stenciled on the rear of the truck, which was not sold in the US, and an engine block heater for its gasoline engine, something that's uncommon on most US models.

We were living in Canada at the time, and although we were planning on returning to the US, went ahead and made the purchase when we learned that the exact same truck sold for $8,000 more in the US. There were several reasons that this price difference was so large at the time. The Canadian dollar had been very low earlier that year, at the time the dealership had imported a number of vehicles into Canada to re-sell. They may have bought more of them than what they could sell, forcing them to dispose of the excess inventory for less profit that they'd originally planned for. Whatever the case was, it was a benefit to us, even though we knew there would be some hassles involved in exporting the truck.

The Steps Involved in Importing a Vehicle from Canada

Our case was slightly different than the scenario of an American crossing the border to by a car in Canada. We were emigrating back to the US, where my wife and I are both citizens. We simply drove to the border with our passports and an itemized list of our belongings, then passed through customs in a few minutes. We'd bought the vehicle in Canada as Canadian residents, it had British Columbia plates and documents, and the fact that we'd be changing the vehicle's status was of little or no concern to border agents at this stage of the process.

If we'd simply gone north to buy the truck, we would've been required to make a number of other arrangements and have filled out several required documents before even arriving a the border. Also, we would've needed to arrive during a certain time window, when the part of US customs that dealt with vehicle imports was open.

If we'd been buying the truck while in Canada we would have had to wire funds to the Canadian dealership from our US bank, but in our case we had our own bank account in the country. The money wiring process can often take several days. If you plan on going north of the border to buy a vehicle, plan on taking enough cash (which you must declare), or have wiring instructions already in place so that the process goes more smoothly. Also be sure and plan around any US or Canadian bank holidays which you may not be aware of. The same holidays are not always observed on both sides of the border.

If we hadn't been emigrating back to the US and were simply bringing a new Canadian vehicle into the US for the first time, we'd have been required to pay import duty at the US border and would've been asked for the following items.

  1. A copy of the Canadian title or registration, if applicable.
  2. The original bill of sale.
  3. A temporary U.S. transit permit or license plate.
  4. A completed DOT form HS-7.
  5. A copy of the EPA form 3520.

These are the things that were required at the time that we imported our vehicle, yet the specific forms, amount of fees and taxes is always changing. Be sure and do your homework first and contact the US border and customs agents at the border crossing that you plan to transit and ask them what you'll need.

What You’ll Have to Do When You Get Home

When you arrive back in hour home state, you'll have to jump through some more hoops. In addition to the import duty and fees that you paid at the border, you'll have to pay state sales tax on your purchase. When buying a vehicle in Canada for export, in most cases you'll pay GST in Canada but not PST, or Provincial Sales Tax. When you get back home you'll have to pay state sales tax before you can obtain your license and registration. Most likely, paying all of these taxes will result in some amount of double taxation, which you need to account for in determining if importing a Canadian vehicle is still worth it.

When you return to your home state with your new vehicle, start the ball rolling by getting all of your documents ready for your visit to the state vehicle registration department. In my case, I had to provide the Texas Department Of Safety with my Canadian title/registration, a bill of sale, a stamped DOT form HS7, stamped EPA form 3520, stamped CBP form 7501 and application for a Texas title, form I-130U, in addition to proof of insurance and my driver's license. I also had to bring an inspection document from official law enforcement in Texas declaring that the vehicle wasn't stolen. This is called a VTR-68A, and in my case involved several weeks of waiting for when the service was eventually provided by our local sheriff's department.

In normal circumstances, had we not been immigrating to the US, we would have been required to pay state ( but not local and county), sales tax on the vehicle's value, in addition to the 5% GST that we'd already paid in Canada. If I'd bought the vehicle in Canada while there as tourists, we could have received an exemption for the Provincial Sales Tax or PST of 7%. This made the transaction a bit less profitable, yet it was offset by not having to pay US duty and local and county sales taxes.

If I'd just bought the vehicle as an American shopping in Canada, I've have paid roughly 11.5% of the sales price in taxes, along with 2.5% in US import duties along with a few hundred in extra paperwork fees. By comparison the local sales tax that's charged on new vehicle purchases where I reside is 8.75%. For the truck to have been a bargain, I would have needed to have found it for sale in Canada at least 5.25% cheaper than one in the US, not including the added expense of my time, travel and other miscellaneous fees.

Some Words of Caution

Before considering buying your next new or used car from Canada, do your homework. You may want to use the services of a reputable import broker, who can help make these type of transactions go a bit smoother. Also be aware that currency exchange rates fluctuate by the second, and you may end up getting a better or worse deal, depending on which way they swing during the time that your transfer your money cross-border to the dealer by wire and make your purchase.

Also, realize that you're buying a car from a foreign dealer and foreign division of the motor company, even if the name is the same in your country. Ford Canada is not the same division of the large multinational corporation as Ford US, although both must usually honor warranty and recall measures if the vehicle was made in the US for sale to Canada. In the case of my Ford F-150, the engine block heater had a recall issue, and I was able to get if fixed at a local dealer in the US, despite having bought the truck in Canada.

Compliance Issues

Not all vehicles sold in Canada meet US EPA emissions and DOT safety standards. If you buy one that doesn't meet US import guidelines, you may be stuck with a vehicle that you can't bring home. In some cases you may be able to have such vehicles modified, such as by installing the proper pollution control equipment, yet this can be a very costly and time consuming process. Certain vehicles over 25 years old may be exempt from these regulations, and this can make some of them more attractive to import. Also be aware that some kinds of vehicles are classified by US customs as "gas guzzlers" and for them you may have to pay an additional import fee.

Resale Value Issues

You may run into small issues that turn out to have large consequences later when buying a Canadian vehicle. We'd actually imported another car to the US from Canada several years earlier, which was owned my my mother-in-law. When we finally went to sell that car a few years later in the US, we had a problem with finding a buyer for it, since it featured an old style analog speedometer that couldn't easily be converted from kilometers to miles. In the case of my current vehicle, all I have to do is change a setting and the speedometer and odometer will read in miles per hour and miles.

It Still May Be Worth Importing a Car From Canada

If you can find a good bargain on a car at a dealership north of the border during a time of very favorable exchange rates, and if the model that you're looking at complies with US standards, then you may find that buying car In Canada is worth the extra time and trouble that it requires. As with any dealer in the US, try and negotiate the best price that you can, then determine if the extra fees to get it across the border are worth it. Those added import fees may also be a bargaining chip that you can use with the Canadian dealer during your negotiations. Some auto dealers in Canada, especially those located in border towns such as Surrey, BC, specialize in cross-border car sales, but just be sure their pricing is comparable with other dealers.

© 2020 Nolen Hart

Comments

Peggy Woods from Houston, Texas on December 27, 2020:

You have laid out some pros and cons of buying vehicles in Canada. Thanks for this in-depth look at doing so.