11 Reasons Why We Pay Up to $15,000 More for a Car Than Americans.
Shopping for a new car in Canada often means paying thousands more than our neighbors to the south for the exact vehicle. And it’s not just a few hundred dollars— the average price gap can exceed $15,000.
Top Reason: Blame it on a combination of Canada’s official policies, import taxes, market size, and industry practices that work together to keep Canadians paying more for cars.
Let’s begin with:
1. Import Duties and Tariffs.
The Canadian federal government imposes a 6.1% tariff on vehicles imported from outside North America, which immediately adds thousands to the base price. This affects many popular models imported from overseas.
2. Smaller Market Size.
Canada’s population is roughly one-tenth the size of the US, meaning Canadian car manufacturers sell fewer vehicles than their US counterparts. This increases the cost per vehicle, as manufacturers cannot achieve the same economies of scale. Additionally, Canadians miss out on discounted pricing, manufacturers’ incentives, and special financing offers.
3. Exchange Rate Variability.
When the Canadian dollar strengthens against the US dollar, one would expect car prices to decrease; however, this rarely happens. Why? Canadian automakers set prices based on long-term exchange rate predictions and are generally reluctant to adjust prices when our currency appreciates.
4. Federal Luxury Tax.
The government imposes a luxury tax on vehicles priced over $100,000. This adds 20% on the amount exceeding that threshold or 10% of the full vehicle price, whichever is lower. While this primarily targets high-end cars, it also applies to electric vehicles and premium SUVs that are popular among Canadian families.
5. Provincial Sales Taxes.
Sales tax rates vary between provinces; for instance, Ontario has a 13% rate, which adds to the cost of vehicles. In comparison, five US states charge no sales tax at all, and many others charge significantly less than 10%. Even in high-tax US states like California, the combined sales tax rate maxes out around 10.25%.
6. Transportation and Logistics Costs.
Canada’s vast geography and lower population density make vehicle distribution more expensive than in the US. Severe winters also require additional preparations for vehicle transport and storage. Automakers factor these higher logistics costs into their prices.
7. Regulatory Requirements and Safety Standards.
Transport Canada enforces different safety and equipment standards than the US, necessitating modifications to vehicles intended for the Canadian market. These changes may include different daytime running lights, immobilization systems, and metric-only speedometers.
8. Limited Cross-Border Shopping Options.
Our federal regulations discourage us from buying a car in the US and bringing it home by adding layers of fees on top of the vehicle’s price. This includes the Registrar of Imported Vehicles fee, GST, provincial taxes, and potential modifications to meet Canadian standards. The process also involves extensive paperwork, inspections, and alterations that can cost several thousand dollars.
9. Dealer Markup Practices.
Canadian dealerships often add significant markups above the manufacturer’s suggested retail price, particularly for popular, in-demand models. While this also occurs in the US, Canadian dealers, who are fewer in number than in America, face less competitive pressure and therefore have no motivation to tweak their prices to attract buyers.
10. Warranty and Service Cost Differences.
Warranty programs in Canada may incur higher administrative costs due to the harsh winter climate and challenging road conditions. Vehicles experience more wear and tear from road salt, extreme cold, and temperature fluctuations, leading to increased warranty claim rates.
11. Canadians Are Not Demanding Enough.
Lastly, Canada’s famous politeness is not very helpful when it comes to car shopping. Manufacturers have historically seen little pushback from Canadians on pricing, leading them to charge what they will.
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