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Buying a Car from the U.S – The Pros/Cons and Process

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):

  1. 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.
  2. Find dealerships close to the border that sell your particular model and make sure that they will sell to Canadians (some will not).
  3. Negotiate your deal, pay deposit via credit card, get info for wire transfer along with the VIN.
  4. Get the dealership to fax the MCO or MSO to US customs 72 hours before crossing the border (returning to Canada).
  5. Obtain a recall letter from the car manufacturer.
  6. 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.
  7. 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.
  8. When you get home, fax the paperwork (MCO/MSO, recall letter) to RIV.
  9. Once you receive the go ahead from RIV (form 2), bring the car to get inspected to ensure that it meets Canadian standards.
  10. 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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FT About the author: FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.

{ 25 comments… add one }
  • Andrew July 27, 2009, 9:32 am

    I bought a Prius from the States a couple of years ago and saved $8000. This was when the Canadian dollar was a little over par with the US dollar. My basic comment is that savings really depend – on price difference, on exchange rate, etc.

    Andrew.

    editors note: please no soliciting business in the comments

  • Wealth Manager July 27, 2009, 12:25 pm

    Back in 07 I bought a Santa Fe – saved around $8k. The main thing to watch out for, and something rarely pointed out in this process is the issue of temporary permit (plates). Many people end up getting temporary US state permit from the dealer, using these to drive the vehicle to the border or even back home.

    When I did my research back then, I learned this is actually not legal and should you be in an accident your insurance claims could be void. The DMV in New York certainly wouldn’t issue one to me and warned me not to accept any offered by any dealers willing to do whatever to get the sale.

    The only proper way to do this is to get your temporary permit from your province’s issuing office and use these to drive your vehicle home (unless you’re having it transported by flatbed).

    The main problem with this approach is the fact that you may need two trips to the US dealer: one to pay for the vehicle and get the title and the 2nd with your temporary permit to drive the vehicle home. In Ontario (and I suspect other provinces) you need the vehicle title in order to get the temporary permit. The dealer I was working with in Rochester wasn’t comfortable doing the deal via couriers and electronic transfers. Luckily I only had 3hrs of travel to contend with.

    The only other thing to note is ensuring that your car insurance covers transport while in the US on a temporary permit. Not all insurers will cover this and in my case I needed to escalate to have a special condition on my policy. I can’t stress this one enough. As well, given the time lag between purchasing and picking up my vehicle, I also needed my insurance to cover the vehicle while temporarily stored at the dealer.

    That’s all I can add to this discussion. Overall I’ve been very pleased with the choice I made and the fact that I get a 10 year warranty vs. 5 in Canada with Hyundai is a nice bonus as well. Just ensure that you know up front what the policies are for warranty and also note this can change at any moment and you likely won’t have any recourse.

    Wealth Manager

  • Rob M July 27, 2009, 12:55 pm

    I bought a 32 ft trailer out of Michigan, and had it shipped to Calgary, Alberta. My cost after all fees (including shipping) was $10,254 less than the lowest price I could negotiate here in Calgary. Was it worth it? You bet!

    All those people thinking of purchasing from the states and travelling to get your vehicle should really consider shipping it. To ship the trailer clear across the country was $2000, to ship it 3 to 4 hours (as one person mentioned in the comments) should cost a fraction of that, and save you time, travel expenses, insurance hassles, etc.

    My savings on GST alone ($512.70) paid for the RIV fee, and $100 tax on the A/C with over $250 to spare (to help cover the transport costs).

  • FT FrugalTrader July 27, 2009, 1:25 pm

    Rob, when you shipped your RV, did the shipping company take care of customs etc? Was it delivered to your door, or did you have to pick it up at the border?

  • Henry July 27, 2009, 2:20 pm

    Here is my experience and my comparison about vehicles not made in North America:

    Mazda3 is made in Japan. It is either cheaper or cost the same to buy Mazda3 in Canada instead of US due Mazda’s competitive pricing in Canada and 6.2% tariff on cars made outside of North America.

    From my experience, Toyota overcharges its Canadian customers. My uncle bought a 2008 RAV4 brand new with the third row package in April 2008 for 20,000US!!! I have no idea how he negotiated the deal.

    In the case of Mazda3, it only makes to buy it in US if the Canadian dollar actually stronger than the US dollar where 1 Canadian = 1 US or more. Just due to the hassle or exchange rate issues, I would say buying Mazda3 in Canada is the way to go most of the time. Try to negotiate a better deal in Canada is probably the key thing in terms of buying a Mazda3.

  • charles July 27, 2009, 2:59 pm

    I bought a Lancer evolution in the US. Saved about 8500 even including a night’s hotel and gas to go and get it. This makes it off warranty, which I’m ok with.

    I think I would only go the US route for saving greater than 5K. It does take some time to get everything prepared. And it is worth being very detailed to avoid and problems when bringing the car back.

    Also, the savings tend to be greater for higher priced vehicles.

  • Craig July 27, 2009, 3:03 pm

    Both myself and my brother in law bought 1 year old higher end used cars in New York a couple of years ago, and saved about $12,000 on each car. Both Audi and Volvo honoured their warranties and in the case of the Audi no charge service was included to 80,000 klms (honoured in Canada). Temporary plates were on the cars when we picked them up, we were in transit so didn’t need to pay any New York tax. We’re both very happy with our cars and savings. Wouldn’t think of buying a car without checking US web sites.
    We also buy our tires in the states (savings are huge), try tirerack.com, you’ll be shocked at the price difference.

  • Jacqueline July 27, 2009, 3:42 pm

    I purchased a brand new Winnebago Aspect motorhome 2 years ago from a dealer in Vermont (I tested it out at a dealer at home first) and brought it back in to Alberta. It was very easy to do and I wouldn’t hesitate for a second to buy another vehicle (or motorhome) down in the US. I had to get a letter for no recalls just for the Ford chassis.

    Looking at purely the dealer sticker pricing compared to Canada, I saved about $30k+ including the 6% GST I paid (rate hadn’t gone down to 5% yet) and the exchange rate.

  • SilverEggplant July 27, 2009, 4:12 pm

    Does anyone know what the resale value on a US vehicle is? Are there less people willing to purchase a second hand vehicle brought over from the US? This should probably be factored into the decision as well.

  • Blah Blah Blah July 27, 2009, 8:11 pm

    I was flipping through your old postings after stumbling upon this site. Unfortunately, you are far from “rich”. You have a ton of debt of various flavors that will eat your “assets” pretty fast in the coming downturn. I have seen it. You are way more leveraged than most of the people I knew at your age (4 years ago).

    It’s funny to see how much Canadian’s attitudes have changed toward money – it’s almost like a mass mania now. Canada has always been sort of broke – maybe solid middle class at best. Funny to see everyone on “millionaire” journeys now! Ha!

  • Sampson July 27, 2009, 9:24 pm

    Wow! All the critics are coming out of the wood work. All that for deciding to buy a car?!?

    Can I have my horoscope read also please? Can some one see what lies ahead for me?

  • Tyler July 28, 2009, 1:58 am

    lol @ Blah Blah Blah
    Jealousy is awesome. Go short some stocks.

    FT,
    Good main post.

    Everyone else,
    Great followups.

    This site is exceptional and full of valuable information. It’s made me more financially conscience at my young age.

  • Henry July 28, 2009, 12:09 pm

    Tyler and Frugal Trader: I find Blah Blah Blah’s written in an offensive way. However, Blah Blah Blah’s point of leverage as another form risk is quite on the spot. I think Frugal Trader did the right thing of selling his investment property so he is less concentrated in real estate.

    Leverage is very dangerous unless there is some way of mitigating the downside risk. I highly recommend looking at this study for an idea of mitigating downside risk in the stock market by using SMA200. Simple and straightforward. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=962461
    There are other ways as well such collared positions, but I like SMA200 the best.

  • Ms Save Money July 28, 2009, 3:55 pm

    I just got my car over the weekend – 2009 Nissan Altima 2.5S.

    It’s Great I’m really excited about it.

    By the way – friend says you can buy a car in Oregon state for very low because there is no sales tax :)

  • Phi July 28, 2009, 9:59 pm

    If the amount of money you save is high enough, you should definitely buy it. You can always get a third-party repair warranty, and the parts won’t be much for cars like Honda’s. You probably won’t need many parts anyways.

  • RB @ RichBy30RetireBy40 July 29, 2009, 4:34 am

    Hey Guys & Frugal Trader, for what it’s worth, I’ve bought 8 cars over the past 10 years online here in the US on Craigslist. All in all, 15 transactions. I wrote about my experience on my blog here. http://www.richby30retireby40.com/2009/07/7-cars-in-10-years.html

    Best of luck!

    RB

    Rich By 30 Retire By 40

  • Bilbo Bloggins July 29, 2009, 3:21 pm

    Is the process simpler if you purchase a car from a private US citizen and the seller is willing to drive the car across the border to you?

  • Jordan July 29, 2009, 8:37 pm

    I bought a used Acura MDX from the US and saved at least $6k compared to a used vehicle hear. The the more important savings is our used MDX was was less then 50% the cost of a new model here. So don’t fool or rationalize yourself into buying a new vehicle just because it’s cheaper in the US then here, the used vehicles are cheaper still.

    We bought our vehicle on eBay, for this make sure you buy from a seller with good feedback, make sure it’s covered by eBay’s vehicle buyers’ protection warranty. Because of the warranty I think eBay is the only place to buy a used vehicle online.

    Our vehicle shipped up from Texas. Make sure you shop around a lot, there are a lot of shipping companies and the prices vary hugely. We paid $800 but got quotes up to $2000 for exactly the same service. Try dealing with an actual shipper, ask that they have their own trucks, otherwise you are most likely dealing with a broker who won’t really be able to guarantee delivery times. Also make sure the shipper has full cargo insurance.

    I’d recommend avoiding paying a company to import the vehicle for you, the process isn’t very hard and the company’s charge at least $1k to do it.

    Regarding a recall clearance letter Honda/Acura and some other manufacturer’s will also refuse to issue one to a Canadian customer! It is disgusting to me that they are abusing a safety policy just to try maintaining high prices in Canada. So you need the seller to obtain this for you before you get to the border. I also recall seeing an online company that would do this for you for a fee, but can’t recall at the moment.

    Also make sure you check with your border crossing ahead of time, because some borders are designated for vehicle imports, and others are not.

    Also be aware there is a $1000-$4000 “Gas guzzler tax”, I mean “Green Levy Tax” you have to pay when importing larger vehicles like SUVs that don’t get a minimum MPG.

    Like Wealth Manager said you need to get a temporary permit to drive the vehicle in Canada. In BC atleast you can get this ahead of picking up the vehicle with a copy of the vehicle’s title. The quirk is a temporary permit is only allowed to be used for a single trip, so we needed one to drive the vehicle into Canada. Then had to walk to the insurance office again for a 2nd permit a few days later to drive it to Canadian Tire for the inspection.

    Another thing to know is not all US vehicles are equipped with day time running lights, so when you get to step 2 of the RIV form where the vehicle is inspected at Canadian Tire they might fail you unless you have them hard wire the lights to stay on. Canadian Tire has a monopoly on this service so they really stick it to you, we got hit with a $300 bill.

  • fifi July 30, 2009, 12:53 am

    Bought a new Nissan Pathfinder in 07, dollar at par at the time. I made sure that it was made in North America first, since I was told that some Nissans are made in the US, others are imported.
    Picked it up in Great Falls, MT, live in Calgary. No sales tax in Montana, saving some hassle. After all expenses, and of course negotiating over the phone over a few phone calls, ended up saving $14,000. I did a lot of reasearch myself to make sure I knew what I was getting in to (mostly w/ RIV), but the dealership in Montana was very used to doing these transactions with Canadians, and basically held my hand as I walked through the process, and basically just handed me an envelope to give at the border when I am crossing back.
    Find a dealership that has experience with cross-boder sales, and hopefully, like in my experience, they’ll be happy to walk you through it all for the sale.

  • Ms Save Money July 30, 2009, 6:09 pm

    Bilbo Bloggins – if that was the case and the person drove the car up for you – just a teaser but are you going to drive the person down afterwards? haha

  • Future Money-Bags July 31, 2010, 8:32 am

    When looking to buy a 2nd-hand car privately (or from dealer), I stay away from out-of-province or out of country cars. These have hidden problems that were not noticed by inspection and depending which province, could have a lot of rust and water damage.
    Sometimes cars have been in floods and driven through salty roads for years, and still do not show any damage, but one day it all comes out and costs you 1000’s.
    I just read a post on Squawfox about buying used cars, its a great read and goes to show that anyone can benefit and learn something.

  • CommonSenseAnUncommonVirtue July 31, 2010, 11:39 pm

    Future Money-Bags,

    Buying a used vehicle from a reputable US or Provincial dealership and demanding they provide a ‘Car-Fax’ listing the history of the vehicle prevents the majority of these sorts of issues. Any decent salesperson will provide you with the car-fax on the vehicle once price has been agreed upon, often without your requesting it. It costs the dealership next to nothing and is figured into their in-house inspection and turn around costs.

    You can also take the vehicle for an independent inspection after signing it out of the dealership for an extended test drive (if your credit is good enough)…any decent mechanic will be able to make an inspection inside of an hour for glaring mechanical issues or body/frame issues. The cost for an hour of shop time is minimal, the potential savings in time and frustration alone…too large to measure.

    As for corrosion via salt…many States do not salt their roads…so you can always request that you are shown something that was taken in trade by the dealership, rather than something they purchased from an auction. Still get the car-fax, to make sure the car was not sold to the dealership after the former owner moved in from out of state.

    One comment on the thread itself…a truly wise Canadian looking for a used vehicle would be better served in doing a little more research, getting a listing of the same used car auctions that the US dealership personnel frequent and saving that much more money.

    You can order car fax’s on vehicles you wish to bid on via your laptop w/ wifi…You’ll have to pay for a shop to inspect the vehicle and fix any minor issues (assuming the vehicle as originally equipped is already up to Canadian smog and road safety standards)…As well as likely having to take it to a detail shop for thorough cleaning/touch up painting…but the savings are still an order of magnitude greater.

    As in much of life, the best ‘deals’ and the best ‘luck’ go to the harder and more intelligent worker. The lazy get gouged, regardless of which side of the border they live on.

  • Rob M August 4, 2010, 5:33 pm

    Frugal Trader,

    In response to your query from over a year ago (sorry, didn’t come back until just now)…

    Yes they dealt with customs, had the recall letters etc (they shipped to Canada on a regular basis), and delivered it right to the location requested (I didn’t want it at my house). To top it off I paid $25 for CDN tire to inspect it on my location (instead of theirs) so I didn’t have to move it around town. They covered the plate for the trip as well.

    As for the person that said that CDN Tire has a monopoly on the service, they don’t. In Calgary I know that Stampede Lexus/Toyota also does the inspections, and you can have the “repairs” to enable the daytime running lights done anywhere, you just need to have the inspection done by a RIV certified shop, of which CDN Tire is the most prolific.

    Rob

  • Phil December 29, 2011, 4:01 pm

    I have a question if anyone can answer it

    Looking to purchase a Infiniti Corporate demo (title is on MSO) and hence does not appeared to be titled as of yet although the dealership says it is a ‘used” vehicle as it has 9500 miles on the clock

    Do I need to first register the vehicle in USA to ensure warranty is transferable to Canada, or is there any way around this. Otherwise I end up paying local state taxes only to import to Canada within 24 hours

    Infiniti Canada states the vehicle needs to be registed in USA first of all

  • shah January 12, 2013, 12:36 pm

    Hi Guys,
    I am looking for Toyota Sienna 2013,
    can you suggest a dealer information that can sale car to canadians?

    also, whom should i contact in governments if i wants details for car transfer?

    thansk

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