Filed under: Car Buying, Government/Legal
Automakers to face $2B class-action for Canadian price discrepancies
A few days ago we posted on the price discrepancy between identical vehicles sold in the U.S. and Canada. The discrepancy was always there, but became apparent when the value of the Canadian Loonie reached parity with the U.S. dollar recently. It was then that consumers couldn't ignore the fact that they were paying more for vehicles than their U.S. neighbors, up to 38% in some cases.
The Toronto-based class-action lawsuit firm Juroviesky and Ricci is taking up the case and expected to file a $2 billion class-action suit on behalf of four Canadians who feel that they paid more for their cars than they would have in the U.S. The class-action suit is open to any Canadian consumer who bought a new vehicle between August, 2005 and August, 2007 when the Canadian dollar was rapidly appreciating, but the prices of Canadian cars weren't adjusting.
Thanks for the tip, SS3!
[Source: Canada.com, photo by KAREN BLEIER/AFP/Getty]
The fact that cars cost more in Canada is hardly new information, and many Canadians simply cross the border and buy their new cars in the U.S. The class-action lawsuit, however, also charges that automakers conspired to inhibit this practice by making consumers sign "no-export clauses" preventing them from returning to Canada with their cars, as well as refusing to perform warranty work on cars purchased in the United States. Even dealers have gotten caught up in the mix, with U.S. dealerships allegedly being penalized for selling cars that were later exported and Canadian dealers threatened with termination if they didn't comply with these practices.
The lawsuit also names the Canadian Automobile Dealers Association and the National Automobile Dealers Association in the U.S as defendants. Cases like this have been brought up before apparently, but have been long, drawn out affairs with little ultimate effect on the issue at hand. With the Loonie and US dollar at hovering around parity, however, the discrepancies are now shockingly apparent.
Reader Comments (Page 4 of 4)
Hooper 8:41PM (9/26/2007)
I'm sure Canadians feel the same way about the U.S. as many of us in the U.S. feel about Mexico.
alex 6:16PM (9/26/2007)
This is ridiculous. To Canadians, cars don't cost any more than they did 4 years ago. It's just that the way the currencies have changed value, the car companies now have a higher profit margin. why must they be forced to share more of that margin with the Canadian public? If a company improves its cost structure and it yields a larger margin, should they also be forced to lower prices?
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tankd0g 10:35AM (9/28/2007)
Canadians were getting ripped off 4 years ago too. Sorry but if we have to live with this stupid NAFTA bull**** then it has to work both ways. If a manufacturer is going to jack up the price in Canada AND restrict Canadians from buying in the US, then no more using cheaper Canadian manufacturing to make those cars in the first place I say.
Bubba 6:32PM (9/26/2007)
The issue, in my opinion, is not that Canadian auto prices have not dropped alongside the relative worth of the greenback. That's all to do with foreign exchange, and can't be blamed on automakers.
I have a real issue, however, with the fact that automakers have taken steps to penalize Canadians who attempt to purchase a car in the US. Not honoring warranty, threatening US dealer franchises and withholding recall clearances are just a few examples. I think the relative "fairness" of these tactics is a perfectly valid topic for debate in a court.
I welcome the profile this brings to the situation....
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Zerk 7:00PM (9/26/2007)
Which automakers?
SPG 7:05PM (9/26/2007)
Not only are cars more to purchase new here but cars hold onto their value much more.
2000 Alero in Canada is usually 7 to 9 grand.
In the USA it can go for as low as $3,500.
It's a huge hassle to buy in the USA and bring a car over.
Belive me, I considered it.
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tankd0g 10:31AM (9/29/2007)
They aren't depreciating any less in Canada, they just started at a higher price.
SPG 4:34PM (9/29/2007)
I have taken that into consideration.
When you look at the resale for vehicles in general the depreciation is greater in the USA to Canada.
Convert to market price, currency rates, average resale.
captain underpants and the bringdown gang 7:18PM (9/26/2007)
Things always cost more in canada than they do in US near as I can tell the reason why they do that is because the sheer volume of cars that are sold in US is much higher.
Additionally they can get away with it.
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Zerk 9:16PM (9/26/2007)
hey captain diapers, do you fail to realize that cars in Canada have been less expensive than in the US for the majority of the past 10 years. Things always cost more in Canada....hmmmm.....nope.
Jonathan 10:33PM (9/26/2007)
The point is less about whether or not a car costs more or less in the United States, or Canada based on currency valuation. The USD has lost ground against most of the major currencies, Japanese Yen, Euro, British Pound. As a Canadian I shouldn't be questioning why we pay more for a car, note that if one does the math Europeans pay more for the same cars than we do, it is why auto makers have not increased prices in the United States. As US currency has hit rock bottom, cars not only cost less in the United States, the Big Three pretty much give them away while complaining about lagging sales, and overhead costs.
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Joe 9:04AM (9/27/2007)
Will these lawyers give back their legal fees when the Canadian dollar drops and the prices are lower in Canada than the US? Or will they just sue south of the border.
I'm all for consumer pressure, but do we really want every price in our society indexed to the greenback? Why not just switch to using it then?
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Quote the Raven 11:23AM (9/27/2007)
Not to be over simplistic, but why does anyone feel the have a "right" to tell a company how much they can charge someone for their product? If they want to charge 700% in Canada what law prohibits this?
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tankd0g 10:37AM (9/28/2007)
In theory the free market would prohibit charging 700%, however cars are not flip-flops at Wal-Mart. For the same reason gasoline is essentially the same inflated price no matter where you buy it, so are cars. If Toyota for example decided to double the price of their cars in Canada AND prevent anyone from buying outside Canada you'd think that Toyota simply would not sell any cars. However, these are cars, necessities in modern life, especially in rural Canada, all the other brands will see this increase and the potential profit and raise theirs to follow suit, it's not a cooincidence that all cars in the same class come in around the same price point regardless of what the cost of manufacturing is. This is why you don't see any manufacturer in Canada undercutting the rest. Left unchecked the price of cars could keep climbing until they find a point where no one is selling a car anymore, then they roll it back $100. This doesn't happen in the USA because there is such a glut of cars available to sale, the 2.8 are practically giving them away, or rather they can't even give them away. Class action lawsuits like this, while seemingly pointless, serve to raise awareness of what is going on, and keep the manufacturers somewhat honest. As this gets more press, no one wants to be singled out as the biggest price gouger of the bunch.
titan 2:53AM (9/29/2007)
I bought a car in late 2003. Two years later a redesigned and improved model was cheaper. That sucks when you've got a slightly used car and you know the resale value is only 33% of what you paid for it because due to the exchange rates the new version is only 66% what you paid (and still owe) on your car.
If the car makers wanted to they could adjust prices, but there is no indication this dollar parity is permanent so it's good they're providing a bit of stability.
BTW a McBurgger is $1.40 CDN vs. $0.99 US still. Better sue every multinataional company and require all Canadians to take a pay cut.
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tankd0g 10:31AM (9/29/2007)
Does McDonald's stop you from buying a horse-burger accross the border?
Tandara 1:10AM (9/30/2007)
"I think the whole point of the litigation is that the automakers imposed certain rules that prevented that free market from developing. Will you buy a new car with no warranty? Most likely not. So the automakers decided to void the warranty so that the Canadians wouldn't buy cars in the US."
Exactly! If Canadian cars were priced higher, fine, people would just go down to the US if they wanted, but the problem was that they were priced higher artificially, and that discrepency was supported by discriminatory rules set in place to make buying a car from the US and importing it something people wouldn't want to do, and therefore be forced to pay the extra 30%.
Again, voiding a warranty because someone takes it across the border is shady. Honestly, why would something like that justify no longer supporting the vehicle? Escpecially when the vast majority of cars are identical north and south of the border.
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