Use Broker When Importing Cars From The U.S. And Watch Out For Car History

Canadian consumers might see slight savings and more options if they buy a used car imported from the U.S., but they need to do their homework and use a reliable broker to avoid getting tangled in licensing and service issues before signing up for an American car.

The rising Canadian dollar has made buying a car in the U.S. cheaper for Canadians, who have been throwing fistfuls of their increasingly valuable money into all kinds of U.S. goods, from clothing to books to luxury SUVs.

Recent reports say Canadian auto dealers across the country have raised their imports of used U.S. vehicles to cash in on growing demand in Canada and the cheaper acquisition costs stemming from a strong loonie.

But buying a car in the U.S. involves a series of potential pitfalls — including licensing issues and border hassles — especially for individuals who decide to go it alone.

Bruce Cran, president of the Consumer Association of Canada, said he has been receiving complaints about some dealers bringing “lemons” deemed unfit in the U.S and selling them for twice their value in Canada.

“They’ve got pretty rigid `lemon laws’  (in the U.S.) — a vehicle can be declared a `lemon’ if, for instance, it’s been in for repair three times and it can’t be fixed,” Cran said.

In such cases, companies auction off the cars, selling them to dealers who sometimes don’t declare their “lemon status” when they drive them across the border.

“The theory is that they should declare that they have been a `lemon’ in the United States, but we’ve had many complaints that this wasn’t known,” he said.

Nick Izzo, who runs family-owned Superior Auto Sales in Hamburg, N.Y., near the Buffalo-Niagara airport, agrees that research is key, saying any customer who isn’t going through a brokerage like his should get a complete history of a vehicle, because some dealers deal in salvage and flood-type cars and trucks.

He said about 80 per cent of his business is selling used and new cars into Canada, and he expects that to continue to “be a big deal as long as the dollar says at par.”

“Individuals are doing it but your Canadian government’s (Department of Transport) is making things difficult with getting cars registered,” he said.

Superior helps consumers find the car and do all the paperwork needed to get it across the border, right into an office in Oakville, Ont., where they can pick up the vehicle.

“That way they’re dealing with a Canadian company (so) they have some recourse … if they have a problem with the car,” Izzo said.

The type of savings, he added, will depend on the value of the car.

“If it’s a really expensive Porsche, they’re saving thousands, up to maybe $10,000 on a car. If its a Camry SE, it’s a better deal to buy it in Canada right now because it’s not as big a saving,” Izzo said.

Companies are increasingly getting into the fray, with firms like AutoCanada Income Fund (TSX:ACQ.UN), a publicly traded franchised auto dealer income trust, expecting a larger portion of their used cars in 2008 coming from the U.S.

“We do anticipate bringing in some more American cars,” CEO Patrick Priestner said. “Our 20 stores will be bring in more U.S. cars, and I suspect other guys will as well.”

Consumers, he said, have begun expressing some interest in those cars, because they “get a slight savings on the vehicle, plus they get more inventory that they might not find here,” he said.

The Consumer Association recommends using a broker to make the purchase, since such dealers will take all the responsibility for getting the vehicle and provide a price quote up front.

“That’s really what you want in the end; you don’t want the hidden funny business in there that you don’t know about or may not want to deal with,” Cran said.

The Registrar of Imported Vehicles is also an important resource to make sure the car meets all the required safety and environmental standards, he added, while the Canada Border Services Agency now runs classes about how to bring a vehicle into Canada.

Data from the Registrar of Imported Vehicles released in November showed Canadians imported more vehicles than ever in 2007 from the U.S. They brought in a record 137,000 new and used vehicles through October as the loonie overtook the slumping greenback at the very end of September. Most of the vehicles imported from the United States are used.

The previous year, Canadians imported 112,826 vehicles from the U.S. At home, the high loonie is prompting some price decreases, but the strong currency also means less money for those customers with expiring leases, since vehicles have a lower value at the time of return.

“They’re finding that the leasing agencies are valuing vehicles at a lower price than they expected,” Cran said.

“If you got a vehicle on a lease, and when you return it you’re expecting to get $15,00 credit for it and you only get $10,000, you’ve got to find another $5,000. That’s the biggest single complaint we’re getting at the moment.”