Why do Ferrari Prices Discriminate Against Canadians?

As the value of the Cdn $ appreciates, one wonders if the price gap between a new, US bound Ferrari (eg., the 458 Italia) and a Cdn bound Ferrari will narrow -- as it should? But some speculate Canadians will continue to be screwed.

An example: The MSRP "base price" sticker for a new 2004 Challenge Stradale sold in the US was $187,124 (before any options costs, destination charges, taxes). The same car, sold in Canada, had a MSRP base price of $284,258. The Canada car cost 1.51 more than the US car. And yet, the average US/Canada exchange rate for 2004 was 1.31, ranging from a low of 1.17 to a high of 1.41. Based on exchange rate differences, and the average of 1.31 for 2004, the Cdn Stradale should have had a "base price" of $245,132. In other words, Canadians seem to have been duped of another $39,000 for no apparent reason. A question: who's behind duping Canadians, what is their rationale, could they be made to pay back the difference?

 

Some or all of these factors may or may not matter.............it all depends on any given day and who is in power, both in the country of importation, and in Maranello. The key words are "there may or may not be differences"...........

1-There may or may not be differences in the hidden or openly declared taxes and duties (if any) applied by the various governments from time to time.

2-There may or may not be differences in equipment levels (mandatory options or safety features) for cars destined to be sold in different markets (countries) that affect the final delivered price.

3-There may or may not be sufficient currency hedging taking place either here, or over there, to account for differences in price due to sudden swings in the forex situation. Everyone involved at the manufacturers and importers level makes their best educated guess for the forex situation when the upcoming years MSRP is released and hopefully they can live with it for the next 12 months. Sometimes they cannot.......

4-Finally, and IMHO this is really it, you always have the situation of volume and demand that comes into play and how much market share you want to keep, or give away. To wit, Canada is nothing to Maranello in the overall worldwide scheme of new Ferrari sales..........we are but the proverbial drop in the bucket. Whereas the US is one of their biggest players, or close to it. Who do you think has the most pull, the small market or the big one ? Keep 1,250 US clients happy and mildly (if at all) annoy a handful of Canadians.......it's a pretty easy call. Ferrari here easily sells each and every new car they get which is about 100 a year IIRC (someone please correct me on this number)........so people are not so upset that it is keeping them from writing the cheques, and the powers that be really don't care that you are.

There is nothing you can do about it except buy a used car wherever the price is best.

 

Taxes
Government
more taxes

 

6.1% import duty off the top will start the ball rolling and don't forget the Canadian dollar has fluctuated anywhere from 0% to almost 20% in recent memory....

 

you forgot this one ----> even more taxes

 

The 6.1% import duty is on cars sold in the US coming into Canada. Is there some independent 6.1% import duty on new cars that originate in Italy and come directly to Ferrari sales outlets in Canada? Put differently, do MSRP prices in Canada include an import duty above and beyond import duties that are included in US MSRP prices? I wouldn't think so.

 

supply & demand, just like Keith says. Everything else is just wiggle words.

same as with books, magazines, bike parts...

 

A thoughtful answer Kds; thanks. If prices for the 458 Italia are considerably higher in Canada than the US, after adjusting for exchange rates, more buyers may be incentivized to buy across the border -- assuming they can get a car at MSRP or a nearly new one at MSRP. A 6.1% import tax on a US car plus some small travel and compliance costs will surely be way less than some bogus overcharge of $35-50K higher than US prices. And I'd say that many more Cdn buyers are becoming more savy, and less reluctant, to get excellent deals in the US, bring them into Canada. I've done this myself and its suprisingly easy as long as one prepares well in advance and gets all the required ducks in a row.

 

no compliance costs except daytime running light modules which is $3-$400 depending on the dealership EXCEPT unless it has a cluster like the Enzo and in that case it's $7000.
But theres no way you're going to get a 458 at msrp for AT LEAST 6 months!

 

Shawsan.....

6.1% is payable, and built into the price of the new cars MSRP if they were built in Italy, Germany, UK, Japan, et al, when they are imported into Canada. The same duty is also payable on a used car not built in Canada and imported from the US. 15 years old gets a free pass except for GST/HST.

This is one reason why the Japanese build new cars in Ontario.

Raw Tubor......

You'll never get a new 458 from a US dealer if you are a Canuck, unless you have a US driver's license and can register the car at your valid US residence which will be located in their franchised trading area. You can always buy a used one at a hefty markup though........and import it. 'Tis the game that is played.....we'll see how the economy changes that....if at all.

 

That is certainly not true. You pay duty of 6.1% on all cars not covered by NAFTA. The 15yr rule allows anything in and you skip the RIV process.

 

Is the 15 year rule still safe? Some suggested that it would be increased to slow the import of old cars.
CH

 

The Canadian Gov't has a long history of screwing its citizens. Why do Canadians pay more for gasoline from oil wells located in Alberta than the US pays for Canadian oil and gas? Canada is not an importer like the US yet if you cross the border to filll up your tank you will pay less at the pump in Detroit than in Windsor.
Heres another one. Heinz has a huge processing and botteling plant in Leamington Ont. just outside Windsor. Yet even in Windsor Ont. you pay more for a botttle of Ketchup than you do in Detroit. The culprit ...... Taxes and more Taxes to pay for the huge social safety net that every Canadian believes is his god given right. I'm a dual citizen and have spent 30 years of my life living in Canada. There are many things that I appreciate and admire about Canada. But its tax structure has never been one of them.

 

+1 Just imported my 93 SS and Yes I still paid the duty's.

Cheers

 

There are two different issues here. The government screwing us with taxes and duties and the price of the imported goods. The first is part of a socialist country and is unavoidable. The latter is a global currency issue. It takes years for the price of goods to adjust to the massive currency swings. There are exceptions and gouging can occur. Wait until the Canadian dollar goes to 1.20 to the US$, but where will the Euro be vs Cdn$. IMO, Ferraris are underpriced in the US as much as they are overpriced in Canada. Remember, years ago Americans were buying up Canadian vehicles and taking them South. That had nothing to do with supply and demand, it was the rapid increase in the US$ that created the arb opportunity. Since there is a significant lag, we will see prices slowly drop in Canada and rise in the US, though suppressed by their economic situation. Manufacturers are very slow to adjust. One exception is Harley, they adjust their prices twice per year to reflect the exchange rate. Although there is still a six month arb lag.

 

My mistake..........duty is not payable on cars over 25 years old. I knew that too, don't know why I typed 15 years.

Not trying to be argumentative......

But it has everything to do with supply and demand. Manufacturer's always price their products to retain the demand in their strongest markets first, often at the peril of the other much smaller markets. I'll never forget our annual dealer meeting with Porsche in 1993 during the recession and in which time the exchange rates moved around quite a bit against us in the 2-3 months leading up to it.......to wit, and I quote......."we are givink ze US 10,000 of zis 911 at zis price, wit zese options"........howls of rage can be heard around the room from the Canadian dealers......."zo, you guyz are gettink 100 of ze 911 at zis price wit zese options for der yearh, or you can have ze carh at zis special unt much lower price, but ve vill charge you zis much for all dose new options we created"...........howls were again heard around the room.

Sorry for my German.

 

No problem,
I did not mean to imply that supply and demand has nothing to do with price, but I was referring to a particular instance. S/D plays a factor, sometimes very minor. In the late 90's all sportbikes were cheaper in Canada than the US, even with low demand here. I contend that relative lag time combined with the speed of currency fluctuations usually play a greater role in price differential. That is of course a general statement and may not apply in all situations. Many foreign manufacturers forward hedge the currency and cannot adjust prices for years out. I bet they are using a 0.78 cdn dollar now while we are at 0.96. We will see some great arb opportunities going forward.


Great vid, I don't know how this guy got on the Clown Business Network though

"Federal Reserve needs to cut US Dollar in half over next 14 years"

http://www.youtube.com/watch?v=0-ZZFmKFk1s

 

True.......

Porsche was not hedging at the time of my story..........a big mistake. Luckily we as dealers guessed right (took the cheaper cars but with the potential to order the expensive options) and we had a great year.

 

canada is a smaller market. BMW's are also more expensive in Canada than the US, as I expect are other brands. Same thing happens with the price of airplanes.

 

The question of a Canada vs USA price discrepancy was specifically asked by a Canadian journalist when the new Lamborghini 560 convertible was introduced. The official Lamborghini answer given at the press introduction was "we look at each market individually when pricing new vehicles". "The price in one market has no influence on our price structure in a different market".

There is another more subtle historic reason for the consistent price spread. The manufacturer is reluctant to lower prices for new models to maintain the country to country price spread. If new car prices fell sharply it would alienate customers who paid the premium price to purchase a new vehicle in their home market. It would also destroy historical inflated resale values. (the 355 market premium here is about to feel the import heat) Why else would car makers use the required for importation 'recall letter' as a weapon to discourage the importer rather than provide it as a service for a nominal fee to the importer?
Further the dealer feels he is justified in charging a higher shop rate for work performed on a privately imported vehicle. The vehicle that was sold new in the home market would be billed for work performed at a lower rate than the imported car for the exact same service provided.
CH

 

Ballpark numbers, just one example

A new US 335i sedan M package in US$ is 45,000
A new CDN BMW 335i sedan M package in CDN$ is 55,000

If you account for duty thats 52 cdn vs 45 us. Now for currency differential. Its equal to an 0.87 dollar. Not bad considering the CDN dollar run up recently.

At todays exchange rate thats 45 x 1.052 = 47.34 in CDN$ for the US car. A 4600 dollar difference. Had the Canadian dollar stayed at 0.87, it would be even. Nothing to do with supply and demand, its all currency fluctuation and adjustment time delay, at least in this case. I bet BMW hedged at 0.87 or thereabouts.

 

USD price X FOREX at the date of export (not purchase date, ergo another small risk thanks to the CBSA in a fast moving environment on a big 6 figure car "and" you also don't get the quoted forex rate, you pay the bank's stated rate, which has another 1-2-3 cents of profit built in for them. I bought $3MM a year when I had my car business, so I negotiated a special rate that was much better than John Q Public, but certainly not Donald Trumps rate) X 6.1% duty on that figure +.......AC tax, out of province inspection/certification fees.....RIV fees......broker fees......PPI fees......CARFAX/CARPROOF/etc.......bank wire trf fees......truck freight of $1,500-$3,500 and/or personal out of pocket transportation costs, lost wages, hotels, food, taxis, etc, if you fly down and drive back which can be $1-3K (not worth it IMHO when you are doing 100 cars a year and 75 are from the US), as well as the cost of money while the car is in transit for 3-6 weeks, as well as conversion for DRL's, etc. It pretty much equalizes it "most" of the time. The $4,600 difference is gone.

So......$45,000 USD x 1.072 to reflect that x 1.061 + + + fees = roughly $55k CAD +/- GST/HST if you pay someone to bring it up for you......and pretty much the same if you do it yourself. All depends where it is located obviously. If you live in Windsor and it is in Detroit, or Montreal/NYC you save $1-2K by doing it yourself.........for example.........if not, it's almost the same.

Whereas on used cars......it is a whole different story as it becomes a matter of condition, condition, condition, plus all of the above.

 

The official Lamborghini answer is propaganda. However, you make a great point. They are reluctant to lower prices not only fearing alienating customers but messing up lease residuals. I have noticed a recent trend with many auto lines in Canada. They retain the high MSRP in face of a rising currency and offer huge $ back rebates for cash near year end. The business model is to make the profit on finance and lease transactions at the higher MSRP. So, MSRP becomes less meaningful for cash transactions, this leads to a faster depreciation cycle. The Yen and the Euro have been rising against the US$, so how long can they keep the price of those Autos down in the US. One thing for sure, there is no simple explanation and one variable that explains this. Asian central banks just bought US$s to goose it and keep their exporters profitable. A form of Gov subsidy for exporters. It is not a true capitalist market system ie supply and demand, but a system of convoluted arb, gov subsidy and corporatism.

The dealers screwing customers who import is just a pathetic attempt to make the arb more uncomfortable.