The title says it all.
I’m an American living in Canada and have wondered why such a difference in price.
Then I saw this article Canadian car buyers blocked from cheaper U.S. prices | CBC News
Which prompted me to go get some straight dope on the matter.
To further the question is this type of pricing the same in Europe. If I buy a Renault in Germany is it more expensive that the same one in France. Well maybe that wouldn’t be a great example. How about the same Ford made in Germany and purchased in France.
I wish it was just cars! Here’s a nice overviewfor what is a widespread problem.
Yeah, the short answer seems to be that nobody really knows. Between 2000 and 2010, the Canadian dollar went from being worth about 65 US cents to being on par or even worth slightly more but prices on most goods (including new cars) never fully changed to reflect that. Most Canadians I’ve talked to about it have various theories about who and what’s to blame, but there really doesn’t seem to be much of a consensus and the impression I get is that it really is a bit of a mystery for economists.
Of course, one big part of it may be that some things have simply always been more expensive up north because of issues with it being a small market (with weird bilingual and metric packaging requirements), big geographic distances, etc., but it wasn’t quite as glaringly obvious how much cheaper things were in the US when the currencies weren’t so close together in value.
As it happened I just heard on the news yesterday morning a question of why Canadians cannot buy a car in the US and import it (and pay the sales tax). The claim, for which they had at least evidence, is that the manufacturers had combined to make it “illegal” (under pain of losing their dealership) to sell to Canadians.
That must be a regional thing. Lots of Canadians buy cars in the US and bring them in. I’d venture to guess that 10% of the cars here (Calgary) are from the US.
Well, it looks like Canucks buying new cars in the USA is at least strongly discouraged. I have a FOAF story where friends of my Snowbird parents were going to buy a car in Florida and drive it home when they returned in the spring, and they allegedly got turned away (using the line Hari referred to) when they told the dealer what their plans were. So they just started saying the car was for use in Florida and all went well!
There are substantial price differences between countries in Europe in spite of it being a “common market”.
Cars, like many other things, cost more in Spain than in the rest of Europe, even if made in Spain and even though salaries and standard of living in Spain are quite a bit lower.
My explanation is that it is a combination of high taxes and low efficiency/productivity. I have seen this in other countries too.
You can buy a pair of Chinese-made sneakers cheaper in America or Europe than you can in China. Why? Because making them is a small part of overall cost and transport is relatively cheap but if your distribution system is inefficient then you end up paying more. It is cheaper to buy a container load of sneakers in china, transport them to America and dump them at a Kmart than to have a long chain of Chinese people involved in the distribution and sale.
In Spain everything is expensive because the general productivity/efficiency is low and taxes are high (which is part of the low productivity part). Everything is expensive and the cost is passed on to the next customer in the chain. Real estate is expensive, energy is expensive, phone/internet is expensive so when you buy something you have to factor in all the expensive cost that went into it. Taxes are very high. Taxes on labor, Sales (VAT), etc. If you buy real estate the tax is just staggering. All this discourages economic activity.
Even if you buy a car outside, it does not matter because you still have to pay VAT and registration tax. You might save a few euros but it is trouble and probably not worth it.
So, yeah, things are more expensive because when you buy stuff you are paying for “free” health care, and many other “free” things and for the general low productivity of the local economy.