Buying a New Set of Wheels

With 2 squirts making a family of 4, our little Toyota Echo is getting cramped.  Pretty sure I won’t be able to fit a set of golf clubs in there anymore.  With the better half on maternity leave, this leaves us at an economic disadvantage.  To sum, we need something bigger and we need to pay very close attention to the price.

Given that we both enjoy the outdoors and that our eldest seems to feel the same way, we’re more or less road warriors.  That means cargo space + fuel efficiency.  I have a dislike for mini-vans, in that 90% of the time you’re in one, it’s just wasted space and therefore wasted fuel – even with a variable engine.  There’s certainly a stigma attached to it, and if memory serves, actual mini-van sales are on a crazy decline.  SUVs, in general, are giant pieces of crap.  They are often put on car frames, let you load up on passenger space but provide less cargo space than a box of donuts.  Plus their fuel efficiency is horrible, they drive poorly (due to the perceived notion that farther from the ground = better) and they are priced way above value.  All that to say we boiled it down to two main options – Subaru Outback or Golf/Jetta Wagon.

Being Canadian, our pricing structure is special like a snowflake.  Market value is based on suggested retail value (MSRP) and no one knows the invoice price (unless you pay for it, like CarCost).  This means you’re negotiating at an artificially inflated price with all the power in the salesperson’s hands.  The US market by contrast, provides invoice pricing to the public, giving them more negotiating power.  This also means that they are more options (trim if you will) when it comes to a given car.  In Canada, there are 5 variants of the Outback.  The US has at least 10 that I’ve found.  In the end, we found out that there’s essentially a 20% markup in Canada.  When you’re looking at a $30K+ vehicle, this isn’t chump change.  Another nice thing to consider is that the warranty coverage is usually the same in both countries.

One final caveat.  If a car is manufactured is not manufactured in Canada or the US, then you pay a 6.1% tariff on cross-border purchases.  The Golf/Jetta is not made here or there, so I’d have to pay.  The Outback is made in Indiana.  That’s ~$2000.

Now we get into the math and my love of spreadsheets.

If I buy the Outback here, the MSRP is about $34,000.  If I buy it in the states, the invoice price is $27,000.  I’ll be charged 200$ at the border to transfer the vehicle.  I won’t pay the state tax due to not being a resident but I will be charged the HST once I come back home.  I would pay HST here too.  Subaru is currently offering a 1.9% interest rate for 4 years.  Buying in the US means cash only and the bank is looking at giving me ~5%.  The Canadian dollar is at par (or better) lately, so that comes out more or less a wash.  Tabulate all that together and we get.

Total cost of the car in Canada: $39,000.  With interest: $40,500.

Total cost of the car from the US: $30,900.  With interest: $34,100

I save $8000 if I pay cash for both or I save $6400 if I wait 4 years.  Even if I had looked more at the Golf/Jetta, I would have saved ~$5000.  Hello!  Why would anyone buy a car on this side of the border with that type of saving?

Here are a few resources to help you out:

RIV – the Canadian government site

Monsieur Maggots – a step by step view of the process