A lower Canadian dollar has been something of a mixed bag for many industries, but the used-car export business is experiencing a real boom at the moment.
New data from Desrosiers Automotive Consultants shows that exports of Canadian used cars to the United States spiked in 2015 as the loonie skidded lower. In 2015 (not including December; that data was not yet available) 200,000 pre-owned vehicles cars crossed the border bound for southern dealerships—the highest number since 2002.
Desrosiers’ data is supported anecdotally by searches on the online used-car service AutoTrader.ca, where cross-border interest has surged: the company says that in November and December of 2015 it saw a more than 27% year-over-year increase in U.S. traffic to its Canadian web site.
But while the interest may be there from American drivers, the ability to buy often isn’t.
“It’s actually very difficult for a consumer to shop for a vehicle across the border,” says Dennis Desrosiers, president of DAC. “There’s a fair number of regulatory hurdles. It’s really the American car dealers who are flocking to Canada.”
Differing safety standards and other regulatory disparities—even those as simple as converting speedometers from metric to imperial—make it impractical for individuals to cross-border shop, says Desrosiers. Instead, dedicated brokers deal in larger volumes of cars and handle the regulatory differences at scale. That also means that most of the cars crossing the border are higher-end luxury models, where the profit margin justifies the effort.
This dynamic tends to benefit consumers in Canada, Desrosiers says—by siphoning off the supply of cars when the dollar is low, it supports higher trade-in values. “Sellers get another few thousand dollars” per car.
The cross-border aftermarket also works in reverse he notes, with U.S. used cars attracted north by a strong loonie. “When the dollar is above 90 cents,” says Desrosiers, “you see a bunch of product coming into Canada virtually overnight.”
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