Oh Canada, Why is the Trade-In Value of Your Car Lower in the US?

October 28, 2019 in Trade-In Value

If you’ve ever seen a Canadian car for sale in the US, you probably noticed that it was significantly less expensive than its American counterpart. What’s up with that, eh? 

You might even have seen two seemingly identical cars parked next to each other on a dealer’s lot, with the Canadian car priced thousands of dollars less than its American twin. Many people have noticed this phenomenon, but relatively few people understand the reason why. 

Are American dealerships discriminating against Canadian cars? Of course not, we love our chilly neighbors to the north. 

There are actually some pretty good reasons why that Canadian car is as cheap as it is. But you should understand that if you buy it, the trade-in value of your car will reflect many of these same differences when you eventually decide to trade it in for another new car. 

It’s Easier to Walk Across the Border than It Is to Drive 

Before a Canadian car can be sold or legally driven in the US, the car’s owner has to file an entry with US Customs and Border Protection (CBP). That is the first step in getting a Canadian car registered in the US, but it’s just the beginning. 

Next, the car must be shown to be compliant with US safety and emissions standards, and this is where the real fun starts. 

According to the NHTSA, if your vehicle has a certified FMVSS label (located under the hood or inside the door), or it contains an EPA certification in the Vehicle Emissions Control Information, then you are good to go. That’s the best case scenario. 

If your car doesn’t have the FMVSS label or the EPA certification, that’s when things can start to get cloudy. In this case, you have to obtain a letter of compliance from the original manufacturer in Canada, stating that your car is compliant with current US regulations. 

How Much Do You Love Your Canadian Car? 

If you’re not able to get a letter of compliance from the manufacturer, then you’ve reached a proverbial fork in the road. There are two ways to proceed, and the best path for you probably depends on just how much you love that Canadian car of yours. 

If your car is a daily driver and your primary concern is just getting from point A to point B, then the best course of action is probably to part ways with it. It’s just not meant to be, and while it’s not cut out for use in the US, you should have no trouble selling it back in Canada. 

If you’re truly head-over-heels, and you just can’t stand the thought of parting with your coveted Canadian car, then you’ll need to start looking for an ICI, or Independent Commercial Importer. An ICI should be able to make custom modifications to the car, get it tested, and then certify the car when it is compliant with US regulations. 

As you’re probably starting to see, there are good reasons why the trade-in value of your car is impacted by a Canadian history. But we’re still just getting started. 

Selling or Trading In a Canadian Car

Obviously, cars from Canada do not start out with an original US title. But you can’t sell or trade a car without a title, so anyone wishing to sell or trade a car from Canada has to first obtain a bonded title. 

The bonding process requires the car’s owner to prove that they are the legal owner of the vehicle, and also demonstrate that there are no disputed claims on their ownership. This process can take a while, and it can get expensive, with a title bond costing from hundreds to thousands of dollars depending on the vehicle. 

Does a Grey Title Impact the Trade-in Value of Your Car? 

After a Canadian car has been bonded, it will be known as a “grey title,” which signifies that the car was manufactured and sold outside of the US, and may not have been built to meet US emission and safety standards. 

There are a lot of American car dealerships who will not sell cars with grey titles. In some cases, this means that the dealer will decline to give you a trade-in offer altogether. 

In other cases, the dealer may take your car without the intention of retailing it and instead send it straight to the wholesale auction. While this is better than getting no trade-in offer at all, the trade-in value of your car will likely reflect the fact that the dealership knows they will not be able to sell the car to another driver. 

A Final Consideration about Canadian Cars 

They don’t call it “The Great White North” for nothing. Canadian cars endure a lot of severe weather, including long periods of freezing temperatures and lots of exposure to snow and ice. This also means they regularly get coated in a variety of chemicals that are used to melt snow and ice. 

The bottom line is that cars in the north are more prone to rust build up than cars in warmer regions. This can complicate several of your regular maintenance tasks. And rust build up will definitely impact the trade-in value of your car, especially if it exists on or near the engine. 

So, while you might be able to save a few American dollars by purchasing a car from Canada, please understand that you are likely to run into complications getting the car titled and registered. And if you find out that the trade-in value of your car is lower than you thought it would be, hopefully this article helps you understand why.