Government

Why Do Canadians Pay So Much More Than Americans?

Why Do Canadians Pay So Much More Than Americans?

Recently, the discrepancy between the price tags on automobiles in Canada versus those in the United States has made headlines. Most shocking is the fact that Canadians pay more for cars that are manufactured here at home! And don’t blame shipping for higher price tags because Americans in Hawaii still pay less than Canadians. When probed, the Canadian automobile industry suggested that part of the reason for higher prices in Canada was the cost of translation. This is a serious insult to Canadian intelligence, given that this is a one-time cost that may equate to a few hundreds of dollars, not thousands per vehicle. The fact that the larger automobile makers have forbidden their American dealers from selling to Canadians who cross-border shop proves that they are exploiting the Canadian market.

The truth is that Canadians pay more than Americans on almost all consumer goods: groceries, beer, gas and books, to name a few, despite being just across the border – geographically much closer, may I add, than those living in Hawaii. Why is that?
In some cases, it has to do with the different tax structures, but otherwise much of the price-differential is based on an outdated value of our dollar. But after years of comparable exchange rates, why are we still being gouged?

Cross-border shopping

Many of my friends have invested in a chest freezer and have integrated regular cross-border shopping trips to the US into their routine. They habitually stock up on chicken, milk, beer, and some have even registered for a membership to Sam’s Club (comparable to Costco) in order to save. Despite accounting for the cost of gas and the use of their precious time, the overall savings are still worth the regular shopping trip. Plus, the number of Canadians who now use a post-box in the States so that they can save the cost of shipping on their online purchases is staggering. The unfortunate part is that, on a macro-level, this type of shopping habit will wreak havoc on the economy of bordering Canadian cities.

Why has it come to this and what can we do?

It is true that part of the explanation relates to taxes, demand, or distance to be shipped, but the rest comes down to what the Canadian market will bear. We pay, therefore nothing changes. How can you influence the market? Lobby federal and private consumer agencies, such as the Consumers’ Association of Canada, and demand change. These agencies are in place to champion consumers’ interests with government and industry, and help solve marketplace challenges.

How does this relate to personal finance?

Speaking out against the price disparity of consumer goods in Canada versus the US will create more pressure at a federal level and will eventually become a government priority and a platform issue. It is important that we each play our part so that we can enjoy the same prices as our friends south of the border.
Less money spent on consumer goods translates to more money in your pocket.

Comments

  1. Gary Shouldis

    Thanks for writing about what I think about everyday. As an American that’s been living in Toronto for the past 5 years, I always shake my head at the crazy prices we pay here in Canada. I think Canadians, for the most part, know they pay more but don’t realize the huge difference in prices across the board.
    When we lived in the states, our monthly grocery bill for a family of 5 was about $700 a month, in Canada it’s about $1200 a month for essentially the same thing.
    I love Canada and love being here, I just feel the big difference from here and in the states is that people in the states aren’t afraid to voice their opinions and pressure (sometimes threaten) politicians if they even hint a tax increase is on the horizon.
    2 years ago in Ontario, they instituted an HST tax of 13%, I think 95% of the people in Ontario didn’t even know it was in legislation, let alone passed.

    Thanks for the great article, cheers

    • Stu L

      Gary, you might be the perfect person to ask about this. I’ve always wondered if our higher taxes on both retail and income would be roughly equivalent to the health insurance costs to US families assuming similar salary levels. We both like to brag about our assumed advantages. We say we’ve got free healthcare and ignore our high taxes while you say you have low taxes but don’t mention your healthcare cost. Just wondering.

      • Gary Shouldis

        Great question Stu,
        It’s a complex question to say the lest, but i’m going to answer it with a few key points from my own experiences.
        – For my family (me, my wife and 4 children), while basic health insurance is free, in order to get the coverages we need, dental, prescription,optical, enhanced services….we pay almost $600 a month here in Canada. In the states, to get all of that, including basic health coverage, it would cost me about $1700 a month if I purchased as a private insurer, not part of a bigger company plan. An $1100 difference per month

        – While the income tax rates are fairly similar, with all of your available deductions (home, kids,retirement), my effective tax rate was much, much lower in the Sates. Several thousand dollars lower a year

        – Lower income individuals in the States get free health coverage (Medicaid), it’s the middle class without employer provided health insurance that get squeezed. The health plan I had through my employer in the States was hands down, better than the coverage I get up here. I think basic health care in Canada is better, the States provides more options and quicker care if you’re really sick
        -The cost of living in Canada is much higher, I figure we spend an extra $12,000 a year on average for living up here. We just bought a new minivan, with the taxes and higher sticker price, it was several thousand more than if we bought it in the States.

        -Overall, If I had a job that provided health care coverage, i’d much rather be in the States…..with a large family and no health care coverage, Canada looks pretty appealing.

        • Stu L

          Gary,That’s $1000 a month. Can you tell “us” where that extra cost goes? I know you say you’re paying about $500 extra for food but where else do you have to pay more? On the income tax side was your US taxes lower as result of the mortgage interest deduction? I guess I have a different view of prices living in Sault Ste Marie with close US access. Other than Walmart US I don’t see local US food prices being much lower.Even then Walmart US has only about 6-8 items with lower prices when compared to the CDN side.Admittedly I don’t have some of the real big US chains close to really compare. I’m lucky to have all the major CDN stores here,1 No Frills, 2 Food Basics,2 Metros,1 Super Store and 1 IGA. This much competition seems to keep prices low.

          • Gary Shouldis

            Hey Stu,
            I probably spend about an extra $150-200 a month just of fuel costs here in Canada.
            Taxes are just lower in general in the states across the board, the sales tax rate is much lower and it applies to only certain items, as the HST applies to pretty much everything.
            Bear in mind that we try to eat organic when we can, but similar items are more expensive in Canada.
            A gallon of organic milk will run about $4.50 in the states, where as 3 litres in Canada will run me $9 bucks, for less milk. Milk alone costs me an extra $25 a month than in the states. My kids like to eat Chex cereal, it retails between $4.99 and $5.99 in Canada, it’s about $2.99 in the states and you can often get it on sale for $1.99. Add those little incremental costs over hundreds of items for a family of six and it adds up quickly.

    • mili mj

      This might be off topic lil bit, but I love how u say ” in the states ppl aren’t afraid to voice their opinions and pressure (sometimes threaten” I actually get into a fight with my friends all The time , because right away they all throw in the towel like bunch of sissies. Ppl in Toronto are absolutely very rude, angry ppl, wwho give attitude to one another for no reason, which is why I ran away to Calgary because of it, now I’m starting to noticed a lot of idiots from Toronto moving here and bringing that garbage attitude with them here too (specially immigrants do this) if this keeps up I’m moving to south of u.s, this sissy b.s Canadian attitude is none sense. I had nasty bosses, for no reason, so I’d would complain to the Head officer a normal Canadian goes aaah! Let him be u get nothing by reporting him (fear of defense themselves seems to me) a girl is rude to me because I smiled at her and made a joke so her and her friends gave me a lot attitude problems, I came to defend myself my sissy friend right away toke the girls side and I wasn’t able to do anything I mean since ur own friend is already defend The , abuser. When we left he started fighting me to why I should be nice to ppl, the world frustration doesn’t began to cover what I’d feel. To get to my point our system is expensive, and etc.. because most Canadians are straight up pu*****ies they argue with one another but are to scared to voice their opinions. And let everything slide!!!

  2. Christine

    Thanks for the article. We do pay too much for consumer goods and food here. It really does affect the bottom line and is frustrating. I hope it does become a platform issue. Otherwise one can always move to the United States!

  3. Stu L

    Jennifer this will never be a gov’t priority except one to avoid just like abortion,assisted suicide or any of the others they always drag their feet on. Especially so for this gov’t which is so blatantly pro-business.

    • Jen Chauhan

      It’s sad to think that some issues that are important to Canadians are not considered important by politicians. Stu, what do you think would convince the Government otherwise?

      • Stu L

        Getting voted out of office????
        No not much gets thru to the gov’t except scandal in the news media. The gov’t could help by eliminating the tax compounding that apparently occurs on products businesses import.

  4. Stinks that you guys have to pay more. I had no clue but I live in Florida so I don’t hear much about it.

  5. Geoff Vincent

    Why do U.S retailers charge more for products in Canada than in the U.S.? Its because they can. Specifically, I believe that the price gap is largely based on U.S. retailers analyzing the Canadian market and pricing UP TO the market.

    Last year, J. Crew CEO, Mickey Drexler indicated that 15% higher prices cover the increased cost of doing business in Canada, citing that other U.S. retailers charge a premium. “We are looking at what others do … The fact is, prices are higher in Canada than they are in America.”

    In other words, our competition charges a premium for no specified reason, so we will too.

    Great point about Hawaii. Consider: Ontario’s population is somewhere around 13 million largely clustered within a 100 mile radius around Toronto. Wouldn’t this market count as super efficient to serve not less efficient?

    • Gary Shouldis

      I think you’re right about price gauging on the US retailers part, but as a business owner in Onatario, I can also tell you that Canada charges a premium to do business up here. Many Canadian industries have lobbied successfully to keep out American competition (or made it very expensive to enter the market), and have thus reduced competition and kept prices high. The publishing and textile industries are two examples of this.

      • state_it_how_it_is

        All these statements and not one deal with the fact that Canada has approx 30 million people compared to 300 million approx in the states. Additionally, Canada has three of the Greediest Unions in the world! Example, CTF, CAW. The CAW drives labour cost up and CTF Drives Federal and minicple taxes way up thus driving the cost of living off the charts!

  6. Fred Demers

    Wondering if the (better) working conditions, pay and benefits in Canada also force a higher price on items.

    It seems that the Canadian culture is (was?) more considerate towards worker rights. It seems that working conditions, pay and benefits are ever so slightly better in Canada than they may be in the US.

    Canada (or parts thereof) also appear to be more in favour of worker unions than in the US.

    This would all translate in cost increases for businesses and, in the end, customers…

    Or are businesses raking in more profits than in the US? Is that even possible?

    • Gary Shouldis

      You’re right about wages, they are quite a bit higher and drive up costs. Unions are still pretty strong in certain sectors in the states, though I think Canada still is stronger. I don’t think any country is better than the other, it’s really what you’re used to and your personal situation and preference.

  7. Dave

    I don’t understand. Doesn’t Canada have a active consumer affairs industry? Are these prices gouging or just expensive. In the U.S. we complain all the time about taxes, price of gas and food, etc. What’s up with Canadians?

    Is it because of higher taxes or the healthcare costs. Cars in the US are more expensive because of union demands for workers healthcare.

  8. Frugal Guy with Balance

    My brother has post office box on the other side.

    I get all sorts of stuff shipped and there are tremendous savings. I shop online using Amazon with free shipping on the majority of the items.

    Coffee (Espresso)
    Pike Pedals
    HDMI Cables
    Pumps
    Sneakers
    Electronics etc

    I could go on and on but the saving average 30%.
    When we make a trip down we pick up gas, stop at Costco, Walmart etc. OTC drugs, vitamins, shrimp, cheese, eggs, milk etc big savings.

    I have been known to bring home to Northern BC a suitcase full of cheese.

    Don’t forget Airfares the list is endless we are getting the big shaft on lot of stuff.

    I think you get my point.

  9. Helene S.

    With the new duty-free shopping that came into effect last week, it will only get worse. I can now bring back $200 worth of goods (duty free) after an overnight stay in the US and $800 after two days away. Recently, I flew out of Syracuse to San Diego for $400 vs. $825 from Ottawa. With three of us flying, this represented considerable savings and made the 3 hour drive and the extra gas to Syracuse more than worthwhile. From Toronto, a trip to New York costs $300. The same trip out of Buffalo (less than an hour’s drive) is $189. It’s the retailers who need to start pressuring government to lower taxes.

  10. Kim

    Hi Jen., I’m Canadian and I’m writing this on Canada’s 145th birthday. I’ve just spent 6 months traveling around the USA and found that there are huge differences in food costs – particularly in the price of wine. However, the cost of a good stake with no growth hormones,steroids and antibiotics was higher in the US. As was a rack of lamb from Australia.
    What really gets my goat is the fact that: as Canadians, we are forbidden from trading in USA brokerages and we pay 2 to 3 times more for an online trade commission with a Canadian Brokerage than our US counterparts. To add insult to injury, Canadian Brokerages such as TD Ameritrade is offering Americans up to 60 free trades and an amount of money approximately, $600 I believe, to start trading with just for opening an account.
    I’m ready to declare financial refugee status.

  11. DanielDM

    Twice a year we travel to Massachusetts for a cook off. Which, requires buying a lot of groceries.

    Interesting that I can buy a case of beer (sitting in the middle of the store) for nearly 25% less than I can get it here from a temperature controlled room.

    But, a can of Campbells Mushroom soup was up to $2.18 US vs $0.49 – 0.69 CDN here. And that is just one example of many.

    Our US cousins (2) pay more than $3200 US a month for healthcare. Their roads and bridges are crumbling.

    Recently It was recently reported that our disposable income is now higher than in the US. And I can say with certainty, my wife’s cousin is making 28% less for the same comparable position in a Canadian hospital.

    Still, the booze and gas is still significantly lower in the US. As is discount clothing. However, I consider those a minor inconvenience. I can still travel to most countries in the world and still feel safer wearing my Canadian Pin, even in the US.

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