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Gray
Market – Don’t Be Fooled
In
a previous issue of The Inside Track,
we discussed the “gray market” whereby brokers
or automobile “advisors” import cars from
Canada at lower prices than they can be purchased for
in the United States (although the practice financially
benefits the broker far more than the consumer—the
broker saves considerably on the exchange rate between
U.S. and Canadian currency, not to mention that Canadian
retail prices tend to be lower than those in the U.S.).
We pointed out that the cars do not always have the
same safety features as cars sold in the U.S. and that
they often use different parts, making repairs costly
and difficult. Further, the odometers on these cars
must be replaced when they are brought to the United
States making them classified as “unknown mileage”
vehicles. This uncertainty regarding the actual mileage
results in these cars bringing a far lower price at
trade-in time. Thus, the re-sale value of these “gray”
cars is far lower than it is for a vehicle purchased
here in the United States with accurate odometer readings.
Now,
a recent newspaper article in The Wall Street Journal
reports that one manufacturer, Daimler-Chrysler, is
canceling the warranty on any such vehicle. While General
Motors and Ford Motor Company have not yet taken similar
action, they issued dealers strong warnings to stay
away from the practice or lose out on the supply of
popular models. The dealers could also be forced to
pay back thousands of dollars in incentive money if
they are found engaging in the gray market.
Most
dealers do not support or engage in the gray market,
but it occurs more frequently with independent car brokers.
Buying a car this way has always been a risky (albeit
legal) way to go, and the potential negatives down the
road far outweigh any savings that might be realized
today.
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