Chrysler Cuts Off Warranties for Gray-Market Canadian Cars

May 30, 2002
Chrysler is taking action to stamp out what it calls the U.S. "gray market" for vehicles built for the Canadian market. From now on, DaimlerChrysler told its dealers, it will not honor warranty claims from U.S. dealers on cars built for sale in Canada.

It seems that car buyers -- as well as some dealers and middlemen -- have been buying cars at sharply reduced prices in Canada and selling them in the United States. The price difference can be significant. One dealer estimated that a fully-loaded Dodge Caravan that would sell for $31,000 in the U.S. can be purchased for US$21,000 in Canada.

Chrysler estimates that at least 200,000 gray-market cars and trucks find their way from Canada into the U.S. each year. While most are imported into border states like New York, some filter into the rest of the country through "illicit" distribution networks.

Consumers should be especially careful when buying new cars at large discounts. If the vehicle was manufactured for sale in Canada, Chrysler won't honor the warranty and the vehicle may have trouble passing state and local emission and safety tests in so me localities. Other manufacturers are expected to follow Chrysler's lead.

The price tag on a vehicle's window should specify whether it is for sale in the United States. Also, the owner's manual generally includes this information.

As consumers are learning, many products are priced more cheaply in Canada, even after allowing for currency differences. Busloads of senior citizens have recently organized day trips to Canada to buy prescription drugs.

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