Financing Previously Canadian Titled Vehicles: Beware!
Selling and Financing Previously Canadian Titled Vehicles
A warning on selling and financing previously Canadian titled vehicles.
The United States and Canada have been fast friends for years. Travel between the countries has been simple and easy to the point that many people cross the border daily for their work. Auto dealers living near the borders have for years crossed the borders both ways to purchase vehicles for inventory, properly documenting the changes through new titles and odometer documentation.
In recent months, the Canadian dollar has weakened greatly in relation to the US dollar. At this writing the exchange rate is CND$1.45 to USD$1.00. What does that mean? It means that it can be really enticing for energetic US dealers to cross the border to the frigid north to acquire vehicles as a CDN$25,000 vehicle can be purchased for roughly USD$17,250 before transportation and US documentation. Sometimes that is thousands back of book.
Before you pack up to go buy these deals, you must consider how you will be financing these vehicles for your customers. The banks and finance companies that dealers are doing business with have very differing views on these vehicles. You must keep in mind that very few banks and finance companies run a CarFax or AutoCheck on these vehicles before funding. All of these vehicles will be ‘branded’ in both services as previously titled in Canada. For some banks and finance companies, financing previously Canadian titled vehicles is 100% off limits, similar to a gray-market vehicle imported from Europe or Asia. Others are welcoming them with open arms.
I have spoken, on the grounds of anonymity, with several executives of the top auto finance companies in the US. While my conversations are confidential, what I can say is that they recognize the issues and some are much more comfortable than others.
My advice is simple. This is not the time to ask for forgiveness rather than asking for permission. You might well find yourself unknowingly in the horrible position of being asked to repurchase the contracts of a large quantity of customers. You should ask the highest ranking official of the bank or finance companies that you are doing business with if they will accept contracts on these vehicles and get it in writing. If they company official says ‘no,’ then ask for them to run it up the ladder. One executive from a large company currently beta testing a program for these vehicles in an area indicated that they would be more likely to try a one-off program for a good dealer than turning it on for their region or state until they had good data. Therefore, if you ask for that, you very well may not only succeed, but have a competitive advantage over other dealers in your market.
Bottom line is that everything is governed by your dealer agreements, and many of them are overly broad allowing for a lot of interpretation by attorneys, as some of my clients are well aware of. The interpretation is usually decided by more than one attorney, is always expensive, and often ruins what has, in some cases, been a good dealer/finance company relationship. Don’t assume. Ask. Financing previously Canadian titled vehicles is not a subject that is flying under the radar with any finance company of any size. I will fall back on one of my old adages: If an opportunity is too good to be true in the auto industry, it likely is unless thoroughly vetted.
By the way, it goes far deeper than just financing, as it also pertains to factory warranties, the service contracts, and even GAP. Some of the manufacturer warranties do not transfer across country borders. If you are selling a vehicle to a consumer under the auspices of it still having a factory warranty, you may be misrepresenting the vehicle. Not good. Also, the service contract that you sell may not cover the vehicle depending on the company’s expectations of it still being covered by the factory. Finally, even some GAP policies may not afford coverage to these vehicles.
Certainly, I have specific knowledge on some companies that I have been allowed to share privately. However, under the conditions that I talk with my friends in the auto finance industry, I simply can’t or won’t jeopardize their trust in a public manner. If you have questions, feel free to reach out to us and we will try to clarify to the point we are allowed.
Thanks, and Great Selling