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Is It Really Cheaper To Buy Electronics Or Other Goods South Of The Border?

It is generally accepted that buying things like electronics in the United States is cheaper than buying them in Canada. Buffalo is a well known shopping destination for Ontarians and I’m sure there are lots of other cross border options to choose from.

It’s not just Canadians that buy TVs, computers, smart phones and other gadgets in the US either. Next time you’re in an American airport, look at all the people bringing huge bags of goods back to their home countries in South America, Africa and the Middle East.

As I mentioned earlier it is generally accepted that things are cheaper in the US yet no one I know has ever given me concrete evidence to support this view! I want to understand the factors that either support or disprove this view and give data to back it up. While it’s difficult to gather data as an amateur blogger, I’ve put together two scenarios which will hopefully shed some light on where it’s cheapest to buy electronics.

The scenarios below will show what country is best to buy two different products for Canadians paying in Canadian Dollars. Each scenario will look at two key factors, the foreign exchange rate and sales tax. Since European prices include taxes already, I have subtracted the sales tax (Value Added Tax or VAT) for comparison.

Inverse Rates Used (Obtained Oct 26th)

US EUR UK JPN

0.99892

1.29114

1.60726

0.01253

 

Scenario 1 – iPad Mini 16GB

The newly released iPad Mini is a great product to analyze to determine what country a Canadian should buy one in to get the best price. Since Apple has launched the device worldwide, prices are easy to find on their website.

Related: The Cost Of Keeping Up With The iPhone

Foreign Exchange

  Canada US UK Japan France
Price Before Tax $329.00 $329.00 £224.17 ¥28,800.00 €283.44
In $ CAD

-

$328.64 $360.29 $360.86 $365.97
% More/Less Expensive than in Canada -0.1% 8.7% 8.8% 10.1%

Sales Tax & Foreign Exchange

Canada US UK Japan France
Tax Rate 13%* 7.25%* 20%** 5% 19.6%**
Price After Tax $371.77 $352.85 £269.00 ¥30,240.00 €339
In $ CAD

-

$352.47 $432.35 $378.91 $437.70
% More/Less Expensive than in Canada -5.5% 14.0% 1.9% 15.1%

*The tax rate used for Canada is 13% (HST – Ontario),the rate used for the US is 7.25% (the national average, varies by state)
**To address the high VAT rates, many European countries have VAT refund services that will refund the taxes if you buy a certain amount of goods from a retailer that participates in the VAT Retail Export Scheme.

As you can see the foreign exchange rate and sales tax play a huge part in determining where it’s best to buy a product. The strength of the Pound (UK) and Euro (Europe) to the Canadian dollar makes purchasing goods in Europe 9%-10% more expensive due to the exchange rate alone. Factor in high sales taxes (VAT) and products may be 14%-15% more expensive!

Taking into consideration sales tax and the exchange rate, the United States comes out the clear winner. It would be around 5% cheaper to buy an iPad Mini there due to lower sales taxes.

Another interesting observation is that it’s only 1.9% more expensive to buy an iPad Mini in Japan, I never would have guessed!

Scenario 2 – Samsung 55″ LED TV

Here’s another product which I found that was available in Canada, the US and UK. You wouldn’t believe how hard it is to find comparable products in different countries!

Foreign Exchange

Canada US UK
Price Before Tax $2,499.99 $2,499.99 £1,770.00
In $CAD

-

$2,497.29 $2,844.85
%More/Less Expensive than in Canada -0.1% 12.1%

Sales Tax & Foreign Exchange

Canada US UK
Tax Rate 13%* 7.25%* 20%**
Price After Tax $2,824.99 $2,681.24 £2,124.00
In $ CAD

-

$2,678.34 $3,413.82
%More/Less Expensive than in Canada -5.5% 17.2%

*The tax rate used for Canada is 13% (HST – Ontario),the rate used for the US is 7.25% (the national average, varies by state)
**To address the high VAT rates, many European countries have VAT refund services that will refund the taxes if you buy a certain amount of goods from a retailer that participates in the VAT Retail Export Scheme.

Even though I picked a different type of electronic product from a different company, the results are virtually the same. Buying this Samsung LED TV in the US is around 5% cheaper than in Canada. Again, buying electronics in the UK & Europe is more expensive due to strong currencies and higher sales taxes.

Fees

I know what you’re thinking, saving 5.5% by shopping in the US sounds great! Unfortunately, the discussion isn’t over yet. In order to buy goods that are priced in US dollars you’ll need to convert your Canadian dollars somehow. Most people will just charge their purchases on their Canadian credit card which will incur a foreign exchange fee of 2.5%. Your savings are now only 3%.

Customs Duties

Another way your savings may be reduced is by paying duty taxes. Unfortunately calculating these taxes are difficult so I don’t have an estimate for these scenarios. You can get around duties with personal exemption limits which are as follows:

After 24 hours abroad: $200
After 48 hours abroad: $800

Buying a few expensive electronic items can easily put you over these exemption limits. Some people may opt to hide their purchases from border officers but this is a big variable. You should always declare your goods!

Food & Lodging

Keep in mind that cross border shopping usually involves an overnight stay and a few meals out along with transportation costs. This could end up costing another $100-$300 or so for a couple for an overnight trip to Buffalo. In order to qualify for the highest level of duty exemption, you’ll need to be out of the country for at least 2 nights.

The Verdict

Even though prices for electronics in the US may seem cheaper than in Canada, when you take into consideration all the other variables, they might not be. Other goods such as clothes, shoes, books, cars, etc may very well still be cheaper south of the border. Now that you know the variables involved you can do your own research on different products and make purchases abroad based on the facts!

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arrow5 Responses

  1. 20 mos, 3 wks ago

    Ahhh the variability of the border crossing! In my experience, often we just have to pay HST on goods, not actual duty. The one thing I can think of is clothes, the duty on them is rather high if they’re outside of NAFTA!
    I find US sales are often better, so if you search the internet you can get pretty good deals.

  2. 20 mos, 3 wks ago

    Hi Andrew,

    Nice comparison. It’s great to see the math laid out like that. Even couple of years my wife and I do a US shopping trip across the border to the outlet stores in Maine (from Nova Scotia). Though a big point of the trip is shopping at places we don’t have here, a lot has to do with the “savings” on individual items. Maybe we should redo our math before our next trip in the Spring. ;)

  3. Andrew
    20 mos, 3 wks ago

    Thanks Rob. It’s definately worth doing a little preliminary research first. Sales tax in Maine is only 5% so that’s good news. The whole topic of availability of goods is one of the most compelling reasons to shop over the border!

  4. Allen
    20 mos, 3 wks ago

    There is absolutely no doubt that camera gear and accessories are better value when the CAD is higher then the USD. As an example, I have purchased batteries for my video camera, memory cards and other items at 50% the cost of the Canadian item. Including duties & shipping the cost was still 28% cheaper.

    I wouldn’t buy a TV from Buffalo but I would buy other items for any trip I make and bring back withon the duty free allowance. Maybe this should also be included in your comparison as a deduction because we all have limits.

  5. 20 mos, 3 wks ago

    Thanks Andrew for sharing such a wonderful anlysis and also providing a unique method of comparing the price of items. I mean the taxation details and overall cost of the product along with lodging and boarding.

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