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Why are the same cars cheaper in the USA than UK?

Take a BMW M3 sedan for example (it's quite hard to find cars with the same engine and trim level). The same car is sold in both countries. In the USA it's $55,400, in the UK it's £50,960.

At the current exchange rate of $1.50=£1 that makes the UK price equal to $76,440.

Not even differences in taxes seem to be enough to make up for a $21,000 difference. UK VAT (sales tax) is 17.5% so the before tax price in dollars would be $65,055, still a lot more. There aren't any other taxes that i'm aware of.

And i dont think exchange rates are to blame, in recent years the exchange rate has ranged from around $1.45 to $2 so currently the dollar is pretty weak.

The cars are made in Germany so imported into both countries, there aren't any import taxes.

So why the big difference? It seems the same across pretty much all cars, a base Prius is £19,504.

Maybe there are some differences in specification or warranty that im unaware of? Surely that can't explain such a big difference on it's own though?

Looking at other countries, the USA seems cheaper than Australia as well, but I think thats due to Australian import taxes. I think Euro prices seemed a bit expensive compared to the US as well.

Update:

To vipassana, that only applies to things that aren't internationally traded i.e. you can't order you McDonalds from China because it's cheaper there - it would go off before it got to you and the transport cost would make it not worth it anyway. And most of the cost of the burger is made up of the local costs of running the restaurant - staff wages, renting/buying the site etc. This applies to things like haircuts, hotels, dining out etc. However, take something like oil - there is a world price, a barrel of oil trades at the same price wherever you are.

With a car like this, they're made abroad and shipped in. The vast majority of the costs is already accounted for, everything except the dealer's margin. Hence production costs are pretty similar. Also the car has to be sold at a profit in both markets and compete with other similar cars, so the company will set a price to maximise its profits in the two markets. Why should these prices be as different as above.

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  • 1 decade ago
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    I didn't even bother reading your whole question.

    There's no point in it.

    There is absolutely ZERO reason to compare prices of items in one country or another.

    Automakers don't set one price, and just convert the price into different currencies. They adjust the value of the vehicle based on local market, demand, etc.

    Hell, look at it this way. A Big Mac from McDonalds is $4 in most stores. But in some, it's $5. In some, it's almost $10, because of location and demand.

    And that's just a hamburger. With higher priced items, it's incredibly easy to understand that there would be a range of values.

    So ultimately, your question, if you had put thought into it....has no basis at all.

    Might as well ask why people in China are a different average height than those in Sweden. One has nothing to do with the other.

  • 1 decade ago

    Traditionally, the US was the only big country that had its own oil supplies. So other countries taxed oil imports pretty heavily, while in the US the oil companies were so powerful that the govt. subsidized them instead, with taxes collected on other things.

    We've run out of our own oil (actually, the country is almost completely explored, and what oil remains is capped off, 'in reserve', until prices go through the roof). But the oil companies still determine our oil policies. So gas (petrol) cheaper than it should be, and the costs of roads, cars, and everything related is still subsidized. Also we have just disgraceful public transportation here, it just isn't an option most of the time. So everyone wants a car, and most families have one for every member over 16.

    We do manufacture our own cars here and there is always talk of putting high import tariffs on imported cars, but the US car companies now are all partnered with Japanese cars, making the same car in both countries, or the same car here with two nameplates--Chevrolet and Toyota, for instance. It really shows you the failure of 'American-style capitalism' that we showed the Japanese how to make good, reliable, high-quality, long-lasting cars, and then we weren't able to do it ourselves, we had to have the Japanese come back and show us how.

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