Canada and Mexico are about 1,400 miles apart on the map and worlds apart in vehicle and insurance regulations for U.S. residents who drive across their borders.
Driving a U.S.-registered car or light truck into Canada usually entails answering a few perfunctory questions at the border and no hassles over the vehicle. The insurance that covers a vehicle in the U.S. generally provides the same coverage in Canada.
Going into Mexico, however, requires proof of ownership of the vehicle, acquiring a temporary import permit and, often, buying Mexican insurance.
U.S. auto insurance generally is not valid in Mexico, and traffic laws are much different. Under Mexican law, police will impound the vehicles and jail the drivers involved even after a fender bender until they can show they have sufficient insurance to pay for damage or injuries they caused.
Whether the destination is Canada or Mexico, visitors should carry proof of U.S. citizenship or residency, current vehicle registration and proof of insurance. There are other obstacles to clear before crossing the border, including whether a vehicle can go into either country.
Mexico requires that visitors going beyond a 16-mile “border zone” show the title to their vehicle or an authorization letter from the owner to enter the country. In Illinois, lease customers never see the title (it goes to the leasing company), and consumers buying a vehicle on monthly payments don’t get the title until it is paid for. (Some states issue titles before a vehicle is paid for and list the lien holder.)
That means drivers have to ask the lender or leasing company for written permission to drive into another country, and it isn’t assured they will receive it.
The rules governing where consumers can drive and for how long vary widely by institution. Leases usually have more restrictions than loans. That is because the driver and the leased vehicle may be adequately covered by insurance, but the owner of the vehicle–the leasing company–may not.
Chase Automotive Finance, for instance, lets loan customers in good standing cross either border, but lease customers need written consent.
“With leases, we own the car, and it’s just a liability issue,” said Chase spokeswoman Judy Miller. Chase will look at such things as the customer’s payment record, credit standing and insurance coverage in deciding whether to give approval.
Ford Credit, the finance unit of Ford Motor Co., lets loan and lease customers drive in Canada or Mexico for up to 30 days, but more than 30 days requires written permission.
GMAC, General Motors’ finance unit, says all of its customers need written permission to venture outside the U.S., and Canada is the only foreign country where GMAC’s lease customers can go. Why not Mexico? “That’s just our policy,” responds spokeswoman Anne Marie Sylvester.
Bank of America’s loan and lease contracts generally stipulate driving into Canada or Mexico requires written permission. Some contracts, depending on when they were written and in which state, may prohibit taking the vehicle out of the U.S.
Requests are judged case-by-case, said Eric Telljohann, a sales executive for Bank of America’s auto group.
Telljohann says the restrictions are due to uncertainty about what happens if a vehicle is in an accident across the border.
“We are marketing to legal residents of the United States, and we aren’t structured to and don’t monitor legislation or litigation in foreign lands,” he said. “We can’t tell you if you drive into Canada and you have an accident if you have the right amount of liability insurance.”
He suggests customers read their contract and if in doubt contact their lender. Customers usually can request permission to drive into Canada and Mexico by phone and receive a written response.
Even if a bank or leasing company says its customers can venture into Canada or Mexico, an insurance company may have a different view.
State Farm, the largest auto insurer in Illinois and the nation, and Allstate, the second largest, say their coverage is good in Canada. Other companies may require special endorsements for driving in Canada or have other restrictions.
The Canadian Tourism Commission recommends U.S. residents ask their insurance company for a Canadian insurance card that verifies they have liability coverage.
Mexico is a different story. State Farm says its coverage for Illinois residents remains in effect within 50 miles of the U.S. border (the limit may differ in other states). Anyone driving farther into Mexico should buy Mexican insurance, which is available from brokers on both sides of the border, State Farm spokesman Joe Johnson said. He suggests contacting an agent before the trip for guidance.
State Farm does not do business in Mexico or sell Mexican insurance. However, its agents and adjusters in border states are trained in Mexican insurance and vehicle laws and will go into Mexico to help resolve claims and retrieve disabled vehicles.
Allstate’s coverage remains in effect 25 miles into Mexico, and spokeswoman Emily Daly says, “They do measure it if something happens.”
Allstate agents in the border states also are trained in Mexican laws and many are licensed to sell Mexican insurance issued by Seguros Tepeyac under an agreement. Allstate agents in Illinois do not sell Mexican insurance, but some Mexican companies have agents in the Chicago area.
The AAA-Chicago Motor Club provides members with a comprehensive description of requirements for driving in Mexico, and AAA offices in Texas, California and Arizona offer Mexican insurance to members and nonmembers. The rates are the same for members and non-members.
The insurance, underwritten by Naranjia, a Mexican company, is sold by the day (minimum of two days) and takes effect 25 miles beyond the border. Insuring an $18,000 vehicle with Naranjia for five days costs $82.45 for liability coverage of $100,000, medical coverage of $50,000 and collision and comprehensive, according to AAA Texas.
Driving a U.S.-registered vehicle into Mexico requires a temporary import permit that is good for six months and signing a form promising the vehicle will not be left in Mexico. Visitors who stay within 16 miles of the border or free-trade zones in Baja California and Sonora (the Mexican state south of Arizona) are exempt from these requirements.
The permit, which costs about $20, is obtained at the border and must be paid with an international credit or debit card in the same name as the owner of the vehicle.
Otherwise, visitors have to purchase a security bond based on the vehicle’s value or post a cash security deposit equal to the vehicle’s value. The cash security deposit is refunded upon leaving Mexico, but companies that sell security bonds keep a portion of it.
Mexican citizens can save some time and paperwork at the border by obtaining the permit at the Mexican Consulate in downtown Chicago. This service began last year and is offered in busy travel seasons, such as summer and late fall.
Benjamin Penaflor, an assistant director at the Mexican Consulate, advises visitors to be mindful of the six-month limit on the temporary import permit, which must be in the vehicle when it is driven.
“Customs is very strict in this area,” he said. “They will impound it, and you can lose the car.”
To avoid the headaches of bringing a vehicle into Mexico is to rent one instead. Renting has its own caveats, and it can be expensive.
Some rental companies don’t allow driving their vehicles across a border, so it is best to ask about such restrictions and insurance requirements before making plans.
Hertz, the largest rental company, has no restrictions on renting a car in the U.S. and driving it into Canada. However, if a Hertz customer plans to drive into Mexico, he must buy additional insurance that covers personal injury liability, damage to other vehicles and theft.
The additional insurance is available at Hertz locations near the Mexican border in California, Arizona and Texas.
A Mexican company issues the insurance, and the cost depends on the type of vehicle and rental location. For driving within 25 miles of the border, Hertz says the insurance averages $20 per day for a car and $30 per day for a minivan. The cost is $10 more per day for driving up to 250 miles into Mexico.
Hertz rents cars through licensed outlets in Mexico, and the company’s Web site recently listed the weekly rate for a midsize car in Mexico City or Cancun at $510. The weekly rate includes liability insurance but not damage to the rental car, which is optional at additional cost. Renting a midsize car from Hertz in Phoenix was $177 per week, including liability insurance.
Other rental companies may not include liability insurance or provide only nominal amounts that do not cover property damage or injuries.
Permission not a sure thing
If Rudy Alvarez is guilty of one thing, it is that he didn’t read the fine print in the loan contract for his 1999 Ford Expedition.
The contract with Old Kent Bank stipulates that the vehicle can’t be driven outside the U.S. without written permission.
When Alvarez went to an Old Kent branch office last December, he was told it was against bank policy for him to drive to his native Mexico to visit relatives. He then called the bank’s headquarters in Grand Rapids, Mich., several times and was turned down again.
“They said there was a very high risk for crime in Mexico, and they were afraid I might leave the car down there,” said Alvarez, who has lived in Chicago for 36 years, is a naturalized citizen and owns a hardware store in the Pilsen neighborhood.
Alvarez, who drives to Mexico as many as four times a year, says he was turned down despite being current in his loan payments.
What puzzles him most is that previous lenders have routinely granted permission to drive into Mexico.
“In the past, with companies like Ford Credit and GMAC, they would issue a letter at a local office,” he said. “It’s a very simple procedure that takes about five minutes.”
Last December, Alvarez parked his Expedition in Chicago and drove to Monterrey in an 11-year-old Chevrolet Astro van he uses for his hardware business. The Astro was paid off long ago, so Alvarez had a clear title to show at the border. The Mexican government requires a title or an authorization from a lender to take the vehicle into Mexico.
He plans to drive to Mexico again in August to pick up his 11-year-old daughter, who is spending the summer with grandparents, but he doesn’t know which vehicle he will drive.
Alvarez would prefer to drive the Expedition because it has ample room for his family, but if his bank won’t let him he will explore other options. One option is to trade the Expedition for a new vehicle–and finance it through a bank that allows driving vehicles into Mexico.
“I may have to if I want to travel to Mexico,” he says. “It’s cheaper for me to drive. Renting a vehicle that can hold six people can cost $1,200 or $1,500 a week.”
Alvarez’s plight was first reported by WGN-Ch. 9 May 22, and a spokesman for Old Kent Bank said at that time that such requests are handled case by case.
Old Kent Bank has since been acquired by Fifth Third Bank, and spokesman Bill Shaffer said he can’t discuss specifics of Alvarez’s case because of privacy concerns.
“Each case is reviewed on its own merits,” Shaffer said, and the bank’s main concern is whether there is enough insurance or other assets to pay off a loan if a vehicle is stolen or damaged in Mexico.
“With Canada, there is no problem at all. We have reciprocal agreements on returning stolen property or damaged property,” he said. “Unfortunately, we don’t have the same agreement with Mexico.”
Alvarez says he always buys Mexican insurance to cover his vehicle across the border.
“It’s too big a risk to go without insurance,” he said. “Even if I go in a rickety old vehicle, I buy insurance. If you don’t and you have an accident, it can cost you a bundle.”
Shaffer said the bank tried to contact Alvarez after the WGN broadcast, but “we couldn’t find him in our system.” Fifth Third Bank was acquiring Old Kent at the time, and Shaffer said that might have been the reason.
The Tribune, however, had no trouble locating Alvarez in the Chicago Yellow Pages because his name is on the hardware store he has owned for 20 years.
Alvarez hopes that going public with his story will help others avoid the same problems.
“I wanted the Mexican people to be aware of this,” he said. “They could encounter the same situation.”
— Rick Popely.
