Dealer Holdback: The
Secret Money
Dealer Holdback
Dealer holdback is a percentage of either the MSRP or invoice
price of a new vehicle (depending on the manufacturer) that is
paid back to the dealer by the manufacturer. The holdback is
designed to supplement the dealer's cash flow and indirectly
reduce "variable sales expenses" (code words for sales
commissions) by artificially elevating the dealership's paper
cost.
The introduction of holdback some years ago, most manufacturers
inflated the invoice prices for every vehicle by a
predetermined amount (2-3% of MSRP is typical). The dealer pays
that inflated amount when it buys the car from the
manufacturer. But later, at predetermined times (usually
quarterly), the manufacturer reimburses the dealer for that
excess amount. This is the "holdback," so named because funds
are "held back" by the manufacturer and released only some time
after the vehicle is invoiced to the dealership.
This holdback amount is "invisible" to the consumer because it
does not appear as an itemized fee on the window sticker. For
example, let's say you're interested in a Chevrolet with a
Manufacturer's Suggested Retail Price (MSRP) of $20,500,
including optional equipment and a $500 destination charge.
Let's also say that dealer invoice on this hypothetical Chevy
is $18,000. The cost of the car includes a dealer holdback
that, in the case of all Chevy vehicles, amounts to 3% of the
MSRP, or $600. (Note that the $500 destination charge should
not be included when computing the holdback.) So, on this
particular Chevy, the true dealer cost is actually $17,400.
Even if the dealer sells you the car for the invoice price,
which is unlikely, he would still be making as much as $600 on
the deal (when his quarterly check from GM arrives).
Dealer holdback allows dealers to advertise attractive sales.
Often, ads promise that your new car will cost you just "$1
over/under invoice!"
Almost all dealerships consider holdback money "sacred" and are
unwilling to share any portion of it with the consumer. Don't
push the issue. Your best strategy is to avoid mentioning the
holdback during negotiations. Mention holdback only if the
dealer gives you some song-and-dance about not making any money
on the proposed deal when you know that isn't true.
Domestic manufacturers (Ford, General Motors and the Chrysler
half of DaimlerChrysler) generally offer dealers a holdback
equaling 3% of the total sticker price ( MSRP) of the car.
Foreign manufacturers (Honda, Toyota, Volkswagen etc.) provide
varying holdback amounts that are equal to a percentage of
total MSRP, base MSRP, total invoice or base invoice, as
indicated in the list below. The figures below were valid at
time of printing. Subject to change.
|
Make
|
Holdback
|
|
Acura
|
3% of the Base MSRP
|
|
Audi
|
No holdback
|
|
BMW
|
No holdback
|
|
Buick
|
3% of the Total MSRP
|
|
Cadillac
|
3% of the Total MSRP
|
|
Chevrolet
|
3% of the Total MSRP
|
|
Chrysler
|
3% of the Total MSRP
|
|
Dodge
|
3% of the Total MSRP
|
|
Ford
|
3% of the Total MSRP
|
|
GMC
|
3% of the Total MSRP
|
|
Honda
|
2% of the Base MSRP
|
|
HUMMER
|
3% of the Total MSRP
|
|
Hyundai
|
2% of the Total Invoice
|
|
Infiniti
|
1% of the Base MSRP
|
|
Isuzu
|
3% of the Total MSRP
|
|
Jaguar
|
No Holdback
|
|
Jeep
|
3% of the Total MSRP
|
|
Kia
|
3% of the Base Invoice
|
|
Land Rover
|
No Holdback
|
|
Lexus
|
2% of the Base MSRP
|
|
Lincoln
|
2% of the Total MSRP
|
|
Mazda
|
2% of the Base MSRP
|
|
Mercedes-Benz
|
3% of the Total MSRP
|
|
Mercury
|
3% of the Total MSRP
|
|
MINI
|
No Holdback
|
|
Mitsubishi
|
2% of the Base MSRP
|
|
Nissan
|
2% of the Total Invoice
|
|
Pontiac
|
3% of the Total MSRP
|
|
Porsche
|
No Holdback
|
|
Saab
|
2.2% of the Base MSRP
|
|
Saturn
|
3% of the Total MSRP
|
|
Scion
|
No Holdback
|
|
Subaru
|
3% of the Total MSRP (Amount may differ in
Northeastern U.S.)
|
|
Suzuki
|
3% of the Base MSRP
|
|
Toyota
|
2% of the Base MSRP (Amount may differ in
Southern U.S.)
|
|
Volkswagen
|
2% of the Base MSRP
|
|
Volvo
|
1% of the Base MSRP
|
| 
