Auto Dealers Compete

I found a really good description of a holdback on cars.com



For most vehicle makes, the published invoice price is not the true dealer cost because of dealer holdback. The manufacturer holds a fraction of the invoice total of all cars a dealership sells (typically 2 percent to 3 percent of either invoice price or the manufacturer’s suggested retail price) that it then returns to the dealer, usually on a quarterly basis. Dealer holdback began its life as a safety net that ensured the manufacturers would have a security deposit of sorts if a dealership missed payments, and the dealerships would have money on hand to cover overhead costs when the holdback was returned. But if you look at the bottom line the way the dealership does — with profit being profit, whether it comes from the car sale, the trade-in or a financing deal — then the holdback is arguably a profit shelter.

The author also goes on to say “Most dealers see holdback as their entitlement…”

Well times are changing and we a consumers are using the internet to cut into this holdback prices. Also lets not forget the other incentives dealers get  “Lesser known are the factory-to-dealer incentives that reduce the dealer’s true cost to buy the vehicle from the factory.”

So before you start feeling sorry for the dealership here is a list of how they make money on the sale of the car and it’s not all profit from what you give them. (This is a partial list):

• the invoice price;
• dealer holdback;
• customer incentives;
• factory-to-dealer incentives;
• supply and demand; and
• your car’s trade-in value (in some states).

cars.com: Buying Advice | Negotiating With Car Dealers

technorati tags:holdbacks

This entry was posted on Tuesday, August 1st, 2006 at 2:07 am and is filed under Dealer Pricing . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.