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Old 07-12-2008, 02:25 AM   #71
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Dealer Holdback

Dealer Holdback


Many car buyers don't understand what the dealer holdback is, what it is used for and what its role is, if any, in the deal-making process. Let's try to clear up some of the confusion.

Dealer holdback is a percentage of either the MSRP or invoice price of a new vehicle (depending on the manufacturer) that is repaid 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.

Contrary to what some consumers think, the holdback itself can't really be used as a bargaining chip. However, knowing about it might help you get a better deal on a new car. How? Well, first here's a little background:

Dealerships must have an inventory on hand so that consumers can browse and ultimately select a vehicle. Dealerships must pay for this inventory when it is obtained from the manufacturer, and the amount it pays is the price reflected on the invoice from the manufacturer to the dealer, the so-called "invoice price."

Now the twist: with the introduction of holdbacks 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.

Why the sleight-of-hand you might ask? Because holdbacks can benefit dealers in three ways:

Dealerships borrow money to finance cars based on an invoiced amount that includes the holdback. So the higher the invoiced amount, the more the dealership can borrow from its lender.

Inflating the dealership's "cost" can have the effect of increasing profit, since sales personnel are paid commissions based on the "gross profit" of each sale. Holdbacks have the effect of lowering the gross profit and thus the sales commissions.

Holdbacks enable dealerships to advertise "invoice price" sales and sell their vehicles at or near invoice and still make hundreds of dollars on the transaction.

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.

However, there are many other holdback-types of dealer credits, such as flooring assistance, wholesale credits, advertising credits, etc. In addition, the dealer stands to reap further benefits if there is "dealer cash" being offered by the manufacturer on the car you are considering. In many instances you can learn about dealer cash in our Incentives and Rebates section. However, unless you know all of these other fees (and who does?), establishing the dealer's true cost can be frustratingly elusive. It's for this reason that Edmunds.com has established True Market Value pricing that accurately reflects "what others are paying" by taking into account all of these fees. The Edmunds.com True Market Value Price is the "bottom line" and what you really need to know in order to negotiate a fair deal. Check it out at: http://www.edmunds.com/tmv/new/.

In summary, holdback is nice to know, but is just one small piece of a complex puzzle.

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.
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Old 07-12-2008, 02:33 AM   #72
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Originally Posted by CamaroScotty View Post
I never said mark up.
I’m playing Devils Advocate here… I noticed you said “no mark up on all order out Camaros”. Does that mean the first wave of Camaro you’re allocated are going to be marked up??? Just trying to read between the lines on the small print at the bottom of the page…
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Old 07-12-2008, 08:19 AM   #73
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another thing that has always bugged me.....destination charges. If you go to the Chevy website you will get the MSRP that includes destination charges. Why is it when you buy from the dealer they add on destination charges again?
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Old 07-14-2008, 02:37 AM   #74
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Wow, this thread has taken a major turn in the wrong direction.

The dealership that I work at has built its reputation by making sure that we take care of our customers. We are a top 10 Chevy dealer, and have led the Nation the last 3 years in pre-owned GM Certified vehicles sold. That doesn't happen by accident. Yes people do spend more money at times to do business here, but they know our reputation and know that they will be very well taken care of. We have over 2000 vehicles on 32 acres. Our owner just received a key to the city. We are far from the enemy.

Bottom line is this: V6 and "normal" V8's will not be sold for over sticker. I have no concrete information about what type of market adjustment would be made, if any, on limited availablilty (don't even know if there will be anything). I do know that when we have had limited edition vehicles (Indy Pace Cars, 427 badged Z06, and ZR1's) that we have "asked" for more than MSRP. Do we always get it? NO! Is there anything wrong with asking for it? Not in my opinion.

As far as allotments go. If we are allotted 50, and we have a list of 75, then the 1st 50 people with deposits have the 1st shot to buy a vehicle. I don't see how there is anything wrong with that.
I think people on this forum are making Karl out to something he is not.
How many dealers do you think will give you MSRP when the Camaro comes out?
It's still a good deal. He was just being honest about the Z28 or whatever it will be, although it's not even confirmed yet. When that car comes out for say, 42,000$, most dealers are going to try to make 15k off of it initially. The Shelby GT500KR sold for 50,000$ above sticker initially. If the buyer is willing to pay it, the dealer should accomadate the buyer. If you don't want to pay a higher price, it won't hurt to wait a couple of months. It's just how the business works, and he's just being honest. The seller is going to try to make as much money as possible, the buyer is going to try to make as much savings as possible, and they make a comprimise.

As for the allotments, that is sort of shady unless you tell them what could happen with the allotments.
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Old 07-14-2008, 07:09 AM   #75
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Quote:
Originally Posted by KILLER74Z28 View Post
I’m playing Devils Advocate here… I noticed you said “no mark up on all order out Camaros”. Does that mean the first wave of Camaro you’re allocated are going to be marked up??? Just trying to read between the lines on the small print at the bottom of the page…
My reference to a possible Z28 edition.....someone saying "we'll this car would typically have an additional $5000 mark up...."

Again, this is THEIR dealership.

I would guess our lot cars would be held very firm to MSRP. But then again, if all our our allocation is sold via the internet on order outs - I don't see the Camaro sitting idle on our lots for quite some time.
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Old 07-14-2008, 09:45 AM   #76
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Originally Posted by LegacyZ28 View Post
I think people on this forum are making Karl out to something he is not.
How many dealers do you think will give you MSRP when the Camaro comes out?
It's still a good deal. He was just being honest about the Z28 or whatever it will be, although it's not even confirmed yet. When that car comes out for say, 42,000$, most dealers are going to try to make 15k off of it initially. The Shelby GT500KR sold for 50,000$ above sticker initially. If the buyer is willing to pay it, the dealer should accomadate the buyer. If you don't want to pay a higher price, it won't hurt to wait a couple of months. It's just how the business works, and he's just being honest. The seller is going to try to make as much money as possible, the buyer is going to try to make as much savings as possible, and they make a comprimise.

As for the allotments, that is sort of shady unless you tell them what could happen with the allotments.

Thank you.......

If there are only 5000 Z28's produced, then I would imagine Iowa will get 75 or so total Z's. Of those 75, my dealership would probably see 10. I see no problem with trying get get the a premium price for a vehicle that will be this limited.

Once again, we will not mark up V6 and V8 SS Camaros. I also have never seen us not reduce price on a car that did have a mark up. Asking price and selling price are always different.

As far as alotment, when we take a deposit, we let the customer know that it might be a while before they get their car. We also ask for a check, and we don't even cash it. It is more an ernest deposit that anything.
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Old 07-14-2008, 01:26 PM   #77
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Good Idea: Telling potential customers you’re selling a hot car at MSRP.
Bad Idea: Telling potential customers you’re selling a hot car over MSRP.

I think GMs sets a fair price with the MSRP. GM makes money, the dealerships make money, the salesperson makes a fair commission, and I figure I was treated fairly. But if a dealership feels justified charging me over MSRP for the Z28 I’m going to wonder if they’re going to try and screw me on a Chevy Beat in a few years . I know, I’ll just stop shopping at the farmers market and start shopping at Wal-Mart, at least I know I’m keeping an child employed in China somewhere . Hey Wal-Mart is successful for some reason, though I don’t think it’s always due to selling at a list price.

Of course Chevrolet dealerships could do what some questionable dealerships do to get around the MSRP policy. Put a few miles on the car and sell it as a used car at a “market adjustment rate”. We all know a few people will pay, some will wait, and some will go to the competition.
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Old 07-23-2008, 07:16 AM   #78
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Maybe I am out in left field here, but, in my opinion, no one is holding gun to your head to purchase any vehcile regardless of price. If you have such a burning desire to pay any price for a given vehicle, then that is your personal decision.

As far as myself. I would walk away from any dealer that has slapped on any kind of " Market Adjustment" onto the Sticker price. Again, it is a personal decision on the part of the consumer.

The decision rests with the consumer. One needs to be savvy enough to play this type of situation out.

Does anyone recall what happened when Chrysler started selling PT Cruisers? The dealers were hammering buyers with additional charges at the beginning. Once that pipe was filled, the prices dropped (big time!).

Caveat Emptor!!!
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Old 07-23-2008, 09:54 AM   #79
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I received confirmation yesterday from the owner that we will be selling all Camaros at MSRP.
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Old 04-23-2009, 02:06 AM   #80
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Originally Posted by diarmadhi View Post
Its not that you took a deposit on a car not on your lot. Its that you took a deposit on a car that isnt even released yet. You could possibly run into customer service issues (Like many dodge dealerships did with the chally) where the final product did not meet the customers expectations/tastes and therefore they where out the interest etc on that deposit.

Its just a customer service type thing.

That said good luck with your sales.
Out the interest???? on the $1000.00...Dude I dont know where your banking at but my moneymarket account gives %2.79 whith over 100k in it ...so lets see 1000.00 at 2.79 for 6 months =$13.95 Now thats worth crying about..Hmmm I can either put my order in for a new CAMARO and be one of the first to have one...NO but wait!!!!!! if I dont like it I WILL BE OUT $13.95!!!!!!!!!!!! GIVE ME A BREAK! if your worried about being out the interest YOU CANT AFFORD THIS CAR!!!!!!
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Old 04-23-2009, 03:08 AM   #81
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Holy resurerection batman!
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Old 04-23-2009, 08:14 AM   #82
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WOW - I don't even think "better late than never" can apply to this resurrected thread no matter how hard you try! L O L !
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Old 04-23-2009, 08:16 AM   #83
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Wow, this is almost better than the breaking news "Camaro at Nurburgring" thread yesterday!
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