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Dealer Holdback

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On: Tue, Oct 4, 2011 at 10:29AM | By: Peter C Sessler

Dealer Holdback

One has to wonder when shopping for a car, how a dealer can afford to sell a car for $100 over cost, or even at cost. Sometimes they'll sell you a car at "below cost", whatever that is. They'll tell you stories such as "the boss says it’s got to go" or something like that. The reality is, of course, even if the car is sold at "cost" (that is, what the dealer invoice price is) it really isn't. There is dealer holdback to consider.

The holdback is a percentage of MSRP or invoice amount that is held back by the manufacturer and credited to the dealer, usually on a quarterly basis. There is an unwritten rule among dealers that they won't go into the holdback to sell a car. The rule has generally held true. On the other hand, you'll find that some dealers will, especially the big volume dealers. They'll sell the car at true cost and I've seen occasions where they'll even go below that.

The big giveaway is when you see a car advertised at an unusually low price. By taking out the holdback, the dealer can advertise an unbeatable price. If you've shopped around, you might be told by other dealers that "they can't possibly sell the car for that” or "it's a bait-and-switch deal". I worked for a dealer who would, and when someone wanted the sale car, they would sell it at the advertised price.

Of course, no dealer can stay in business for long by selling cars at true cost, and no sales manager can keep his job for long by doing so either. Still, it is a calculated risk and the likelihood is (the dealer hopes) that the shopper will eventually end up buying another car. And, in any case, even if the car is sold so cheaply, the dealer still has a chance to make some money through the financing of the car and selling an extended warranty and accessories. After all, the customer is getting such a good deal so he can afford to buy some extras.

The following is a current list of makes and the amount of the dealer holdback:

Acura: 2% 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

Hyundai: 3% of the Total MSRP

Infiniti: 1.5% of the Base 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: 1% 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: 2.8% of the Total Invoice

Porsche: No Holdback

Scion: No Holdback

Subaru: 2% of the Total MSRP

Suzuki: 3% of the Base MSRP

Toyota: 2% of the Base MSRP

Volkswagen: 2% of the Base MSRP

Volvo: 1% of the Base MSRP


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