What is Dealer Holdback?
EJD1984
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1. The holdback is irrelevant to the purchasing/negotiations process.
Quit trying to determine what a fair profit should be for the dealer. You would have to open up the accounting books to find out what all of the dealer's real costs are (rent, inventory, salaries, expenses, etc.). And even then, why do you think you can dictate a fair profit?
2. Let the market decide
Get a good starting point -- find out what the invoice price is for your car and see what others seem to be paying -- look at TMV on Edmunds or similar. Then get several quotes from different dealers, but do your homework -- see if the car you are buying is common or in short demand, see if the dealer is struggling to make their numbers or is doing just fine, etc. All this will determine which dealer will most likely give you the best price and why some dealers will be higher than others.
3. This is a buyers' market.
It has been for a long time now. Except for a few high-demand cars or temporary shortages, manufacturers have capacity to produce more cars than they can sell,
so there's usually plenty of supply and dealers are eager to clear their lots or order
and sell a car to keep up their numbers, keep their service side busy, and take profitable trades in. Manufacturers discount many of their cars to keep their market share and to sell more parts in the future.
So it pays to shop around and get the best price.
The best price is determined by the current actual market -- cars on the lots vs. actual buyers, as well as the perceived market -- buyers' perception of popularity of certain models vs. dealers' and manufacturers' expectation of short-term demand.
Never negotiate based on invoice/holdback/fair profit. It all really comes down to the basic supply and demand. Just get a few quotes, figure out which one is the best option and go with it. You might get something below invoice and even below holdback if you find a dealer that needs to get rid of inventory. After all, there's something called opportunity cost -- what would the dealer's profit be if the car does not get sold and ends up sitting on the lot for another 2-3 months? Let's say it is a 2010 in September of 2011 when the 2012 models are already out.
Remember that no one should be mad or insulted because they did not get a deal they wanted, and everyone should be happy about a deal that was struck since both sides agreed to it.
Quit trying to determine what a fair profit should be for the dealer. You would have to open up the accounting books to find out what all of the dealer's real costs are (rent, inventory, salaries, expenses, etc.). And even then, why do you think you can dictate a fair profit?
2. Let the market decide
Get a good starting point -- find out what the invoice price is for your car and see what others seem to be paying -- look at TMV on Edmunds or similar. Then get several quotes from different dealers, but do your homework -- see if the car you are buying is common or in short demand, see if the dealer is struggling to make their numbers or is doing just fine, etc. All this will determine which dealer will most likely give you the best price and why some dealers will be higher than others.
3. This is a buyers' market.
It has been for a long time now. Except for a few high-demand cars or temporary shortages, manufacturers have capacity to produce more cars than they can sell,
so there's usually plenty of supply and dealers are eager to clear their lots or order
and sell a car to keep up their numbers, keep their service side busy, and take profitable trades in. Manufacturers discount many of their cars to keep their market share and to sell more parts in the future.
So it pays to shop around and get the best price.
The best price is determined by the current actual market -- cars on the lots vs. actual buyers, as well as the perceived market -- buyers' perception of popularity of certain models vs. dealers' and manufacturers' expectation of short-term demand.
Never negotiate based on invoice/holdback/fair profit. It all really comes down to the basic supply and demand. Just get a few quotes, figure out which one is the best option and go with it. You might get something below invoice and even below holdback if you find a dealer that needs to get rid of inventory. After all, there's something called opportunity cost -- what would the dealer's profit be if the car does not get sold and ends up sitting on the lot for another 2-3 months? Let's say it is a 2010 in September of 2011 when the 2012 models are already out.
Remember that no one should be mad or insulted because they did not get a deal they wanted, and everyone should be happy about a deal that was struck since both sides agreed to it.
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7,148 Posts
Agreed. Great post.
If you trade a car to another dealership, when they sell it, does your dealership then get the holdback, or is it just gone for both?
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2,141 Posts
there is no holdback on used vehicles, as far as GM is concerned if dealerships never carried them they could care less,
GM is about new vehicles sales and that is all
not gonna get into the pissing match this thread is, think I have said my piece on the matter before. ppl have to stop thinking aobut dealerships making money, its all percentages and like the first post pointed out, there is more markup in a loaf of bread percentage wise tehn ANY car or truck......
I dont see a problem with a dealer making a couple of grand on a $60,000 trucks what is that 2%.... so really... its percnetages and nothing more....
not sure what the monthly bill is on our new GM mandated 15 million dollar store is but Im sure the owner needs to make some money to pay for it....
GM is about new vehicles sales and that is all
not gonna get into the pissing match this thread is, think I have said my piece on the matter before. ppl have to stop thinking aobut dealerships making money, its all percentages and like the first post pointed out, there is more markup in a loaf of bread percentage wise tehn ANY car or truck......
I dont see a problem with a dealer making a couple of grand on a $60,000 trucks what is that 2%.... so really... its percnetages and nothing more....
not sure what the monthly bill is on our new GM mandated 15 million dollar store is but Im sure the owner needs to make some money to pay for it....
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2,426 Posts
Here's a thread I had started in the "Customers and the Outside" section several months ago. I think it was a great discussion:
http://www.gminsidenews.com/forums/f73/what-fair-deal-100408/
http://www.gminsidenews.com/forums/f73/what-fair-deal-100408/
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2,141 Posts
I memeber that...... :hyper:
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2,141 Posts
this is a salesman wet dream, but it will NEVER happen, not because manufacturers dont want it, not because dealers dont want it, not because salesman dont want it....
The public would never do it.. for some ppl its an addiction, they just cant handle paying 'sticker' for anything....
sometimes I agree with the dodge dealer in town, they markup all their cars $2980, and all their trucks $5490, OVER MSRP..... if ppl want a deal, sure here is 5 grand off, happy now, most are, they maintain sticker, and customers think they got a great deal....
personally, if ppl would just pay sticker, there would be no more false advertising, no more scams, no more gimmicks, no more admin fees, no more advertising fees, this **** would go away as dealers would be back to making money on their inventory..... and no need for the gimmicks to make money.....
the buying public IMO cause most of the problems we have today.
Prime example, we got our 2012 Orlando pricing today... retail is $19995 for a base LS, INVOICE is $18516, now add $250 pack, $100 bucks for full tank of gas, so that is $18966?? ish is about our cost, so that leaves us about $1000 profit, (not including holdback) which at 3% is a whooping $570 bucks...... SO.... whats fair there?
I think sticker is more then fair.... gotta sell ALOT of those at sticker to pay the bills
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2,683 Posts
Who said I was selling cars? I just really hate when people are ignorant. There needs to be some equality. I feel really really bad for car salesmen that get jacked around all day.
What do you mean dealer fees?
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2,141 Posts
I think he means documentation fees...... some dealers have others like advertising fees and such..
we have a Doc fee, and have I agree with customers, it should be regulated and not allowed over 'SAID' amount..... why? dealers are free to charge what they want, it gets added at the end, your deal is done before it gets dropped on you how much it is, and by then you like #$%^ it just get it over with.....
what are they, well there are ppl here that dont get paid commish, the doc fees pay those salaries, and the dealership overhead... at least thats what we are told.... really its the owners Ferrari fund... I dont know what else to say...
$150 bucks or something I can see, maybe $200, but some places charge over $700 bucks, time your done and finance taht is another 5 bucks a month payment, its a BS fee, that needs to be regulated by someone....
Im on the customers side on this one.... :yup: I hate doc fees, biggest arguement we get outside of trade values
I think NYS regulates that documentation fee. Cant be more than $75. Which I kinda think is a bargain.
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7,148 Posts
Again, it doesn't matter. Just add up the total price and compare to other dealerships.
...
Let's put this whole thing a different way. People love to compare cars to homes in terms of negotiating. But - in most cases, no two homes are the same. Cars are a completely different matter - but lets go with it anyway and say you're buying a condo and there are 2 which are basically identical.
Who here would not pit the two sellers against eachother and take the lowest, all things being equal. That's what I thought.
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7,885 Posts
"Hold Back" Is nothing more than a "Bonus" for the dealership.
At the Ford Canada Camp, Hold Back is 2% over Base invoice. The Invoice is what the dealership pay's for the vehicle. They generally pay the "Salesman" commision on the "Dealer's Bottom Right: which includes "Hold Back" 2% over actual cost.
If you think you are purchasing a Vehicle at "Actual Cost" Sorry, "How would they stay in business?" They have "Many costs" I.E. Interest on the Stock, Advertising, The dude that washes the Lot.
Hold Back does not include "WAP" "Wholessale Assitants Program" Averages $350/ unit to help with, "Interest on it's floorplan" If it doesn't sell within 90 days, the Dealer has to pay. Not just your unit, but Interst paid on "All Units".
I have seen almost $13K checks, for 1 month of Juice, on about 70 units. A life as a Dealer.
No the Lights, Advertising, Units to LQQk at, all cost Dealership's $$$$ Thousands/month.
You want Cheaper cars? Google "Eye's Blind Car Purchase" No test drive, no Salesman to help you with your questions, no trade ins, No "Can I drive the Blue one, then I may order the Grey One" and No "Can I see/feel it first" And "NO TRADE INS"
Yes "Future Shop" works at much higher Mark Up's, but nobody question thier deals.
I ordered my 00 Yukon before they started building them at $500 over invoice. I bought it on the internet from a dealer 60 miles away. I never stepped foot in the dealership until the unit was delivered. The only test drive I took was from a GM sponsored event months after ordering it.
I bought my 01 Alero, without ever driving one. I bought it on the internet from a dealer 90 miles away - at invoice. Car was "in transit" when I put the down paymnet. Showed up a week later to pick it up.
I bought my 03 Yukon XL from the same dealer as I got the 00 Yukon from. I was not looking to trade to an 03, but when I brought the 00 in for service they made me an offer I couldn't refuse on the old one and sold me the 03 at Supplier pricing.
I bought my '11 Turbo 6 spd Regal having driven only an automatic, regularly aspired one in the wrong color. I ordered what I wanted from a dealer 15 miles away who gave me the best deal (at $200 over invoice). No trade in.
More or less, I have been doing "the Blind Eye Purchase" for a Decade and I see nothing wrong with it.
Honestly if GM sold all the cars directly to the consumer from the same number of outlets with the same number of employees making the same amount of money, I think everyone (except the dealership owners) would be better off. We would get more consistent pricing, consistent service, and less dishonesty in the profession of selling cars.
To prove my point, think about Apple Computer vs PC. Apple's are mainly sold thru outlets that Apple owns. The service and customer experience is very highly rated. We pay more for the product, but legions love it. PCs can be had from countless outlets, pricing is all over the place, customer service is a joke.
But this will never happen as state franchise laws likely prohibit this from ever happening.
Here is an interesting read on the subject:
http://www.justice.gov/atr/public/eag/246374.htm
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3,211 Posts
Interesting argument, but one that neither side will convince the other on. If you think this type of thing only happens in the car industry, you are wrong. I work for a software vendor, and part of our suite is a Point Of Sale retail system. Good Retail systems handle 'floor cost' and supplier rebates.
Floor cost is the cost that the retailer wants you to think is their cost. When the salesman swings the monitor around to show you 'here's our cost for the item' you can be sure that it is not the cost that was on the suppliers invoice. It will be the invoice cost, plus a margin for overhead, and usually plus a margin for guarranteed profit. That way, even if the salesman gets talked down to 'cost', the store will still make money.
Supplier rebates in some industries are the only way retailers make money. Selling computers to educational institutions is often done at a real loss. The only way the store makes money is based on the rebate cheque the supplier sends them for each verified sale.
Like many have said, businesses have a right to make money. Caveat Emptor.
Floor cost is the cost that the retailer wants you to think is their cost. When the salesman swings the monitor around to show you 'here's our cost for the item' you can be sure that it is not the cost that was on the suppliers invoice. It will be the invoice cost, plus a margin for overhead, and usually plus a margin for guarranteed profit. That way, even if the salesman gets talked down to 'cost', the store will still make money.
Supplier rebates in some industries are the only way retailers make money. Selling computers to educational institutions is often done at a real loss. The only way the store makes money is based on the rebate cheque the supplier sends them for each verified sale.
Like many have said, businesses have a right to make money. Caveat Emptor.
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1,051 Posts
It bothers me how some people basically just think that the dealership is just there to entertain them. No, its a living for people. The owners want to make money, like all business owners, so why shouldnt they make a profit on their customers? I dont see people going into the super market and trying to haggle down that loaf of bread or that gallon of milk. Percentage wise the markup is much higher than on a car so why not haggle the price down, they shouldnt be making any money.
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10,722 Posts
We used to do it as a mix of what you are suggesting -as consumers we got together. When I wanted to buy a fridge or something reasonably expensive we would get workmates and friends to buy something at the same time. Then we would take our list to major retailers and a couple of smaller ones. When you are going to buy three fridges, two stoves and couple of other appliances you get a different attitude from sales managers in the stores as well as much better pricing. We never charged our friends for doing this as we made sure we had saved enough on what we wanted to make it worth while. "Buying clubs" should be used more often.
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10,722 Posts
It is always best to buy common often used items in bulk from "warehouse" type operations than the supermarket. people do shop around between supermarkets rather than ask for "pricedowns"
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7,148 Posts
Exactly. People shop around for lots of things. But according to some salesmen, we should simply "eat it" from whichever we go to first. So - if Safeway doesn't have it on sale, I'm not supposed to checkout Lucky's?
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