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Dealer Holdback questions



  • My Texas car dealer charges me "inventory tax" on the car I want to purchase. He says in Texas, all buyers have to pay ""inventory tax. I would like to know if this a correct statement, or is "inventory tax" an expense that should be paid by the car dealer instead. I always thought that the buyer only has to pay sales tax. Thank you for your help.
  • I live in Texas and every new car I've bought since living here has had that charge and I've bought from many different places.
  • Thank you Badgerpaul for your input. I guess it's normal business practice in Texas for buyers to pay inventory tax, and this is not a negotiable point.
  • A little known secret is that the customer always pays for everything whether it's broken out on the sales sheet or just a part of the price.
  • kyfdxkyfdx Posts: 66,757
    The tax is technically a tax on the dealer... But, as noted, every dealer in Texas passes it along to the consumer, as a line item charge.

    So, the statement by the dealer is wrong, but immaterial..

    Fortunately, it is a small charge, relative to the purchase price.

    visiting host


    Prices Paid, Lease Questions, SUVs

  • oldfarmer50oldfarmer50 Posts: 10,445
    "...Fortunately, it is a small charge..."

    What next, a toilet paper tax for the customer rest room? Every time I read about these kind of deals I become more devoted to the "Bobst" method. :mad:

    2015 Mustang GT, 2009 PT Cruiser, 2004 Chevy Van

  • dash5dash5 Posts: 421
    Will specific dealer holdback information be on the vehicle invoice? Sorry if that's obvious.

    Also, as I understand it I should be able to request to see the invoice on any vehicle i'm purchasing and the salesperson should show it to me, or I should find another salesperson. Sounds right?
  • oldfarmer50oldfarmer50 Posts: 10,445
    "...Will specific dealer holdback information be on the vehicle invoice?..."

    Edmunds has that info online. I don't know if it is on the invoice of most cars.

    I would think the salesman is under no obligation to show you the invoice unless he/she is basing your price on it (such as: Invoice plus $100). Invoice info is also available online.

    I once saw a car where the dealer had listed the holdback as a charge to the customer thus trying to collect it twice.

    2015 Mustang GT, 2009 PT Cruiser, 2004 Chevy Van

  • dash5dash5 Posts: 421
    Ah I see, it's a static value:

    Honda 3% of the Base MSRP

    I thought it varied from dealer to dealer or changed over time. Thanks

    I know invoice is online but they seem to vary a bit depending on which site you use, not to mention I cant find the exact codes the dealer gives me sometimes. For instance a Rav4 was quoted to us with 5 or 6 option codes, I found 4 easily but not the others. I suppose bottom line is it would be easier to just see the invoice ;)

    Well what I'll do is run up an invoice online and just tell them "this is what I'm coming up with and that's what I'm going by unless I see otherwise from you"
  • wlbrown9wlbrown9 Posts: 867
    "...Fortunately, it is a small charge..."

    "What next, a toilet paper tax for the customer rest room?"

    I thought that was covered under the 'shop supplies' charge. Well, on second thought that should be included in the DOC fee for the sales side, shop supplies would cover it for the repair shop side.
  • isellhondasisellhondas Issaquah WashingtonPosts: 19,668
    Honda changed thier holdback to 2% last year.

    Holdback HELPS pay for flooring charges and it doesn't fall to the bottom line as profit for the store.
  • oldfarmer50oldfarmer50 Posts: 10,445
    "...Honda changed their holdback to 2% last year..."

    I know you have mentioned that before. Edmunds data is from 2005. Shouldn't they update it? I know some of their rebate data is off too. Mr. Edmund must be asleep at the switch. ;)

    "...Holdback HELPS pay flooring charges..."

    Except when you collect it from the mfg. and then try to collect it again from the customer like the Saturn dealer I mentioned. Hmmm....Saturn's holdback is 3% of total MSRP so that would have been 6% on a $25000 car. And that's if they sold it at "invoice".

    2015 Mustang GT, 2009 PT Cruiser, 2004 Chevy Van

  • dash5dash5 Posts: 421
    Thanks, 2%, good to know that. By flooring charge I assume you mean the cost to keep the car as inventory on site? And by "helps" do you mean partially covers it or fully covers it and the rest is profit?

    I'm looking to be fair but get a good deal.
  • isellhondasisellhondas Issaquah WashingtonPosts: 19,668
    Collect holdback from the customer?

    Now, that's a new one!
  • isellhondasisellhondas Issaquah WashingtonPosts: 19,668
    You won't make any friends by bringing up holdback at a car dealer.

    When I say it "helps" that's what I meant. That would vary.

    Besides flooring, the overhead to run a store is a lot higher that most people would imagine.
  • dash5dash5 Posts: 421
    Not looking to make friends. Just buying a car and like to know the whole picture. I certainly doubt the best salesman would look to make me a friend by telling me the whole story.

    I'm a big fan of capitalism, I have no problem with a guy making a buck so long as the service is good. Wouldnt nickel and dime down to the last 50 dollars on a car. That said, if a dealer is selling at invoice and still getting another 500+ from holdback, on top of the money he's getting from me via financing, my trade in and any work I'll have done in his service bay, I wanna know.
  • isellhondasisellhondas Issaquah WashingtonPosts: 19,668
    All of those things are interesting to know but every car has a market value. If what you offer makes sense, you'll have a deal. If not, they will walk you.

    The finance profit, if any, won't be considered by the sales dept and they can't assume you'll ever use thier service dept.

    It sounds like you are trying to be fair and you will probably drive out with a new car.
  • jeffyscottjeffyscott Posts: 3,855
    Rather than saying "I want to pay $X because I know the invoice is $Y and holdback is $Z and I know there is a dealer incentive of $W and...", just say "I will pay $X for this car".
  • joel0622joel0622 Posts: 3,302
    Besides flooring, the overhead to run a store is a lot higher that most people would imagine

    Truer words have never been spoken. Check this out.

    I read your post earlier and it got me thinking so here is what I did. I took the average number of new cars and trucks that we sell a year and multiplied it by the average hold back.

    Then I multiplied our average monthly expenses here including floor plan times 12 to get a figure for the year.

    A years worth of hold back is equal to 3 months worth of expenses in our store, and we have our expenses under control here and have a slim advertising budget.
  • kyfdxkyfdx Posts: 66,757
    I'd think an extra revenue stream that covers 25% of your expenses is substantial... Not sure what argument you are trying to make here... :surprise:

    Not too hard to figure out how cars sell for under invoice.. ;)


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  • joel0622joel0622 Posts: 3,302
    No argument, just an observation. Isell just got my wheels turning and got me thinking about it.

    Besides its not an extra revenue stream its just the way the business is structured. If the manufacture did not offer hold back our dealer invoice would just be that much lower. They try to make you think it is something they are doing for the dealer but it is just another way to distribute $$ that are ours in the first place.

    Also every one know that you are not in the new car business to make big money, it is just gives you the ability to sit under a Manufactures sign and sell used cars and new trucks. :D
  • exb0exb0 Posts: 539
    Are you saying that the holdback alone covers 25% of all the expenses in your store, including the used car and service departments and all the salaries? If that’s true, it is simply amazing! I bet that the 300% markup in your service dept. pays the rest of the bills and then some. Not to mention the profits on the used cars.
  • joel0622joel0622 Posts: 3,302
    My god, you people are like Hyenas on a dead Zebra. :D My statement was painted with a broad brush as a generalization, thinking out loud more then anything.

    I always tell myself to stay away from the holdback forum. :D
  • exb0exb0 Posts: 539
    My apologies, Dead Zebra. :D But I really appreciate your post. Lifts a little guilt of my shoulders when I beat a SM down to $1K under invoice while he’s whining to me and wants to know if I’ll pay his mortgage.
  • volvomaxvolvomax Posts: 5,274
    The ONLY thing holdback even remotely cover is the flooring expense on a new car.
    Depending how long the car sits on the lot, it may not even cover all of that.
    All other expenses are covered out of the profit generated by the dealership,just like any other business.
  • isellhondasisellhondas Issaquah WashingtonPosts: 19,668
    Yeah, this is a good forum for me to stay out of and I know this.

    Now service has a 300% markup ??
  • exb0exb0 Posts: 539
    I don't know, Isell, my dealer charges $90 per hour for labor, do you think they pay over $30 per hour to the techs? And lets not even mention that those are the book hours, not the actual hours worked.
  • volvomaxvolvomax Posts: 5,274
    Do we really need to get into this?
    A lawyer charges $300/hr

    Markups on goods and services are part and parcel of the real world.

    If your gonna use the car dealer scale and complain,then EVERYONE is horrendously overpaid and making wayy too much money.
  • jeffyscottjeffyscott Posts: 3,855
    my dealer charges $90 per hour for labor, do you think they pay over $30 per hour to the techs?

    That is just silly,

    Do you think the techs get no paid time off, do you think they have no health insurance, life insurance, disability insurance, FICA tax, etc. paid by the employer?

    Do you think there is no cost for the facility that they work in?

    Do you think the rest of the service department personnel get no pay or benefits?

    I'm not in that busness, but pretty sure my hourly pay represents somthing between 1/3 and 1/2 of the total cost of me, to my employer. I assume it is a similar ratio for auto techs.
  • isellhondasisellhondas Issaquah WashingtonPosts: 19,668
    You really need to think about some of the other costs.

    We have four people who man our appointment desk, six Service Advisors, three shop managers and paperwork people. These people, like our techs like to get paid. Then we have lot porters, the guy who drives our shuttle van.

    And if you had any idea what we pay to replace and constantly update our shop equipment, that 90.00/hr would start looking pretty reasonable.

    Have you ever worked as a mechanic or managed a shop, as I have?

    Sometimes a skilled mechanic can beat book times. On other, nasty jobs they can't. Today's well equipped mechanic/technician probably has 40,000 invested just in his personal tools alone.

    It's not all gravy!
This discussion has been closed.