Dealer Holdback

Edmunds.com · July 2011

Dealer Holdback

Dealer holdback should be considered a "no-fly zone" for consumers. Car dealers rarely will allow car buyers to use the figure in negotiations. | July 29, 2013 | iStockphoto

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eflite · July 2011

After reading this post i went to Consumer Reports and paid $15.00 thats right fifteen dollars US and got a print out of exactly how much a dealer paid for a certain car. I was in the market for a Jeep Liberty, Dealer sticker Price was $28,650.00 so after I conveyed the Vin # of the Liberty I was looking at and called Consumer Reports and told them the Vin # and the dealership where I had planned to make my purchase they informed me that this Vin # was purchased by my dealer for $8,756.00 now why is it that Consumer reports can give the True Value of that car but Edmunds cannot?..It is also true that they do have Hold Backs..they also have Dealer Incentives, ect. ect. ect. from talking with consumer reports here is how they understand it to work. Say my dealership tells the factory that
1). We can sell 100 Liberties for xx,xxx.xx and well buy an extra 20 Liberties at a discounted price for x,xxx.xx here is where the Dealer Incentives kick in. They are actualy rewarded by the manufacturer IF they sell the extra 20 Liberties before year end.
2). After they have sold 120 Liberties for that model year their Incentives for the next year start to kick in. Now for this year the Manufacturer says hey you sold 120 modles last year how bout we give you 150 Liberties this year for X,XXX.XX each and we will remove the hold back and give you 6 options for each of the 150 models at no cost to you. Meanwhile the cunsomer is Ignorant and doesnt know any better that the dealers who move 200-300 cars a year actualy get a reduced price from the auto manufaturers.
That is why it is SOO important to educate yourself and join any and ALL clubs that realy do work like Consumer Reports, Wholesalers Clubs and the like. Dealerships are like any other company in the world. If you think for one minute that the dealerships are only making 500-600 bucks on every car in their lot, then why do they have 10-20 salesmen per dealership? Its hogwash. They mark their product up just like any other company.

minniedave · July 2011

Furthermore to the post above, Edmunds "True Market Value"????? If TMV shows what "people are actually paying", the number is only valuable to me if it represnets the purchase price of buyers with great negotiating skills. It's entirely possible that TMV reflects the efforts of very poor negotators.

cobraglf · September 2011

If Edmunds didn't have advertisers or people that pay a premium for someone's advice whom they have never met, they would not be around to give over egregious information. If a dealership operates at NO profit, they wouldn't be there to service the customer when they need it. I am not familiar with any business that stays around by not making some sort of profit. They have to (in the very least) keep the lights on and pay their employees. I understand not having to overpay for something, as this is what has made Wal-Mart so very popular, and in the process run many mom and pop stores out of business, but when people pander to the rants and raves of websites that make a living out of trying to HELP? consumers, they are in fact doing a disservice. If a dealership keeps their holdback as their only profit, and chooses to sell vehicles at sticker, then go ahead and be glad you are getting a deal. And when you wake up in the morning and go to work just hope someone doesn't come in to your place of employment, and try and squeeze you into shuttering your windows. Never once has any business stayed operative by not making money. INCLUDING EDMUNDS!!!

thatlaoguy · September 2011

Nice now I have a better understanding of holdbacks. I always pondered why dealers would sell cars for invoice and claim there's no money to be made.

@eflite a very informative post. I'm shocked to hear that cars are bought for such a price if a dealer sells well. I'm tired of all the lies in the auto industry. This is why I refuse to buy a new car because of these lying salesmen.

Tell me if you would do business with a liar because I won't!

austincraft · September 2011

Holdback is actually money to be used for advertising and other related expenses like insurance to sell that vehicle and gets taken away from the dealer. In some cases the money goes to the dealer and the longer the vehicle sits on the lot the less money is in the holdback and will go to a 0 balance.

The thing is though the salesman doesn't make any money and they have families too. The dealer makes the most of course and sales usually gets paid 20-25% gross profit so if they make 1000 they get paid 200-250$. They do not however get paid off the holdback! If they sell you a vehicle at invoice pricing then usually they get a mini deal which is anywhere from $50-$100. So most salesman sell about 10-15 cars a month if that in this day and age. Some are making only $1000-$1500 a month!!? If you have kids and a wife then how can you live off of that. Give the salesman a break they are only trying to make a living in this tough economy and sales is more stressful now because of the internet and because car salesman can't make a living or career at it. That is one reason why there is a high turnover of salespeople. Be considerate of other people because the consumers are ripping off the salesman.

pnnp · September 2011

question for eflite.... so did you end up with the jeep liberty and if so how much did you end up paying for it?

motoyota_ · October 2011

@Eflite: You just gave everyone on this site the most inaccurate information you could mustard. You seriously think dealerships buy 29,000 dollar cars for under 9,000?? You also think that a "3rd" party has exact invoice based on the vin #. WRON

waiting4 · October 2011

TMV only notifies you of what others have (over) paid for a vehicle.

shaoyang · December 2011

hi Eflite, i tried to learn from you and do the same thing but Consumer Reports said they couldn't get report from VIN # (only from model and options etc). how did you do that? thanks!

supermaneah · April 2012

Eflite I would really like to pick your brain for a min, please respond asap.

deputydog1214 · July 2012

Well, this is truly informative. I wish the holdback wasn't hidden. Just offer the lowest price without all the haggle.

DLu · September 2012

@ austincraft,

1. What people are not happy about is dealers' routine practice of concealing information from the consumer, not the fact that they make money. If a consumer concealed information from the dealer and ended up paying less money, then you

nsolinsky · October 2012

Im a salesman at a Honda dealership. It is very rough in this business to make anything. We don't walk into a target and start suggesting what we want to pay for items. We also do not go to a supermarket and make the same suggestions. The car business is one of the toughest environments to be in. Everything is published online so that everyone is aware what is paid on a vehicle. People do not think its reasonable for a dealership to make 3% profit margin on such a high end purchase. A comment below is also correct. A salesman makes only 20% off what the dealership makes. This is also after a $500-1000 that our specific dealer holds as a pack. Meaning if the dealership makes $2,000 on a car. After the pack, there is $1,000 left and the salesman will make $200. It is quite a huge sum of hours and very little compensation. I agree, what would it be like if we were to walk into your work environment and tell everyone to take a huge paycut because everyone is negotiating on our product/service. This is the case for us because it is not a few salesman that are making less, it is every last salesman that exists. We are all just trying to make a living...........and what business survives without making a profit?

bpence1 · October 2013

EFLITE---You sir, are a [non-permissible content removed]! If a car dealer could really make $20,000 GROSS PROFIT on a NEW car....there isn't a car dealership on the PLANET that would sell used cars to make $1,000-3,000 each. [non-permissible content removed]!!!

bam5590 · January 2014

The guy named eflite is a [non-permissible content removed]. There is no discount to dealers who buy cars in volume. Most manufacturers allocate cars to the dealers by who sells the most not buy who can buy the most.. It's called turn and earn. The more you sell, the more you can buy.

redxsage · March 2014

Meh. I just look at the sticker price, multiply it by 0.85, and ask for that amount OTD. Works fine.

doctorevill · May 2016

There has to be more then just standard domestic 3% holdback as Eflite claimed. The largest GM and Chrysler dealer around here routinely sells cars for what would be invoice, -rebates, -3% holdback, minus another $2500-$3000 on a $33,000 MSRP rig. $7-10k off a $32,000 MSRP is common depending on the rebates. I also know there are some manufacturer to dealer rebates occasionally as well. I don't think there is anything as large as Eflite claimed but somehow this dealer is cutting double or triple holdback numbers and still making a lot of profits. They don't even add in the special rebates like college grad or military. If you qualify for those you get even more off. I think this article might be outdated. The current "invoice" prices you see on Edmunds show a much lower markup to MSRP then they used to when this was written. I wonder if they haven't hidden more of the profits in holdbacks then they used to. Not saying that a dealer shouldn't make money but I also don't buy these guys are not getting by just fine. The most expensive mansion in out town belongs to the Ford dealer owner,

stever · May 2016

Invoice doesn't mean what it used to, @doctorevill.

Surprising tips for car shopping in Internet age (USA Today)

dingol · July 2016

what a few people are missing is that the car is just ONE part of the sale. there's accessories, financing, extended warranties. You can sell the car at a mild loss occasionally when the actual car is the smallest part of your profit. So few people understand the other parts of the purchase, get blinded by the "deal" they walk into other areas of profit. Our store, we sell at a loss to cash buyers, make it up on loans. Its a very honest dealership. It just operates at a high volume of razor thin margins. Its a cutthroat industry.

dingol · July 2016

Furthermore, with all the competition out there, average price is right at or below invoice. People think dealerships rake in the cash. As this points out, holdback is only a few hundred to about $1000 on every car. Then the salesman has to get a commission. Our "big sellers" generally start out at "break even" price (not counting keeping the lights on). We're a no haggle place though. Just watch yourself with the "paint protection system" and "extended warranty" from the Finance officer. He is the real profiteer.

dingol · July 2016

doctorevill said:
There has to be more then just standard domestic 3% holdback as Eflite claimed. The largest GM and Chrysler dealer around here routinely sells cars for what would be invoice, -rebates, -3% holdback, minus another $2500-$3000 on a $33,000 MSRP rig. $7-10k off a $32,000 MSRP is common depending on the rebates. I also know there are some manufacturer to dealer rebates occasionally as well. I don't think there is anything as large as Eflite claimed but somehow this dealer is cutting double or triple holdback numbers and still making a lot of profits. They don't even add in the special rebates like college grad or military. If you qualify for those you get even more off. I think this article might be outdated. The current "invoice" prices you see on Edmunds show a much lower markup to MSRP then they used to when this was written. I wonder if they haven't hidden more of the profits in holdbacks then they used to. Not saying that a dealer shouldn't make money but I also don't buy these guys are not getting by just fine. The most expensive mansion in out town belongs to the Ford dealer owner,

its all in the financing.... also.. different trims will usually be marked farther from profit than others. cheap 300 is below invoice... leather gets 2% above... or vice versa. marketing knows how to balance the lot.