Dealer Holdback questions

isellhondas · November 2007

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.

oldfarmer50 · November 2007

"...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".

dash5 · November 2007

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.

isellhondas · November 2007

Collect holdback from the customer?

Now, that's a new one!

isellhondas · November 2007

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.

dash5 · November 2007

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.

isellhondas · November 2007

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.

jeffyscott · November 2007

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".

joel0622 · November 2007

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.

kyfdx · November 2007

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..

joel0622 · November 2007

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.

exb0 · November 2007

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 thats 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.

joel0622 · November 2007

My god, you people are like Hyenas on a dead Zebra.

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.

exb0 · November 2007

My apologies, Dead Zebra.

But I really appreciate your post. Lifts a little guilt of my shoulders when I beat a SM down to $1K under invoice while hes whining to me and wants to know if Ill pay his mortgage.

volvomax · November 2007

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.

isellhondas · November 2007

Yeah, this is a good forum for me to stay out of and I know this.

Now service has a 300% markup ??

exb0 · November 2007

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.

volvomax · November 2007

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.

jeffyscott · November 2007

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.

isellhondas · November 2007

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!

Kirstie_H · November 2007

Customers figure that it's ALL gravy. To hear some talk, you'd think that salespeople would be living on easy street just for opening the doors every day.

Dealers say that NONE of it is gravy. To hear some talk, you'd think that the dealer is in the red every day and keeps the biz open just for public service.

I suspect the truth can be found somewhere in the middle.

isellhondas · November 2007

Oh, I think most mechanics would be happy to tell you about the gravy jobs. It's a good thing there ARE gravy jobs or there would be a bigger shortage of techs than there already is!

Finding a rattle under a dash or trying to track down an intermittent drivability problem can be vexatious work!

british_rover · November 2007

I think you would find most new car operations are run in the red almost all the time. The used car side might make money on its own but once you lump in the new car side loses then over all sales department probably runs at a loss or at best break even.

The money is made in parts and service.

exb0 · November 2007

Isell, I was just following up on Joel's post that basically said that the holdback alone pays for 25% of all the expenses of his store that includes the lights, building, salaries and the porter. If that's the case, then you guys are doing really well and you have nothing to complain about when a customer hits you below invoice, especially if you keep in mind all the other sources of revenue.

However, I understand your point of view, it doesn't matter how much you sell the car for, you will always want more and you will always have a justification for it. It is human nature to always want more, and it is also human nature to blame somebody else when you can't get that.

I personnaly know some store owners and members of their immediate families. Trust me, they are not suffering. However, they are always whining about what cheapskates their customers are, even though they enjoy a lifestyle that exceeds 99.9% of their customers.

joel0622 · November 2007

personaly know some store owners and members of their immediate families. Trust me, they are not suffering. However, they are always whining about what cheapskates their customers are, even though they enjoy a lifestyle that exceeds 99.9% of their customers

Kudos to them for being successfully business people and having the balls to take a chance on owning there own business. You don't speak badly of them so they must be ethical business people.

(the following is not directed at exb0, just talking)
Success is not a bad thing in the car business and you can't hold a dealer at fault or immediately brand them crooked because they are successfully

We work in the only industry in the world with the exception of the Crude Oil business that people dislike you for being profitable.

venture · November 2007

We work in the only industry in the world with the exception of the Crude Oil business that people dislike you for being profitable.

Well...I'm not exceptionally happy about what my attorney charges me per hour.

My real estate agent charges 6% too which doesn't make me jump for joy either.

joel0622 · November 2007

True, the commission structure in the realty world baffles me also.

jeffyscott · November 2007

Kudos to them for being successfully business people...Success is not a bad thing in the car business...We work in the only industry in the world with the exception of the Crude Oil business that people dislike you for being profitable.

What I dislike is as was posted above..."Dealers say that NONE of it is gravy. To hear some talk, you'd think that the dealer is in the red every day and keeps the biz open just for public service." When reality is, as was also posted above..."they enjoy a lifestyle that exceeds 99.9% of their customers".

Note that this is talking about the owners of dealerships not sales people or other employees. Do sales people not see where and how the owners live? Maybe they should demand a bigger slice of the pie from ownership, instead of blaming the customers...just a thought

.

jeffyscott · November 2007

Do you go into a department store and demand to see invoices of the clothes you are buying and then try to get some of the stores own money on top of that?

What would happen if I did?

Am I holding a gun and demanding this information from the car dealership? If you don't like it just say "no you can't see that" and/or "no I won't sell for that price". I think that is what the department store would do.

joel0622 · November 2007

Its just profit, nothing more, nothing less. Holdback, Dealer Cash, Bonus Cash, working a wholesaler after you leave to put more money in your trade, its all profit.

I wish the the manufacture would do away with all of it to include rebates and just give us about $5K mark up in each car. Then may the best man/women win when the smoke clears. It would be a level playing field for all concerned. I want you to pay all $5K and you want to pay me $100 now lets meet in the middle. There would be no mystery for the customer wanting the elusive holdback on the car we have had in inventory for 210 days.

It would also help my check because I don't get paid on holdback or any other after sale money

Now allot of that is tongue in cheek but I do wish the process was simplified

I have a very long rant on the demise of the car business from a sales point of view but I won't get into all that. I will just summarize it by saying we have given the consumer to many decisions to make when they come to buy a car. That may be good Blog material

dino001 · November 2007

I want you to pay all $5K and you want to pay me $100 now lets meet in the middle

Means... $150?

:P

jeffyscott · November 2007

There are some dealers that put a price tag on a car and stick with it, the price is what it is...at least on any given day. Examples are Fitzmall, Carmax, Saturn (they still do that, right?).

british_rover · November 2007

I think Saturn stopped.

greanpea68 · December 2007

There are some dealers that put a price tag on a car and stick with it, the price is what it is...at least on any given day. Examples are Fitzmall, Carmax, Saturn (they still do that, right?).

The fun begins when they appraise your trade :P

"KElly Blue book says my car is worth $12,900"

"Why are you only giving me $9000"

GP

exb0 · December 2007

The fun begins when they appraise your trade.

Nonsense. A month or so ago I went to the Fitzgerald Toyota in Gaithersburg MD to test drive Camry SE V6. The store has 6 pcs in the center of the showroom that the customers and salespeople use to check their inventory on the public web site. The salesman searched their inventory on one of those pcs and printed out the specs and the price of for all SEs V6 available from their public web site. Their price was $300 under invoice w/ $99 processing fee and no other junk fees.

After the test drive the manager appraised my trade-in: 04 Acura TL base w/ 30K on the clock that was in a minor accident. They gave me a detail appraisal with the KBB good condition and the Black Book avg. cond. values written on the appraisal. Values they gave me matched the online values for those guides. They offered me $20K minus $600 for a new set of tires. The price they offered me was in between KBB and BB, BB was about 1K lower than KBB. $20K was the most any traditional store had offered me for that car at that time.

The whole process was extremely painless and polite. No lies, no pressure, just smiles; it didnt feel like I was in car store.

jeffyscott · December 2007

I think Saturn stopped.

I don't know for sure, but I do see that edmunds lists TMV at MSRP, so I am guessing they still do the one price thing.

Maybe doing rebates is something new for them???

british_rover · December 2007

Yeah maybe that is right and the rebates are new.

deskman · December 2007

Holdback belongs to the dealer.Consumers need to get a life and understand profit is what every business is based on.

Next time anyone asks me about my holdback i will give them directions to a different dealer. :shades:

oldfarmer50 · December 2007

"...Next time anyone asks me about holdback I will give them directions to a different dealer..."

If I understand correctly when you do a dealer trade holdback stays with the other dealer. If that's correct why do salespeople seem to prefer dealer trades vs.ordering from the factory?

Is it really because they think the customers are likely to back out if they have to wait?

deskman · December 2007

I only dealer trade if i am making a big gross or i am close to a stairstep level from the factory.

volvomax · December 2007

If you are "trading cars" then in essence, you are trading holdbacks.
If dealer A sells a car to dealer B, but doesn't take one of dealer B's cars in return, then dealer A keeps the holdback.
Since you have to swap cars to keep the holdback straight, thats is why it is called a deaerl trade

greanpea68 · December 2007

If dealer A sells a car to dealer B, but doesn't take one of dealer B's cars in return, then dealer A keeps the holdback

Here in the world of Nissan...

Who ever reports the car sold gets the hold back. When ever we do swaps we in clude all hold back plus any add ons... ussualy only wheel locks...

Did have one dealer charge us the resistall pkg. It was a sticker deal and they had the car what are you gonna do. :confuse:

GP

kyfdx · December 2007

Wow... a dealership getting stuck with the Mop-n-Glo.. :surprise:

Bad karma...

volvomax · December 2007

With Volvo, the holdback is paid when the car is wholesaled to the dealer.
CSI money is paid or RDR's,assuming that the dealer qualifies

deskman · December 2007

Collect holdback from the customer? I LIKE IT!!!!!!!!!

I like to pencile a non lease payment like a lease.payment plus tax always gives my closer a move if they need one.

Dealer Holdback questions

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