Manufacturer Holdbacks

What Exactly Is Holdback? - Dealers must pay the manufacturers when they order a vehicle, not when it is sold. To provide adequate numbers of new vehicles whose options satisfy most customers, dealers finance this excess inventory through the financial arm of their manufacturer or through a local bank. This financing procedure is called a floor plan.

To help their dealers keep up their inventory, manufacturers return the interest the dealer has to pay on those loans (floor plan) for the first 90 days by issuing them a "holdback" check every 90 days. The amount is based on the either the base MSRP or total MSRP or the base invoice or total invoice - less destination charges and averages between 2% and 3%, depending on the manufacturer. In addition some Ford-Lincoln-Mercury dealers who excel in Ford's dealer service ratings (those that are Blue Oval certified) receive an additional 1% to 2% rebate as a further incentive to keep up their good service record.

Don't expect a holdback discount on every vehicle. If a car has been sitting on the lot for 90 days or more, all of the potential holdback profits have been wasted on interest payments that the dealer makes to floor plan (finance) the vehicle. After 90 days, the dealership has to dip into its own profits to keep the car in inventory.

If the car's just arrived, the dealer gets to keep all of the holdback as instant profit. At 45 days he gets to keep 50% of it. Since most dealers rotate their inventory in less than 90 days, they usually get to keep some of the holdback payment.

Holdbacks are paid out whether a customer leases, finances, or purchases a vehicle with cash. Note: not all manufacturers pay their dealers a holdback, so check below to see if your dealer is getting one before negotiating a price on a vehicle. Most salesmen will either deny that such payments exist, or will tell you that other manufacturers offer them, but not their manufacturer.

Even dealers that acknowledge it aren't going to include the holdback in any negotiations. High volume dealerships or dealers with excellent service departments (eg: Ford Blue Oval) qualify for additional manufacturer discounts and incentives (in addition to their holdback payments), and are usually willing to sell vehicles at or near invoice.

There is usually more money available to play with than your salesperson will admit to. Several hundreds of dollars in extra cash can be made by a shrewd dealer who sells a car "at invoice" without acknowledging that they get a holdback payment or a rebate from their manufacturer. Unless you're buying an Audi, BMW, Jaguar, Land Rover, Mini Cooper, Porsche or Saturn rest assured that your dealer is getting a holdback payment which may amount to over £1000 on some higher priced models.

However don't expect a holdback discount on every vehicle. If a car has been sitting on the lot for 90 days or more, all of the potential holdback profits have been wasted on interest payments that the dealer makes to floor plan (finance) the vehicle. After 90 days, the dealership has to dip into its own profits to keep the car in inventory. So on vehicles that the dealer has had for over 90 days, holdback won't help you at all.

Holdback allows dealers to advertise big sales with ads that promise you "£1 over/under invoice!" The dealer can stand to collect more if dealer cash (a rebate) is offered by the manufacturer on the car you are considering. Most advertised sale prices stipulate that all holdback payments, rebates and incentives go directly to the dealer.