How to Figure Car Dealer Holdback Rates on a New Vehicle
What is dealer holdback? How do you figure a new car dealer's holdback rate? What manufacturers actually have this secret amount of money built into their new car invoices?
New car buying tips about car dealer holdback you will find in this section:
- 2014 car dealer holdback chart by manufacturer.
- What is dealer holdback?
- What car dealer's do with holdback.
- Is dealer holdback negotiable?
- Which car manufacturers have holdback built into their new car invoice?
- How to figure dealer holdback on any new car.
- Step-by-step example on how to figure car dealer holdback on a new vehicle.
What is dealer holdback?
Understanding what dealer holdback is as a car buyer is very important when it comes to determining the true cost of a new car. Many car buyers make the mistake believing dealer holdback is a really large amount of secret money new car dealer's secretly pocket.
A car dealer's holdback on a new vehicle is, depending on the manufacturer, anywhere between 0-3% of the MSRP or invoice price. The dealer holdback is repaid to the dealer from the manufacturer after the vehicle is sold. Dealer holdback is usually totaled up and sent from the manufacturer to the dealer on a quarterly basis.
Holdback was created by the manufacturer's to help reduce a car dealer's variable sales expenses (sales commissions and such) and to supplement a dealer's cash flow. Bottom line, dealer holdback artificially elevates a car dealership's cost on paper.
Knowing what a car dealer's holdback is on the new car you want to buy, has a direct correlation when you're figuring the car dealer's true new car cost on any new vehicle.
What do Car Dealers do with Holdback?
When a car dealer orders new vehicles from the manufacturer, they will finance them through the manufacturer's lending arm or an outside bank at a certain interest rate. The lender will finance the invoice amount of the new vehicle. The invoice is inflated with the holdback amount, this allows the car dealer to borrow more money on each car it orders.
A car dealer pays interest to the lending institution on a new car until it's sold. This is called "flooring." This is why car dealers want to sell their cars as fast as they get them. Once the new car is sold, the dealer will receive the holdback amounts in one check from the manufacturer, usually every quarter.
Dealer holdback, customer rebates, and incentives allow car dealers to run heavily discounted prices in their advertising to the public. Another reason you should always read the "fine print" when reading a car dealer's advertisement.
Car salesman are paid on the gross profit of a car deal. Since dealer holdback is built into the new car's invoice, car salesmen miss out on any commissions related to holdback.
Is Dealer Holdback Negotiable?
Some books and well-known car buying websites tell you not to worry about trying to negotiate dealer holdback with a car dealer. These so called experts will tell you it's a losing battle. There's been many times I've personally given up a portion, if not all of dealer holdback on a car to sell it. Being a dealer myself, I say, "If you don't ask, you don't receive."
Car dealers, including myself, will give up a portion, or all of the dealer holdback to sell a car that's been on their lot for a while. You never know what a dealer will do to sell a car. They may be just shy of a unit bonus from the manufacturer, or the Sales Manager may be trying to hit his own personal bonus. The interest a dealer has to pay on a vehicle sitting on their lot starts to get expensive when a car sits around for too long. A unit bonus is a lot more money in the dealer's pocket than the holdback amount. The dealer would be glad to give up the holdback to you to get rid of an aged vehicle.
How to get Car Dealers to Compete Online to Give You the Lowest Price!
Most foreign manufacturers like Toyota, Nissan, and Honda will offer car dealers holdback that's a variable percentage of the base invoice, total invoice, base Manufacturer Retail Price (MSRP), or total MSRP (sticker price). Domestic manufacturers like General Motors, Ford, and Chrysler offer car dealers a holdback of 3% of the total MSRP of the new car. There are also some manufacturers like BMW, Audi, and Porsche that offer no dealer holdback to a car dealer
Most Current New Car Dealer Holdback Percentages by Manufacturer 2014
|Acura||2% of base MSRP|
|Audi||No dealer holdback available|
|BMW||No dealer holdback available|
|Buick||3% of total MSRP|
|Cadillac||3% of total MSRP|
|Chevrolet||3% of total MSRP|
|Chrysler||3% of total MSRP|
|Dodge||3% of total MSRP|
|Ford||3% of total MSRP|
|GMC||3% of total MSRP|
|Honda||2% of base MSRP|
|Hyundai||3% of total MSRP|
|Infiniti||1.5% of base MSRP|
|Jaguar||No dealer holdback available|
|Jeep||3% of total MSRP|
|Kia||3% of base invoice|
|Land Rover||No dealer holdback available|
|Lexus||2% of base MSRP|
|Lincoln||No dealer holdback available|
|Mazda||1% of base MSRP|
|Mercedes Benz||1% of total MSRP|
|Mercury||3% of total MSRP|
|Mini||No dealer holdback available|
|Mitsubishi||2% of base MSRP|
|Nissan||2.8% of total invoice|
|Porsche||No dealer holdback available|
|Ram||3% of total MSRP|
|Saab||2.2% of base MSRP|
|Scion||No dealer holdback available|
|Smart||3% of total MSRP|
|Subaru||2% of total MSRP (There may be a difference in the Northern U.S.A.)|
|Suzuki||3% of base MSRP|
|Toyota||2% of base MSRP|
|Volkswagen||2% of base MSRP|
|Volvo||1% of base MSRP|
Revised January 2014
How to figure dealer holdback on any new car
If the manufacturer calculates holdback from:
Total MSRP: You must include all factory added options and packages for a total MSRP before multiplying the percentage for the dealer holdback amount. (Do not add the amounts of dealer added options to the total before figuring the dealer holdback)
|$34,000.00||=||Cadillac vehicle MSRP|
|$3,500.00||+||GM Sports Package (Manufacturer added option retail price)|
|3%||x||Dealer holdback percent (multiplied by total MSRP of vehicle PLUS manufacturer added options)|
|$1,125.00||=||Total dealer holdback amount|
Base MSRP: You must multiply the holdback percentage by the base MSRP before the factory added options and packages to get the dealer holdback amount.
|$28,980.00||=||Toyota base MSRP (Before any manufacturer added options or packages)|
|2%||x||Dealer holdback percent (Multiplied by base MSRP BEFORE any manufacturer added options)|
|$579.60||=||Total dealer holdback amount|
Total Invoice: You must add all the factory added options and package costs together for a total invoice cost before multiplying the percentage for the total dealer holdback amount.
|$18,989.00||=||Nissan base invoice price (Before any manufacturer add options or packages)|
|$680.00||+||Sports package invoice amount|
|$78.00||+||Invoice price for floor mats|
|$19,747.00||=||Total invoice price (Total invoice amount for base Nissan vehicle PLUS all factory added options)|
|2.8%||x||Dealer holdback percent (Multiplied by total invoice amount including all factory added options)|
|$552.92||=||Total dealer holdback amount|
Base Invoice: You must multiply the percentage by the base invoice price before any factory added options or packages to calculate the dealer holdback amount.
|$38,579.00||=||Lexus vehicle base invoice (Base invoice BEFORE any manufacturer added packages or options)|
|2%||x||Dealer holdback percent (Multiplied by base invoice BEFORE any manufacturer added options)|
|$771.58||=||Total dealer holdback amount|
Step-by-Step Example on How to Figure New Car Dealer Holdback on a New Vehicle
Here's a step-by-step example on how to look up and calculate a new car dealer's holdback on a new car:
You want to find the holdback amount on a 2011 Nissan Maxima 3.5 SV. First click on Edmunds.com and select the make (Nissan), then the model (Maxima). Now select the pricing and which trim or style you would like (S or SV). I selected SV. Now select the color and options you'd like on your new car. Afterwards select the True Market Value tab.
Looking at the chart above you can see for Nissan you have to take the total invoice price and multiply it by 2.8% (do not add the destination fee when calculating dealer holdback). The Nissan Maxima that I built, with the options I selected totals $30,727.00, multiply it by 2.8% and that equals $860.36 for dealer holdback.
Subtract the $860.36 from the total invoice of the Maxima and you get $29,866.64. At this time there is no other dealer incentives or rebates available for the 2011 Maxima.
Now you must add the $760.00 destination fee (sorry no way around it) and you get a total of $30,626.64.
Your GOAL is to buy the car as close to $30,626.64 as you can, this includes the destination fee. If there were any factory rebates, or dealer cash available on this car, you would subtract it from the $30,626.64, and that would be your new purchase price goal.
Read our section on How to Figure a New Car Fair Profit Offer to read in more detail on how to calculate the cost on any new car.
Get the Lowest Price on Any New Car | Car Buyer's Cost Sheet Index
Where am I?