Calculate Dealer Holdback on Any New Car

What is Dealer Holdback, and is it Negotiable?

How to calculate dealer holdback on any new car, truck, or SUV.

Last Update: May 2024

The dealer holdback is a percentage of money built into the manufacturer’s factory invoice price of a new car. The manufacturer’s holdback amount varies, typically between 0 and 3%.

It’s essential to note that not all manufacturers offer a holdback amount to dealers. Most vehicle purchasers have no idea what a dealer holdback is, whether it’s negotiable, or how to calculate it.

What is Dealer Holdback?

The dealer holdback amount is a portion of the price of a new vehicle included in the invoice price, generally around 0-3% of MSRP. This money is returned to the dealer by the manufacturer in a lump some quarterly. It’s crucial to understand that holdback isn’t usually negotiable, and not all vehicle manufacturers even provide it to dealers.

The dealer holdback is one of the new car price terms that does not fall in the category of a new car rebate or dealer incentive and is not advertised to the public.

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Although, most dealerships do not like to negotiate holdback. Some dealers will negotiate part or all of their dealer holdback money to sell a car. A common mistake many car buyers make is they attempt to reconcile this hidden dealer money without researching to find out what the actual amount is first.

Car dealers rarely be upfront with this closely guarded secret unless you bring it up first. Knowing how much dealer holdback is ( if it’s even available on the car you want to buy ) will give you a better idea of how you should negotiate your car deal.

Understanding what dealer holdback is and how to calculate it is essential when determining the cost of a new car and figuring out an offer to present to a dealer. Many people believe dealer holdback is a large amount of hidden money new car dealers secretly get to pocket.

Dealer Holdback = Up to 3% of MSRP or Factory Invoice

The holdback percentage will be 0-3% of the MSRP or invoice price, depending on the manufacturer.

The dealer is reimbursed for a holdback from the manufacturer after they sell the vehicle. Every quarter, the amount paid is tallied from all automobiles sold within a particular time range and sent from the manufacturer to the dealer.

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How Dealer Holdback Works

When a car dealer orders a new vehicle from the manufacturer, they’ll finance it through the manufacturer’s lending arm or a third party. The lender will typically only finance up to the invoice amount of the new car. The holdback amount inflates the invoice price; this allows the dealer to borrow a little more money on each vehicle it orders from the manufacturer.

Until the vehicle is sold, the dealer will pay interest to the lending institution, “flooring.” This is why dealers want to sell their cars as fast as they get them on the lot. The quicker they sell the car, the less interest they pay. Once the vehicle is sold, the dealer will receive the manufacturer’s holdback amount in one check.

Car salespeople are typically paid on the gross profit of a car deal. Since dealer holdback is built into a new car’s invoice, car salespeople miss out on any commissions related to dealer holdback.

Dealer holdback, customer rebates, and incentives allow car dealers to advertise heavily discounted prices in their print and media. Another reason you should always read the “fine print” when browsing a car dealer’s advertisement.

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How Dealers Collect Holdback From the Manufacturer

Below is a rough example of how a dealer collects holdback from a manufacturer. As you can see, this is why a dealer tries their best to keep it a secret. Since holdback is a percentage, the amount varies depending on the vehicle.

789 = New cars sold in the first quarter
2% x Holdback percentage to the dealer. (Average of $650/vehicle.)
$512,850 = Quarterly payment to dealer

Depending on the dealership and their percentage, the amount could be higher or lower. $512,000 may seem like a lot of money, but running a new car dealership is costly.

The manufacturers created dealer holdback to help reduce a car dealer’s variable sales expenses (sales commissions and such) and supplement a dealer’s cash flow.

The bottom line: dealer holdback artificially elevates a car dealership’s new car cost on paper.

Is Dealer Holdback Negotiable?

Some books and well-known car-buying websites tell you not to negotiate a dealer’s holdback. These so-called experts tell you it’s a losing battle, but I’m afraid I have to disagree.

I’ve often given up holdback, or a portion of it,l a car. Being a dealer myself, I say you never know what the dealer will do.

“If you don’t ask, you don’t receive.”

Some car dealers, like myself, may give up a portion or all of the dealer holdback, especially if the vehicle is old or has been challenging to sell.

The interest a dealer has to pay increases when a vehicle sits around for too long. Any dealer would gladly give up holdback to get rid of an old car they couldn’t sell.

They may be shy of a unit bonus from the manufacturer, or the sales manager may be trying to hit his bonus. A manufacturer’s unit bonus for the dealership will be a lot more money in the dealer’s pocket than the holdback amount on a single car.

The point is that you never know what a dealer will do to sell a vehicle.

New Car Dealer Holdback Amounts for 2023

Below is a list of the current new car manufacturers and their dealer holdback percentages.

Some manufacturers listed below are no longer in business or phased out.

I left the last known holdback rates posted for college students and car industry professionals doing automotive research.

ManufacturerDealer Holdback
Acura2% of base MSRP
AudiNo dealer holdback available
BMWNo dealer holdback available
Buick3% of total MSRP
Cadillac3% of total MSRP
Chevrolet3% of total MSRP
Chrysler3% of total MSRP
Dodge3% of total MSRP
Fiat3% of total MSRP
Ford3% of total MSRP
GMC3% of total MSRP
Honda2% of base MSRP
Hyundai3% of total MSRP
Infiniti1.5% of base MSRP
JaguarNo dealer holdback available
Jeep3% of total MSRP
Kia3% of base MSRP
Land RoverNo dealer holdback available
Lexus2% of base MSRP
LincolnNo dealer holdback available
Mazda1% of base MSRP
Mercedes Benz1% of total MSRP
Mercury3% of total MSRP
MiniNo dealer holdback available
Mitsubishi2% of base MSRP
Nissan2% of total invoice
PorscheNo dealer holdback available
Ram3% of total MSRP
ScionNo dealer holdback available
Smart3% of total MSRP
Subaru2% of total MSRP (may vary in the Northern U.S.A.)
Toyota2% of base MSRP
Volkswagen2% of base MSRP
Volvo1% of base MSRP

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How to Figure Dealer Holdback on Any New Car

There are four different ways holdback is calculated on a new vehicle:

  • Base Invoice – Figured from base invoice before any options.
  • Total Invoice – Include invoice price of all options before figuring holdback.
  • Base MSRP – FiguFullrom the MSRP before any full options.
  • Total MSRP – Calculated from total MSRP with all options included.

Foreign manufacturers like Toyota, Nissan, and Honda will calculate dealer holdback as a variable percentage of the base invoice, total invoice, base Manufacturer Retail Price (MSRP), or full 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. Some manufacturers like BMW, Audi, and Porsche offer no dealer holdback to a car dealer.

How to Calculate Dealer Holdback From the Base Invoice

To calculate the dealer holdback amount, multiply the percentage by the base invoice price before any factory-added options or packages.

Calculate Dealer Holdback from Base Invoice Example
$38,579.00=Lexus base invoice.
(BEFORE manufacturer packages or options)
2%xDealer holdback percent. (BEFORE manufacturer options)
$771.58=Total dealer holdback amount

How to Figure Dealer Holdback From the Total Invoice Price

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.

Calculate Holdback from Total Invoice Example
$18,989.00=Nissan base invoice.
(BEFORE manufacturer packages or options)
$680.00+Sports package invoice amount
$78.00+Invoice price for floor mats
$19,747.00=Total invoice price
2%xDealer holdback percent. (Total invoice amount including options)
$394.94=Total dealer holdback amount

How to Calculate Dealer Holdback From the Base MSRP

You must multiply the holdback percentage by the base Manufacturer’s Suggested Retail Price (MSRP) before the factory-added options and packages to get the dealer holdback amount.

Figure Dealer Holdback from Base MSRP Example
$28,980.00=Toyota base MSRP. (BEFORE manufacturer packages or options)
2%xDealer holdback percent. (BEFORE any manufacturer added options)
$579.60=Total dealer holdback amount

Figure Dealer Holdback From the 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)

Figure Dealer Holdback from Total MSRP
$34,000.00=Cadillac base MSRP
$3,500.00+GM sports package. (Manufacturer added option retail price)
$37,500.00=Total MSRP
3%xDealer holdback percent. (Total retail price plus any added options)
$1,125.00=Total dealer holdback amount

Walk Through on Figuring Holdback on a Vehicle

You want to find the holdback amount on a 2018 Ford F150 pickup. First, click on Edmunds and find the invoice price. You will also want to check the “See What Others Paid” section to see what deals are available in your local area.

Looking at the chart above, Ford has a holdback of 3% of the total MSRP. So, you multiply the full retail price by 3%. Do not add the destination fee when calculating dealer holdback.

The Ford F150 I built has an MSRP of $46,620 with added options minus destination; multiply it by 3%, and you get a dealer holdback of $1,398.60.

Subtract the $1,398.60 from the total invoice of the F150, and you get $40,474.40. When writing this example, no other dealer incentives or rebates are available for the 2015 Ford F150.

Now, you must add the $1,195 destination fee (sorry, there’s no way around it) and end up with a total of $41,669.40.

Your GOAL is to buy the car at as close to $41,669.40 as possible; this includes the destination fee. If any factory rebates or dealer cash were available on this car, you would subtract it from the $41,669.40, which would be your new purchase price goal.

About the author
Carlton Wolf is the author and founder of Auto Cheat Sheet.My name is Carlton Wolf, and I’ve been in the car business since 1994, both retail and wholesale. I created the Auto Cheat Sheet to better educate buyers about the deceptive sales practices many dealerships use nationwide. Please understand that not all car dealers are dishonest. However, you never know who you’ll be dealing with, though. I’m willing to share my knowledge and experience with anyone who listens. Keep in mind that I’m a car guy, not a writer.

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