Dealer Cost of '03 S2000 = $29,785 USD
#11
Originally posted by 03SL-s2k
Hold back is there because consumers don't allow a dealer to make a fair profit anymore and the manufacturer has to ensure the dealer makes some money, $4 doesn't pay diddly sh%t.
Hold back is there because consumers don't allow a dealer to make a fair profit anymore and the manufacturer has to ensure the dealer makes some money, $4 doesn't pay diddly sh%t.
Besides, protecting dealer profit is not the main reason for holdback. BMW and a few other manufacturers don't even use holdback. Their invoice is the price. Holdback (as in check or restraint) is used more as a stick by the manufacturers to ensure that the dealerships follow the rules. For example, a dealership could sell a car and then pay other bills instead of paying the manufacturer for the car. If they report the sale within the time allotted, then they get the holdback. If they don't report a sale or go out of business after making a sale, the manufacturer still has the holdback to offset the loss. Holdback is also used to pace the profits of a dealership so that they will have a more constant flow of money coming in to pay their bills. This way the dealership won't get in financial trouble during the lean months and the manufacturer is protected against the dealership going out of business.
Anyway, new cars sales is not where dealerships make most of their money. Used cars and service are where the profit is made. New car sales just brings in the business.
#13
Speaking as a former dealer I can tell you that there are other reasons for the holdback, why it originated and why dealers like them.
1. Salespersons are generally paid a % of the profit on each deal. The holdback is not considered part of the profit for calculating sales commissions. Thus a dealer may sell an S2000 for $500 over invoice and the dealer makes $1500 but the salesperson makes about $125. If there no holdback and the dealer made $1500 the salesperson would make about $375.
2. Most people know about it now but the holdback was a big secret for several years. It allowed dealers to advertise sales with "cars at invoice" and still make a profit. They could also show customers the invoice and say, "See what a good deal I'm giving you, I'm selling it to you for only $500 over invoice so I'm only making $500 on a 30k car". Yeah, right!
1. Salespersons are generally paid a % of the profit on each deal. The holdback is not considered part of the profit for calculating sales commissions. Thus a dealer may sell an S2000 for $500 over invoice and the dealer makes $1500 but the salesperson makes about $125. If there no holdback and the dealer made $1500 the salesperson would make about $375.
2. Most people know about it now but the holdback was a big secret for several years. It allowed dealers to advertise sales with "cars at invoice" and still make a profit. They could also show customers the invoice and say, "See what a good deal I'm giving you, I'm selling it to you for only $500 over invoice so I'm only making $500 on a 30k car". Yeah, right!
#14
I am not convinced that the internet displayed invoice price and holdback percentage is all there is to the story. More than once I have purchased cars (not the S2000) at exactly this dealer cost (invoice - holdback). Seems like the sale does nothing more than keep the volume up and feed the service volume. It is hard for me to believe the new car showroom is operated at a net loss.
#16
Originally posted by cdelena
Your example makes it sound like the manufacturer/distributor is financing dealer inventory. I was under the impression that is left to financial institutions like it is in most industries. It is hard for me to believe that AHM is a banker and these dealers are funded by an auto company rather than a funding company.
Your example makes it sound like the manufacturer/distributor is financing dealer inventory. I was under the impression that is left to financial institutions like it is in most industries. It is hard for me to believe that AHM is a banker and these dealers are funded by an auto company rather than a funding company.
#17
Originally posted by cdelena
I am not convinced that the internet displayed invoice price and holdback percentage is all there is to the story. More than once I have purchased cars (not the S2000) at exactly this dealer cost (invoice - holdback). Seems like the sale does nothing more than keep the volume up and feed the service volume. It is hard for me to believe the new car showroom is operated at a net loss.
I am not convinced that the internet displayed invoice price and holdback percentage is all there is to the story. More than once I have purchased cars (not the S2000) at exactly this dealer cost (invoice - holdback). Seems like the sale does nothing more than keep the volume up and feed the service volume. It is hard for me to believe the new car showroom is operated at a net loss.
Also don't forget the "documentary fee" or "processing fee". In our area that can run as high as $400 and is routinely $299. TN has a law that says that dealers cannot waive this fee. If they charge it to only one customer they must charge to all. Last year I bought a new Avalon "at invoice". With the holdback, the wholesale finance reserve and doc. fee the dealer made about $1000. Of course the saleman made nothing!
Also many manufacturers, particularly domestic manufacturers, give a 5% rebate to all cars in dealer inventory when the new models come out.
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