Can someone Please explain dealer holdback?..........
Senior Member
Joined: Dec 2002
Posts: 308
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From: Houston, TX
2003 E500
Basically it works like this from what I understand.....
The car manuf. themselves (MBUSA, BMWUSA, all other car makers generally) usually "assist" the dealerships financially by offering a % as a rebate for every car they bring into the dealership.. doesn't matter if they ordered it for stock.. or for a customer. This rebate they receive a percent every month or whatever the time period is to help offset interest payments (they sometimes have to take loans to stock their lots), advertise, maintain/clean the car while the car is on their lot.
Generally the manuf will give them "holdbacks" for I think it's 3 months from when they receive the car. So if the car sits on the lot a long time.. you can see they lose all their "incentive" essentially and that's when it's easy to get a "great deal" on a car.. At that point the car is COSTING the dealer money just sitting there.
On the other hand, if you order the car and take delivery the day it arrives from port. The dealer will STILL receive the holdback on your car for 3 months.. so that it money in THEIR pockets.
There was a site that listed the holdback amounts based on the marque of the car. I think BMW and MB were about 1% of dealer cost or something.. don't quote me.. I forgot. Actually edmonds.com may be the place I found that chart come to think of it.
So basically you can try to work holdback into the deal to get yourself a more attractive offer.
Anyone know how MB is handling the NAV replacement? Will dealers be getting holdback on those cars?
Hope this helps.
Peter
The car manuf. themselves (MBUSA, BMWUSA, all other car makers generally) usually "assist" the dealerships financially by offering a % as a rebate for every car they bring into the dealership.. doesn't matter if they ordered it for stock.. or for a customer. This rebate they receive a percent every month or whatever the time period is to help offset interest payments (they sometimes have to take loans to stock their lots), advertise, maintain/clean the car while the car is on their lot.
Generally the manuf will give them "holdbacks" for I think it's 3 months from when they receive the car. So if the car sits on the lot a long time.. you can see they lose all their "incentive" essentially and that's when it's easy to get a "great deal" on a car.. At that point the car is COSTING the dealer money just sitting there.
On the other hand, if you order the car and take delivery the day it arrives from port. The dealer will STILL receive the holdback on your car for 3 months.. so that it money in THEIR pockets.
There was a site that listed the holdback amounts based on the marque of the car. I think BMW and MB were about 1% of dealer cost or something.. don't quote me.. I forgot. Actually edmonds.com may be the place I found that chart come to think of it.
So basically you can try to work holdback into the deal to get yourself a more attractive offer.
Anyone know how MB is handling the NAV replacement? Will dealers be getting holdback on those cars?
Hope this helps.
Peter
Senior Member
Joined: Nov 2002
Posts: 454
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From: NC
'03 Mercedes E320
Holdback is normally paid in a lump sum quarterly, for all cars shipped to the dealer that quarter. Most cars are 3%, and some manufacturers now vary that with the customer service ratings earned by that dealer. The sum is also usually offset against any charges to the dealer for floor plan interest and advertising, etc., so he will not typically see the full amount. There is no holdback payment for cars traded with another dealer and delivered to a customer, the so called dealer trades. That reduces the profitability of those transactions.
MBWorld Fanatic!
Joined: May 2003
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From: Northern NJ
2014 BMW 550i
I was under the impression that MB holdback was hovering around the 5% area. Other things to consider with holdback is that the dealer usually considers this to be sacred ground, so getting them to eat in to this figure is going to be like pulling teeth. But, it does mean that a dealer can offer below cost deals and still make money. And, different car companies that offer holdbacks take the figure on different amounts. Some are on invoice, others are on MSRP, some may even be on final selling price. Some may even offer different holdbacks on different models. Edmunds.com has a good reference somewhere on this, and autospies.com also made a few mentions about this.
Senior Member
Joined: Dec 2002
Posts: 285
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From: Ohio
2003 E320
Why sell at invoice?
OK, so once a car had been on the lot for longer than 3 month, the holdback incentive is gone.
Then why would the dealer sell a car at cost? I am talking specifically about '03 Volvos, and not saying "invoice" - it is invoice minus some marketing incentive from Volvo. Apparently, dealer is reaping no profit from '03 cars, which is against the laws of nature
Then why would the dealer sell a car at cost? I am talking specifically about '03 Volvos, and not saying "invoice" - it is invoice minus some marketing incentive from Volvo. Apparently, dealer is reaping no profit from '03 cars, which is against the laws of nature
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Joined: Jul 2002
Posts: 5,110
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From: SoCal
MB
Re: Why sell at invoice?
Originally posted by Gethen
OK, so once a car had been on the lot for longer than 3 month, the holdback incentive is gone.
Then why would the dealer sell a car at cost? I am talking specifically about '03 Volvos, and not saying "invoice" - it is invoice minus some marketing incentive from Volvo. Apparently, dealer is reaping no profit from '03 cars, which is against the laws of nature
OK, so once a car had been on the lot for longer than 3 month, the holdback incentive is gone.
Then why would the dealer sell a car at cost? I am talking specifically about '03 Volvos, and not saying "invoice" - it is invoice minus some marketing incentive from Volvo. Apparently, dealer is reaping no profit from '03 cars, which is against the laws of nature
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From: House of Imports, MBZ (So. Cali.)
'06 ML500 w/Apperance pkg & '07 SL550 w/AMG pkg
jim256 is correct with his explaination for MBZ dealerships. The dealer receives the Holdback in one lump sum every quarter, but is contingent on certain criteria. If the dealer is not above the regional average in Customer Satisfaction, they will not get this money and that is typically why they do not like negotiating into this area!!!
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Joined: Jun 2003
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From: Los Angeles, CA
Holdback is paid quarterly and MBZ dealers get 6%. It can be reduced by a number of factors as stated above. It is not considered negotiable because it the owners risk of doing business fund. If a car is selling slow it cost the owner to floor the car, e.g. C-coupes. Dealer incentives are above and beyond any holdback. The manufacturer provides this to the owner in order to sell slow moving units below invoice for example to offset these loses. Realize that if a large number of a particular model are sold near invoice or below it ultimately affects resale-trade-in values. Rebates have the same effect. CLK's sold mostly at sticker or over sticker since US introduction in '97 have the highest resale value of any model ever sold in the US. It's documented! If everyone buys low expect the same at trade-in time. Kelly and Edmunds, etc take all of these factors into consideration.
Thread Starter
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Joined: Jun 2003
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Thank You for the replies. It definitely helped me to understand the whole holdback scenario. My reason for asking this question, wasn't to try to dip into their holdback, but to better understand how the dealer makes his money, and possibly get a better deal when we order our car next month.
If a car is sitting on the lot for awhile, they pay lot taxes on it, and other expenses. That's why it's better to buy a car at the end of the month.
If a car is sitting on the lot for awhile, they pay lot taxes on it, and other expenses. That's why it's better to buy a car at the end of the month.
