What does the term “holdback” mean?
Holdbacks are offered by the manufacturer to help defray some of the costs associated with the dealer’s acquisition of new cars from the factory. Usually holdbacks are anywhere from one to three percent of the MSRP and vary in duration by manufacturer. In most cases, holdbacks are provided to cover the interest on the dealer’s vehicle loans. The advantage to the dealer in selling the car as soon as possible is that he pockets more of the holdback money. The longer the car stays on his lot, the less he gets. After the holdback period has expired, the dealer begins to lose money on the car. While holdbacks are not negotiable, it is possible to negotiate the profit the dealer makes above invoice by knowing how much holdback he/she will be retaining. If a car has been on the lot for two or three months, the dealer is far more likely to sell at or near invoice to avoid incurring further debt. Remember, the dealer’s profit is built into the cost of operating the dealership, paying his salesm
