Brian2010

I did the same thing. I sold my infiniti on the street. I made 7000 bucks.Carmax wanted to give me a break even price. Dealers want to make money on both ends.Brings alot of bull into the deal.

snowman0920

Holdback is additional money that a manufacturer pays to a dealer on new cars. No two programs are alike, and there are as many formulas and programs for holdback as there are manufacturers. So, a program for a Chevy dealer is going to different than one for a Ford or VW dealer. It could be a fixed dollar amount per unit bought or a percentage. And, the amount could vary depending on sales targets that the manufacturer sets for the dealer. Also, lately, manufacturers have been more inclined to change holdback programs from fixed $ or %'s to "earned" amounts, that increase as target sales levels are achieved.

Dealers do actually pay the invoice amount for the car. It's the holdback or other similar earned incentive, which is normally paid to the dealer after the vehicle is sold, that allows them to sell at or below invoice. I saw a Chrysler/Jeep dealer last weekend that had one of those big yellow signs-on-wheels out front that said "All cars and trucks $149 below invoice". The only way they can do this is to "sell into holdback", which some dealers will do and some won't. In many cases the dealership never actually sees the holdback and it doesn't show up on their P&L. The owner takes it as his compensation. And, why not? No one invests millions of dollars in anything, let alone a business, without expecting a return on their investment. So, whether or not holdback is available to dealership managers to use as a negotiating tool is a business decision that the owner has to make.

So, I guess, bottom line is shop hard and make your best deal. You'll never really know what the holdback is on a car. Heck, the dealer may not even know until the end of month when they report all their sales back to the manufacturer. And the amount of holdback is irrelevent to a consumer anyway. It doesn't matter what a business pays for something. The only thing that matters is what you can get it for, right?

saleentim

Why not just buy a used one? There are tons out there for the price you want..

S'vette

cool thanks

LMB-Z

Blah, blah, blah...car dealers don't make but 2% or 5%...I call BULL***T. Dealer here borrowed 22 Million to build a new building. Now he is building a million dollar house, poor thing, he only makes 3%.

In these parts, the average house is about 100K. A 1 million dollar house is over 10k sq. ft. I feel sorry for him.

snowman0920

Used is a GREAT way to buy a Vette. People don't drive them much and they take care of them better than their own spouses. There are a lot of used Vettes out there that look like they just rolled off the showroom floor. Last year I bought an '05 with 4k miles in perfect (no, really, perfect) condition for a fraction of the price of a new one. You can find 2 or 3 year old cars that still have a whiff of that new-car smell.

CyberGSDude

You are probably dealing with a low volume dealer who in a sense maybe selling at a loss and just doesn't think they need to do so. They may very well sell the car to the right person for what they want based on past experiences however I agree that a 2010 in the mid 2011year is not real smart to hold onto expecially since 18-20% off a 2011 is about the going rate at any volume discount dealer. If you have a somewhat local volume dealer maybe you can cut a deal for them to get the car from this other dealer.

Financing should be another consideration if they are offering 0% on either year or not. Haven't followed current incentives.

Another consideration is that possibly our trade in is holding the price back if your being aggressive on what you want for it. Ask them for a cash price and maybe think about selling trade in privately.

m48xhp

hmmm. not sure how to approach this....math is hard....

it is a fact, not opinion, the average dealer makes 5-10% gross profit on new cars. 0-5% after operating expenses.

lets say the average new car is $30,000. if an average dealer sells 100 new cars per month, that is $3,000,000. If the net income is 5%, that comes to $150,000 per month.

lets say they sell 50 used cars at $20,000. Thats $1,000,000. The net income on them may be 8%. That comes to $80,000

service and parts may sell another $500,000 in revenue per month.They return is closer to lets say 20%. Thats another $100,000.

So the dealer profited $330,000 each month. That is $3,960,000 profit per year. That is how the dealership pays for upgrades and construction and obtain lending. (which the OEM requires the dealer to do and pay for)

The owner doesn't make $4MM in a year, but he should make enough to buy a $1MM house. nothing wrong with that to me. if he goes under he is on the hook for millions. risk vs. reward. that is capitalism.

So yes, even though dealerships can be extremely profitable, their net return in % is pretty low. Larger volume dealers have a lower % return and smaller volume dealers will have a lower revenue but likely higher % return.

what about construction? large scale commercial construction is usually around 1% GROSS profit. less after operating expenses.

snowman0920

Don't try to do math, dude. It will just make your head hurt.

I work with dealership P&L's every day and can break down every line for every department to it's smallest sub-schedule. Gross profit on new car sales at almost ANY dealership is in the 4% - 6% range, depending on the brand and how competitive the market is. After paying sales commissions, salaries, advertising and fixed costs, dealers LOSE money in the new car sales department. They make money on used cars, parts and service. And, if at the end of the month they have cleared (netted) 3% - 4%, they have done OK, and can afford a few luxuries.

Also, for the business & franchised challenged, manufacturers participate in the cost of building upgrades, remodels and R&R's. It doesn't all come out of the owner's pocket.

Yes, dealership owners can make a pretty good living. If not, why would they invest in a business? Businesses, even dealerships, are extremely risky ventures, vs other investment options. If the possible return didn't justify the risk, no one would build one. They'd just keep their money in the bank.

Lubrecon

The holdback is 3% of the MSRP less the shipping, it is listed on the invoice, ask to see it. The advertising allowance is 1% of the MSRP less the shipping, it is on the invoice, ask to see it. There are also some credit numbers on the invoice that could never figure out, but they are on there also. The dealer will show you all of that, just ask.