Understanding dealer holdbacks- a key to your negotiations.

If there's one thing a good car salesperson knows how to do, it's working an angle they think will cause you to give up on your negotiation efforts. One of those angles is to convince you that they can't possibly give you that dream car at straight invoice. I mean, how are they going to be able to put food on the table if they keep taking those kinds of losses? The truth is is that many of those car salespeople will be eating very well from the profits they make off buyers who won't understand the dealership's profit structure.

One of the perks that manufactures give dealers is what is referred to as a holdback. This means that on a typical car that lists for one price and invoices at another, the manufacturer will hold back a percentage of the profit (2-3% depending on the manufacturer). This means that the dealer can add that amount onto the invoice price, showing the buyer where 'tissue' is (a new invoice price) only to get the same amount back from manufacturer when the deal is done.

Knowing that there is a holdback on a car helps you know what the true cost of the vehicle is, which in turn helps your bargaining position. To ignore it is to leave money on the table.