is the holdback an asset or a deficit to a car dealer? (plus bonus rant on the dealership)

[vi edit]

I was negotiating with a car salesman today and he told me that I was responsible for paying for the hold back. I told him no way in hell that I was responsible for it because it was a "bonus" check given to the dealership for keeping the car on the lot.

Anyway, I shot him a price pretty close to the invoice of the vehicle, and he had to go back and talk to the sales mananger(like always), and he comes back with a sheet showing the invoice of the vehicle, the destination charge, advertising fees, and the holdback.

Now, on this sheet, it showed the holdback as a deficit to the dealership and tacked it onto the cost of the vehicle. Now, if my understanding of the holdback is correct, they are feeding me a line of sh!t! :| That is money that is guaranteed to them. In this case it was about $850. Now, if I'm thinking right, they are automatically given this money. Soooooo, if they charge me another $850 to "make up" for the holdback, then they are in essence, really making $1700 correct?

Anyway to make a long story short, they fscked us over with the financing by renegging on monthly payments AFTER we signed the loan papers(they screwed up their numbers, in other words - not my problem), and they fscked me over on the holdback.

We still have a couple papers to sign over that we didn't get done today, but needless to say, they are being taken custody by me, and torn to shreds. I'm kissing this dealer goodbye :|

I haven't put any money down on the vehicle, nor will I be.

 

[IBhacknU]

These guys shoot from the hip (whatever that expression means?)

Some good reading here and here.

Hope the info helps.

 

[Sluggo]

The way I understood it is that holdback was a percentage of the list price, 3% for most american makes. This is a "helper" from the factory to help dealers with their "floorplan" which is the cost of interest on unsold vehicles. I was told that this amount is 3% when the car first gets to the lot, but is less and less as time passes, therefore a car that a dealer has had for 6 months has a lower holdback than one that has been on the lot 1 month.

It is kinda like most vendors offering you a small discount if you pay your bills promptly...deduct 1% if paid by the 10th.

This is basically what the dealer holdback is, pay us for the cars we shipped you, pay quickly and deduct 3%. Pay in a couple of months, deduct 2%. These are wild guesses on my part about time and such, this is just how I understood that it worked.

Oh yeah, they are still making money from you on the "back-end" if you finance through the dealership. They get a commision on the loan 🙂

If I were you I would call the General Manager ( call the service dept or parts dept first to get the general managers name.....dont talk to anyone but him or her) of the dealership first thing in the morning, tell him you dont appreciate being treated like a 4 year old, and if this is they way they insist on doing business, you will take yours elsewhere, where customers are appreciated. Also ask him for a way to contact the regional sales manager for GM/Ford whatever the maker is, that you will be wanting to contact him as well. Do this in a wonderful and civil voice. Dont let him talk you into coming back in the same day to work it out, tell him you will only consider dealing with his dealership again if you get to deal directly with him. Give him your phone number and ask him to call you Wednesday and set up an appointment with you at a good time for you, and you will come and speak to him about the vehicle and amounts of money in question. Chances are you will come out smelling like a rose.

 

[Spindler]

I just took out a $12,000 loan to help purchase my '99 Honda Passport. (put a big down payment on it). From what I understand correctly, I got a holdback on my loan too. If I make on time monthly payments for the duration of my 3 year loan, i will get $350.00 back in a refund check. If I am late on even one payment, I do not get anything back.

I'm not sure if this is accurate or not as this is my first loan myself, but the guy at the dealership made it really simple to understand as he put it this way "Its an incentive from the finance company for you to make your payments on time".

Looking at the paperwork, I actually took out $11,650 instead of my $12,000. Not quite sure how he did it, but it appears he took this $350.00 and kept it for himself first.... lol this is getting more confusing the more I look at it.

 

[lupohki]

Holdback according to edmunds.com

 

[compuwiz1]

Sluggo, you are right on the money. Without going into the drawn out financial details, the hold back is there to assist the dealers in paying their flooring costs. With multimillion dollar inventories, few if any dealers pay cash for their inventory anymore, but pay interest for their cars that are on the lot each month. At a point if the car has not sold it is curtailed. That term means the flooring agreement on that particular car has expired and the vehicle must be paid off. Dealers not only use the holdback to cover their month to month flooring expense, but any carryover is set aside in a fund used for curtailment. Car dealership financials are very involved. I was a finance manager at a large Ford dealership for 13 years. 🙂
At the end of the year, ideally we wanted our holdback dollars to equal at least the flooring dollars. Most of the time, is was in the red.

 

[kranky]

vi_edit, I think they were just trying to get another $850 out of you. I wouldn't go back either.

Spindler, that sounds kind of fishy. I've never heard of a loan with a "holdback". Read the fine print of your loan and see if you can figure it out.

I once was buying a car and the dealer told me the interest rate on the loan would be 8%. I asked if that was the APR (the figure that enables you to compare loans that are structured differently), and he said no, the APR was 17%. I never could figure out how a 17% loan could be called an 8% loan, but I didn't stick around to find out.

 

[Wangel]

Welcome to the world of purchasing a new car. It's not pleasant.