Car Dealer Hold back

Dealer “Hold-Back” is money paid to a dealership by the manufacturer to off-set the cost of having an “in-stock” selection of vehicles for sale.  Most car dealers will have to finance their inventory. This financing cost is called “Flooring”.  Because the manufacturer wants the dealer to have a good selection, they contribute to the “flooring” by offering their dealers hold-back payments.

 

For example, if a dealer buys a car from the manufacturer for $20,000 they generally will have to have it at the dealership for an average of 90 days before it sells.  Most dealers will finance that $20,000 cost over the 90 day period.  Since the manufacturers want the dealer to have a good selection of vehicles for sale, they will reimburse that finance charge. In most cases the dealers will receive the hold-back every 90 days.

 

On average, the dealer hold-back will be 2% to 3% of Base MSRP, Total Invoice or Base Invoice. Our Cheat Sheet will automatically calculate this cost in Chapter Three: Car Price Calculations .

 

Recently, manufacturers have also tied bonuses to the dealer’s hold-back payment. For instance, some manufacturers will increase the hold-back percentage if the dealer maintains a good CSI rating or exceed their sales goals. However, some dealer may find the hold-back reduced if the dealer fails to meet minimum requirements.