Example of a Holdback Calculation (Car Buying Tips)
Example of a Holdback Calculation
This is how it works. Suppose a car has a sticker price of $20,700, an invoice price of $17,000, a $700 destination charge and a 3% dealer holdback. In most cases, the holdback is taken as a percentage of the total MSRP price minus any destination charges. In this case, the MSRP is $20,700 with a $700 destination charge. We must therefore first reduce the $20,700 by $700 to base the holdback as a percentage of $20,000. In this case 3% of $20,000 is $600. Every 90 days, the manufacturer will issue the dealer a check for the amount of unused holdback. If the dealer were to sell the car immediately, it would receive $600 back. If the dealer were to sell the car in 45 days (half of the 90 days), it would receive $300 back (half of $600). If the car stays on the lot for 90 days or longer, the dealer would get nothing back. Regardless of the amount the dealer will get back, it must wait for its quarterly holdback check (every 90 days). This check is often in the tens of thousands of dollars for the dealers.
Keep in mind that the purpose of the holdback check is to help the dealerships with the interest payments they pay for financing their inventory. In a way, one could argue that any refund from the manufacturer is a reduction of the invoice. If the dealer’s invoice was $17,000 and a $300 holdback applied, then one could argue that the dealer got the car for $16,700.
Taken from The Car Buying Bible, a 162-page car buying guide which features car buying tips and car loan calculators. Written by a former car salesman, college math instructor and health insurance analyst.
This is how it works. Suppose a car has a sticker price of $20,700, an invoice price of $17,000, a $700 destination charge and a 3% dealer holdback. In most cases, the holdback is taken as a percentage of the total MSRP price minus any destination charges. In this case, the MSRP is $20,700 with a $700 destination charge. We must therefore first reduce the $20,700 by $700 to base the holdback as a percentage of $20,000. In this case 3% of $20,000 is $600. Every 90 days, the manufacturer will issue the dealer a check for the amount of unused holdback. If the dealer were to sell the car immediately, it would receive $600 back. If the dealer were to sell the car in 45 days (half of the 90 days), it would receive $300 back (half of $600). If the car stays on the lot for 90 days or longer, the dealer would get nothing back. Regardless of the amount the dealer will get back, it must wait for its quarterly holdback check (every 90 days). This check is often in the tens of thousands of dollars for the dealers.
Keep in mind that the purpose of the holdback check is to help the dealerships with the interest payments they pay for financing their inventory. In a way, one could argue that any refund from the manufacturer is a reduction of the invoice. If the dealer’s invoice was $17,000 and a $300 holdback applied, then one could argue that the dealer got the car for $16,700.
Taken from The Car Buying Bible, a 162-page car buying guide which features car buying tips and car loan calculators. Written by a former car salesman, college math instructor and health insurance analyst.
posted by Brian at 1:49 PM
Social bookmark this
1 Comments:
Your blog article is really extremely genuine, that is the reason I cherish your website, in which you have granted your appreciable information about Car Buying Tips from The Car Buying.
Cash For Junk Cars | Sell Junk Car | Junk Cars Cash
Post a Comment
<< Home