Dealer Holdbacks

[jasper]

I recently purchased a new Lexus. During negotiations the salesman stated several times that Lexus has no "dealer holdbacks". Dealer holdbacks are usually 2% of the invoice price. The dealer gets to keep this amount as additional profit. Despite the salesman's statements, I believe that all dealers have holdbacks. If true, it would not be the first time a car salesman lied to me. Can anyone answer my question? Does Lexus have "Dealer Holdbacks"?

[SW03ES]

He's lying, Lexus most certainly has a dealer holdback, 2% of the base MSRP for the car. Some companies do not, and how its computed is always different.

A holdback isn't a bad thing, it simply re-imburses the dealer for costs in keeping the car in inventory. He's either mistaken or he's lying.

I'd like to know what dealer in MD it is, just out of curiosity. You can post it here or send me an email, whichever you're comfortable with. There are a couple dealers around here that are...well...stupid.

[jasper]

He's lying, Lexus most certainly has a dealer holdback, 2% of the base MSRP for the car. Some companies do not, and how its computed is always different.

A holdback isn't a bad thing, it simply re-imburses the dealer for costs in keeping the car in inventory. He's either mistaken or he's lying.

I'd like to know what dealer in MD it is, just out of curiosity. You can post it here or send me an email, whichever you're comfortable with. There are a couple dealers around here that are...well...stupid.

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Thanks for the info.

The dealer I dealt with was Lexus of Towson. Towson is a northern suburb of Baltimore, Maryland.

[Unlisted]

what does it matter. Dealers are in business ot make a profit. Thats how they stay in business. If you dont feel cpomfortable paying $30,000 for a car, go somewhere else. A dealership needs to average $1400. per car just to break even. Besides the GS and Hybrid they are way below that at this point.

Is it fair for a dealer to ask for your financial records before the sale so he can charge you more $???

[SW03ES]

Oh the new one? Havent had any experience with them.

Unlisted- For the most part I agree with you, I think buyers are unfair in what they expect car dealers to sacrifice for the sale but when asked point blank there's no excuse for lying.

[Unlisted]

agreed most salespeople do not get paid on wholeback and are sometimes not aware it exists. But by agreeing to it existing probably would have opened a new round of negotiating. Dont blame him . He also could have been referring to dealer cash incentives which only exist on 05 GS's

[bartkat]

what does it matter. Dealers are in business ot make a profit. Thats how they stay in business. If you dont feel cpomfortable paying $30,000 for a car, go somewhere else. A dealership needs to average $1400. per car just to break even. Besides the GS and Hybrid they are way below that at this point.

Is it fair for a dealer to ask for your financial records before the sale so he can charge you more $???

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Knowing that there is a holdback and how much it is, puts the buyer in a better bargaining position.

[Unlisted]

The holdback just gets the dealer back to even after they have paid to put the car in inventory and have prepped etc. Not to mention helps them pay for the nice piece of property they maintain to be in close proximity to better serve you.

[bartkat]

The holdback just gets the dealer back to even after they have paid to put the car in inventory and have prepped etc. Not to mention helps them pay for the nice piece of property they maintain to be in close proximity to better serve you.

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That's not the way I heard it.

[SW03ES]

Oh come on LOL. Pay for the nice peice of property to better serve me? Please. Dealerships are in it to do one thing, make money. If they historically provided better service then dealerships and salespeople wouldnt have such a bad rap and wouldnt have as hard a time making a buck.

[Unlisted]

Lexus runs their dealerships better.Ive been on both sides of the table. Ive worked for Lexus for 7 years plus before going into business on my own.You have an 70% customer base that respect your right to make a living and return to you everytime for a new car because they appreciate the value of the service. Then the are 20% brandjumpers always in search of the newest and greatest. Then the 10% price shoppers. That only seek price with little concern about value or service. They would by a car from a dealer in another state just to save $10. But be glad to bring it in our service dept to complain and demand things. No gross hi grief. There is always someone willing to sell a car cheaper especially after another dealer put in all the work and all i have to do is quote a price. it also more rewarding for dealer #2 to steal a customer with a low # because A its a no there customer and B its a customer from dealer #1s area. That puts dealer 2 up 2 cars

Second is the lo ball quote very often used on the price ahopper. If a customer from area A shows up at dealer B and he just wants a price to take back to Dealer A, Dealer B lo balls {quotes about $20. less a month then either dealer will sell the car} Customer now takes quote from makes it another $20. cheaper and presents it to dealer A. Dealer does the math shows the customer they cant do business at that # because it is doesnt make sense. He is now forced to go back to dealer B who explain they somehow made a mistake but would sell the car for $20. more and call it even} Customer wont go back to dealer A {even thugh they were honest} so they buy at B or go to a 3rd dealer. Funny business. Lexus does have the best loyal customer in the business. I still drive noting but Lexus and refer all my clientele to Lexus.

[bartkat]

Some dealerships are good and some aren't. Lexus has their fair share of both. Plenty of great stories, and plenty of bad ones. Design and quality and the right products for the target buyers sells cars. Dealerships are just a necessary evil.

[SW03ES]

I know how the business works, I consult with car dealers for a living remember. Lexus does have the highest % of customer loyalty I agree but the dealer network is far from perfect. That doesn't change the fact that the business exists to make money, its not some altruistic thing we should kiss our salesman's shoes for doing for us. They do it for them. They only do so much for us as it will be of benefit to them.

My only point is that theres no excuse for lying to your customers. Salespeople know what holdback is and if they don't they're in the wrong business. I've worked with hundreds of car salespeople and never met one who didnt know what holdback was. You're better off turning the business away than lying.

[blake918]

They would by a car from a dealer in another state just to save $10. But be glad to bring it in our service dept to complain and demand things.

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You are right, but you leave out the part that the dealer is paid for their services either by Lexus or the customer. The customer demands things; yall demand $110+/hour for labor. The dealer always comes out on top. My friend just had a grab handle on his Xterra replaced under warranty. The recipt showed that Nissan would be billed 1.5 hours plus the part for the job; that's insane! It takes maybe 5 minutes to do that, and they charged 1.5 hours...poor, poor dealer.

[SW03ES]

I missed that quote. That makes no sense.

Tell me this Untitled, why would you not want them to bring a car bought somewhere else to your service department? You are aware that car dealerships make many times more money on service than on sales right? Car dealers pay me thousands and thousands of dollars every month just to help them convert sales business to service because sales business on its own is worthless.

I expect a lot from my dealer, and no I didnt buy the car from them. For $110 an hour, which is more than I pay myself, I expect excellence. If you complain about people "demanding things" when you charge them $110 an hour just because you didnt make a couple thousand dollars off them from a sale when you could potentially make hundreds of thousands of dollars off them in the future just by treating them right, then you did the right thing getting out of the car sales business.

Blake also forgot to add that Lexus dealers charge 3-500% markup for parts, and parts hidden in repair costs like oil. On top of a $110 labor rate thats criminal. You can charge that amount but you've got to make the customers happy and make them feel they're getting something for their money. If you do that then maybe next time they wont drive 50 miles for those $10. Saying things like "der..They don't buy the car here then they expect us to service it and do it well and treat them right" FOR $110 AN HOUR! Thats totally ignorant and it puts car dealers out of business, and rightfully so.

Each customer is worth approximately $300,000 in business for a car dealership over their lifetime in service, sales, and sales and service referrals. Thats easily captured 90% of dealerships just suck at it because they have an attitude like yours.

I've already made probably 3 times for this dealer in service what the dealer who sold me the car made on the sale. Who'se lucky to have had my business?

The "poor dealer" routine is the biggest crock of !Removed! I've heard in a long time. Dealers that dont make any money, or dont make the kind of money they should be making are that way because they suck. Its not the customer's fault. You can always depend on customers to be customers, if you follow the tenets of customer relations as they're laid out by consultants like me, authors, harvard business professors, social scientists, etc you'll make a killing. Its textbook and perfect every time. Its your choice.

Blaming the customer is the first step in the wrong direction.

[Unlisted]

how many times are you paying $110. an hr. for a car under factory warranty?

[SW03ES]

Every time they change the oil or do one of the services that are called for every 5000 miles. When warranty work is done the dealer gets paid by Lexus. My dealer charges $240 for an oil change.

I've spent $3000 just on dealer scheduled maintenance alone, on top of the warranty work thats been performed, much of which has been 4 digits worth of work. Thats much more money than they would have made had I bought the car from them.

[VBdenny]

I have never lost a minutes sleep worrying about a dealer not making a profit. One of my best friends fixes swimming pools and does several dealers home pools. They are not uncomfortable in the least.

They say "Their ad is our ad"

They SHOULD say "your money is our money"

Lexus service is very overpriced, but they get it. Lexus parts are way overpriced, but again they get it. The worst part of owning a Lexus, is Lexus dealers.

[Unlisted]

$240 for an oil change??? a 5k service is at most $60. oil/filter change

[SW03ES]

Not at any Lexus dealer in the Metro DC area. The absolute cheapest I've ever seen is $160. The dealer I'm currenty using charges $240 but they dont run my car into things like the "cheap" $160 dealer does.

$60 would be a real deal for a 5k service, thats less than Toyota dealers charge, you must be mistaken. Remember they change the oil and rotate the tires every 5k.

[lexus411]

$129. in New York for oil change.rotation and I thought that was high

[jamesrabus@yahoo.com]

I missed that quote. That makes no sense.

Tell me this Untitled, why would you not want them to bring a car bought somewhere else to your service department? You are aware that car dealerships make many times more money on service than on sales right?  Car dealers pay me thousands and thousands of dollars every month just to help them convert sales business to service because sales business on its own is worthless.

I expect a lot from my dealer, and no I didnt buy the car from them. For $110 an hour, which is more than I pay myself, I expect excellence. If you complain about people "demanding things" when you charge them $110 an hour just because you didnt make a couple thousand dollars off them from a sale when you could potentially make hundreds of thousands of dollars off them in the future just by treating them right, then you did the right thing getting out of the car sales business.

Blake also forgot to add that Lexus dealers charge 3-500% markup for parts, and parts hidden in repair costs like oil. On top of a $110 labor rate thats criminal. You can charge that amount but you've got to make the customers happy and make them feel they're getting something for their money. If you do that then maybe next time they wont drive 50 miles for those $10. Saying things like "der..They don't buy the car here then they expect us to service it and do it well and treat them right" FOR $110 AN HOUR! Thats totally ignorant and it puts car dealers out of business, and rightfully so.

Each customer is worth approximately $300,000 in business for a car dealership over their lifetime in service, sales, and sales and service referrals. Thats easily captured 90% of dealerships just suck at it because they have an attitude like yours.

I've already made probably 3 times for this dealer in service what the dealer who sold me the car made on the sale. Who'se lucky to have had my business?

The "poor dealer" routine is the biggest crock of !Removed! I've heard in a long time. Dealers that dont make any money, or dont make the kind of money they should be making are that way because they suck. Its not the customer's fault. You can always depend on customers to be customers, if you follow the tenets of customer relations as they're laid out by consultants like me, authors, harvard business professors, social scientists, etc you'll make a killing. Its textbook and perfect every time. Its your choice.

Blaming the customer is the first step in the wrong direction.

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[jamesrabus@yahoo.com]

I recently purchased a new Lexus.  During negotiations the salesman stated several times that Lexus has no "dealer holdbacks".  Dealer holdbacks are usually 2% of the invoice price.  The dealer gets to keep this amount as additional profit.  Despite the salesman's statements, I believe that all dealers have holdbacks.  If true, it would not be the first time a car salesman lied to me.  Can anyone answer my question?  Does Lexus have "Dealer Holdbacks"?

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I do not for the life of me understand why profit to the dealer is such an issue. If you have a problem with the price then buy a hyundai. If profit really is an issue look to your insurance agent for a disclosure on their profit margin. Heck you pay all kinds of money to insure expensive cars hopeing never to have to use their services. Think about your agent and his 65 foot boat in the keys drinking margaritas on you...twice a year! be thankfull you are fortunate enough to be driving or even have the means to drive the best car on the market today. And remember your sales rep does need to feel he is important to you, that you value his services, afterall hopefully you will a great relationship for the nexy 4-5 years.

If you treat them with respect they are obligated to show you the same. lets not for get about the good in man.

[bartkat]

I recently purchased a new Lexus.  During negotiations the salesman stated several times that Lexus has no "dealer holdbacks".  Dealer holdbacks are usually 2% of the invoice price.  The dealer gets to keep this amount as additional profit.  Despite the salesman's statements, I believe that all dealers have holdbacks.  If true, it would not be the first time a car salesman lied to me.  Can anyone answer my question?  Does Lexus have "Dealer Holdbacks"?

←

I do not for the life of me understand why profit to the dealer is such an issue. If you have a problem with the price then buy a hyundai. If profit really is an issue look to your insurance agent for a disclosure on their profit margin. Heck you pay all kinds of money to insure expensive cars hopeing never to have to use their services. Think about your agent and his 65 foot boat in the keys drinking margaritas on you...twice a year! be thankfull you are fortunate enough to be driving or even have the means to drive the best car on the market today. And remember your sales rep does need to feel he is important to you, that you value his services, afterall hopefully you will a great relationship for the nexy 4-5 years.

If you treat them with respect they are obligated to show you the same. lets not for get about the good in man.

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Do you just walk in and pay sticker price for a car when you buy one? That would be the opposite end of the spectrum. Car trading is like horse trading, both parties try to get the best of the deal. It's not only about money.

[SW03ES]

I do not for the life of me understand why profit to the dealer is such an issue.  If you have a problem with the price then buy a hyundai.  If profit really is an issue look to your insurance agent for a disclosure on their profit margin.  Heck you pay all kinds of money to insure expensive cars hopeing never to have to use their services.  Think about your agent and his 65 foot boat in the keys drinking margaritas on you...twice a year!  be thankfull you are fortunate enough to be driving or even have the means to drive the best car on the market today.  And remember your sales rep does need to feel he is important to you, that you value his services, afterall hopefully you will a great relationship for the nexy 4-5 years.

If you treat them with respect they are obligated to show you the same.  lets not for get about the good in man.

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Thats a rediculous tirade LOL. "If value is important to you then buy a Hyundai". If you feel that way all you'll be able to afford is a Hyundai real quick. People don't get rich by squandering and wasting money. I don't need to be thankful that I can drive the car I drive or that I'm fortunate. I'm not fortunate, I worked my !Removed! off for it. I have no one to thank for it but me, and I thank me. I've experienced that attitude in dealers before, that if you want the best deal they can give you or want to know what they're doing for all that money you can't really afford the car anyways. My dad cleared a BMW showroom and got a BMW salesman fired for saying to him "If you can't afford this car then we can look at some cheaper cars" when he asked what kind of a discount they could offer on a 740iL.

You completely missed the point of my statement. I've agreed many times in the past that people are unduly hard on car salespeople. I think people walk in and except something for nothing and expect that no one else around them should make a living and I think thats wrong. All I want is a fair price compared with normal charges for whatever I'm buying or having done, and I want to be treated well as a valued customer. I'm in real estate and trust me, we deal with people wanting us to work for free every day. I don't expect anyone to work for free, or even work for cheap. I expect them to do what they're supposed to do, and give me good service. If I wanted crappy service I'd buy a Hyundai, I bought a Lexus and I DEMAND excellent service for $100 an hour and I have been dissapointed many times in the past.

Take the dealers, I just switched from a dealer that charges $160 for a 5k service to one that charges $240. I'm happy to do that because the new dealer is SO much better. As for insurance agents I have a wonderful insurance agent that has insured my family for a long long time. He's fair and honest and never hesitates to try and save me money or advise me about what the best courses of action are for coverage even if it means he makes less. Thats excellent service and I'm happy to pay him. I hope he can afford a 65 foot yacht and that he enjoys it. Knowing what I do know about the insurance industry though, thats very unlikely. Insurance agents and real estate agents don't make as much money as everyone thinks, kind of like doctors and lawyers.

I don't care how much the dealership makes, but they need to EARN it and they certainly shouldn't lie when asked a straight question from a customer.

"Do you have a holdback"

"Yes we do, its 2% of the gross sales price"

"So figuring in holdback etc etc"

"The absolute best we can do is X, we can't really use to lower the price because it isn't figured into the dealas profit, its used to defray costs associated with keeping the car on the lot"

If the salesman has been honest, trustworthy, and good to work with through the process this won't be an issue. If he hasn't been then he'll loose the sale, as he should.