New Car Pricing & Rebate Terms - Part 2
Dealer Holdback
Also known as “Holdback” or “Giveback”. Invoice Price is the price the car
manufacturers sell their cars to the dealer for. Even if a dealer sells their
car to you for $1.00 over Invoice Price, they will still make from 2% to 5% on
the car because of the billing system the manufacturers use.
Incorporated into
that billing system is a fee that is given back to the dealers known as Holdback
or Dealer Holdback. Obviously dealers don’t like to reveal the fact that
Holdback even exists so you will need to find that out for yourself.
Dealer Invoice Price
Also known as “Invoice” or “Tissue”. This is the price the dealer pays the
manufacturer for a car.
Destination Charge
Also known as “Delivery Charge”. This is the charge dealers get hit with for
having their cars shipped from the factory to the dealership. All dealers get
charged the same whether their car order is shipped ten mile from the factory or
two thousand miles.
Incentives
This is any price reduction offered to car buyers from the car manufacturer to
get them to buy a new car. These Incentives are also used to motivate the sales
force to sell more cars.
Manufacturer's Cost
Also known as the “Auto Maker Costs”. Many things need to be factored into the
manufacturers cost of a vehicle. You’ve got the cost of the property, building,
machinery, maintenance and repairs of the machinery, payroll, insurance, etc,
etc. So its pretty difficult to determine the exact cost of a particular car.
Manufacturer to Dealer Incentive
Also known as “Dealer Incentive” or “Factory to Dealer Incentive”. These are
incentives the manufacturers offer the dealers when they build too many of a
certain vehicle.
The dealers are supposed to pass on these incentives to the
buyers but they like to keep these for themselves instead. It’s up to you to
find out when these are happening. It’s worth it to find out about these because
they can often amount to thousands of dollars in savings.
Market Prices
This represents the prices for a specific model and/or geographic area based on
supply and demand. An over simplified example might be: A certain four wheel
drive vehicle sells for $20,000 in area ‘A’ but it might sell for a premium of
$2000.00 (or whatever) in area ‘B’, again, based upon supply and demand. These
Market Prices change over time too.
Minimum Deal
This is a sale where the profit is so small that the dealer will pay a flat fee
to the salesperson instead. “Ad Unit” sales are usually like this because they
are loss leaders for the dealers.
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Pricing & Rebate Terms - Part 3