auto

What is a dealer holdback?

 

What is a dealer holdback?

The Bankrate.com financial term of the day is: "Dealer Holdback"

It's not uncommon to see a car dealer selling a vehicle at a price that's "below invoice," or for less than the dealer's cost for the car. How is that possible? One explanation is something called dealer holdback. It's an amount a dealer receives from the manufacturer after the car is sold. A typical dealer holdback is 2 percent to 3 percent of the Manufacturer's Suggested Retail Price.

Don't feel sorry for car dealers when they say they're selling vehicles below cost. Dealer holdback provides dealers with some profit after the sale.

To find the best new cars and the best new-car financing, visit the Auto section at Bankrate.com.

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