Question: In your opinion does it make any sense to factor in the holdback fee during the negotiation of a new car deal?

February 22, 2006

Hi Tony

I'm interested in buying a 2006 Mazda MX-5. MSRP is $22,435, invoice is $20,726. The Fleet Manager I'm dealing with has offered to sell it to me at the invoice price plus $300.00 bringing the cost to $21,026(not including sales tax, tags and destination charge).

I know the invoice price is not the true dealers cost. Mazda has a 2% factory holdback that is not listed on the invoice. Holdback fee would amount to approximately $400.00 bringing the dealer cost down to $20,326. Add the $300 over dealer invoice would bring the price of the car to $20,626.

In your opinion does it make any sense to factor in the holdback fee during the negotiations or do you think the $300 over invoice of $20,726 is a good deal?

There is also no trade-in, and I plan on putting $9,000 down and finance the rest through my credit union unless the dealership can offer a better finance deal.

Thanks for your help and time.

Joe S.

Answer:

Hi Joe,

99% of the time the dealer is not going to negotiate the holdback. The holdback is there to help the dealer offset his finance charges on the new cars he has in stock. It was never designed as an extra profit margin. Forget about it!

$300 over invoice is an excellent deal. Don't forget to check and see if there are any rebates available. If so make sure you get those too.

Also, the fact that there is no trade-in, or that you are putting $9,000 down has no bearing on the price negotiation. You can be sure however, that the Finance Manager will definitely try to convert you to letting the dealer handle the financing. Be very careful here. The car dealer makes big profits on arranging car loans . . .that's big profits at your expense!

All my very best...

Tony Iorio