Q: What does wholesale reserve mean?

asked by on February 08, 2017

I'm buying a trunk from a local dealer and its advertised as "wholesale reserve" I have no I idea what that means please help.

If you are referring to a new car transaction, "wholesale reserve" is a category of "dealer holdback". Dealer holdback is simply any economic value or component of "profit" that a dealer receives in a car transaction but which is paid by the car manufacturer. Holdbacks are sort of "rebates" paid to the dealer, by the manufacturer, once the car is sold off the lot. The reason holdbacks are important is because holdbacks represent "costs" in the transaction that are essentially invisible to the consumer and, as a consequence, put the consumer at a distinct disadvantage in negotiating his or her deal for the car. Consider this illustration: Let’s say the MSRP of a car is $20,000. In fact, though, there’s a wholesale reserve, or "holdback", whether "revealed" to you or not, that attends the transaction in the amount of $1,000. That is, once the car is sold, the car manufacturer pays the dealer a $1,000 "rebate". As far as you, the customer, are concerned, though, the dealer claims his invoice cost on the car is $18,900 and he’s willing to sell you the car for $100 over invoice (not unusual ad strategy, by the way: "$100 over invoice!") so you accept the deal and buy the car for $19,000. Of course, you think you bought the car for $1,000 off the MSRP, saving 5%, but in fact the $1,000 "savings" in the transaction simply become part of the dealer’s profit. The problem, of course, is these dealer "holdbacks", and there are many categories of holdback, wholesale reserve being merely one, make it difficult or impossible for a person to formulate an intelligent understanding of the ACTUAL economics of the transaction, that is who gets what benefit in the sale. If you already have a car that merely needs repairs, you can avoid the aggravation of dealing with "holdbacks", and all the related shenanigans, by letting YourMechanic just repair what you already own. In fact, repairing what you have versus buying a new or used car is almost almost always the least cost strategy. If you have further questions or concerns, do not hesitate to re-contact YourMechanic.

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