by Kendrew Pape
When you have trouble with a car purchase, here are some tips that may help.
This week, I received the following question by e-mail. As the co-author of three books on cars, I take a great interest in the subject and this situation caught my attention. Here's what the writer had to say:
"This evening, I took delivery of a 2003 Chevrolet Cavalier, for which I
negotiated a great price ($750 over invoice) thanks partly to Kendrew's
excellent book, The Essential Guide to Buying and Selling a Car in
Canada, and to the invoice price I obtained from CarCost Canada. For
the sake of brevity, I will spare you the details, but I was considerably
less than completely satisfied at delivery time, and therefore, I took
Kendrew's advice to re-open negotiations.
"I was somewhat appalled that they would not budge on the price nor offer anything else to address what I consider to be a valid concern. When the Sales Manager told me
that they are barely making anything on the sale, I informed him that I am aware of the 'dealer holdback', which is defined by Edmunds.com as 'a percentage of either the MSRP or invoice price of a new vehicle that is paid to the dealer by the manufacturer'.
"I could not find this mentioned in Kendrew's book so I suspected that it may not happen in Canada, but I figured it was worth a shot. The Sales Manager said that dealer holdback is a Chrysler thing and that GM does not do it.
"So, do you know anything about dealer holdback? Does it happen in Canada? Is it true that GM does not do dealer holdbacks?" - D.L., Dartmouth, N.S.
I did some research into this matter. Here's what I found.
GM Canada almost certainly has dealer holdback programs in place. They are sure to model their business on their U.S. counterpart. But these initiatives are closely guarded industry secrets, which explains why you're being told they don't exist. GM Canada may call their program by a different name, which allows management to deny that holdbacks exist.
The Cavalier is what's known as a 'bread and butter' car by salespeople. A lot of them are sold every year, and even though the profit margins are thin, the dealers and manufacturers make their money on the volume of cars they are able to move. Holdbacks and dealer incentives are most generous on the models that are harder for salespeople to move, like a Plymouth Prowler or Dodge Viper. So the resistance you're getting is likely due to the fact that whatever holdback or incentive is in place, it's probably a meagre one.
But rest assured, the manager is lying when he says the dealership is making no money on the deal they gave you. They're making at least $750, right? But now that they have your signature on a legally binding contract, they will make it an awful lot harder for you to negotiate any further discount.
But you still have the upper hand. As long as you can demonstrate that they are failing to provide the vehicle that is specified on the bill of sale - wrong color, wrong trim, wrong floor mats, anything - then you are within your rights to refuse delivery.
If the negotiations seem stalled at this point, you have a few options.
1. Contact the sales manager of a competing dealership. Fax him your bill of sale and tell him that you're having trouble with the delivery of this vehicle and that you no longer want to do business with the dealership that originally sold you the car. See if he's willing to earn your business by matching or bettering your current deal.
2. Contact the General Manager of your dealership. Let him know that you're trying hard to buy a car from his staff, but for some reason they don't seem to want your business. Send him a fax with your bill of sale and a brief point form explanation of your problems with delivery. And let him know that his competitor is willing to do business.
3. Make sure to tell both the GM and the sales manager that you intend to service your car at their dealership, and recommend your friends/family/peers to their store if they can resolve this problem.
4. If you can't get even a nominal cash discount, ask for something else. Rust protection at ½ price (they'll still make money even at a 50% discount), or three free oil changes, or a stereo upgrade. Whatever is agreed upon, get the GM dealer to authorize it in writing. There's a high turnover rate among salespeople... even managers. Any promises made for future benefits, like free oil changes, need to be approved by someone that you know will still be there in 6-12 months.
5. Expect a lot of resistance, considerably more than during the initial negotiations. But
chances are that they won't let your business walk out the door. Winter is a slow sales season and 2003 is forecast to be a difficult year for both manufacturers and dealers. Plus, there is still profit to the dealer in this sale. So I expect you'll get what you're asking for, as long as it is reasonable.
If all that fails, you can contact the APA for further assistance. Their website is
Kendrew Pape is the co-author with Mel Wise of The Essential Guide to Buying and Selling a Car in Canada.