Lincoln drops holdback method of paying dealers

Article by Anita Panait, on September 26, 2012

Lincoln is changing the way it pays its dealers as it tries to make itself a stronger presence in the premium segment. Lincoln dealers used to receive an automatic payment, known as a holdback, of two percent of a vehicle's sticker price, paid to dealers every quarter.

Instead, Lincoln dealers could receive more than two percent, if they could meet new standards designed to boost sales of off-lease, certified-used Lincolns as well as improve the online sales and vehicle-delivery processes. Lincoln is likewise increasing vehicle invoice prices, on which its payments to dealers will be based, by one percent, effective in January 2013.

Sticker price of Lincoln vehicles, however, will be affected by the changes. Kevin Cour, Lincoln sales and service operations manager, told Automotive News that the changes, which are in line with practices at luxury import brands, are intended to finance dealers' ability to offer a good customer experience to luxury shoppers.

Cour remarked that for Lincoln to compete in the luxury segment, it needs to push itself and its dealers. Cour quipped that although the changes "may be uncomfortable to some" of their dealers, it would make Lincoln more competitive, particularly in certified-used sales and residuals. A number of import luxury brands like BMW and Audi do not practise holdback.

According to Lincoln, 50 to 60% of luxury-brand sales have no holdback. The carmaker noted that the increase in the invoice price and the cancellation of the holdback also mirrors the growth of Web-savvy shoppers.

Cour said that with the advent of the Internet and the access to pricing information being prevalent in Lincoln’s business, “holdback is in many cases negotiated at the desk," adding that this is the direction that all premium manufacturers are embarking on.

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